The Monday Report – 21 August 2023

This story features MAGELLAN FINANCIAL GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: MFG

By Greg Peel

Choosing to Follow On

It was a rock’n’roll session on the ASX200 on Friday, ahead of a flat close. The futures had said down -28 on Wall Street weakness, the ASX200 fell -22 points on the open, but by 12.30pm was up 21. Then it sold off in the afternoon.

The market appeared to largely ignore Wall Street and concentrate on earnings results, although the 12.30pm pivot may have been as a result of the Japanese CPI coming in unchanged at 3.3% when 2.5% was forecast.

Friday’s was only a smallish list of reporting companies, compared to Thursday’s extensive list, thus while there were some sharp moves for Friday’s reporters, more notable were follow-on moves from Thursday’s reports, post broker analysis.

Magellan Financial ((MFG)) was the big winner among the Friday crowd with a 13.3% gain, after announcing a special dividend and cost cutting. Property Fund manager Centuria Capital ((CNI)) went the other way, falling -5.9%.

Yet the real estate sector won the day with a 1.7% gain, thanks to a whopping follow-on surge for Goodman Group ((GMG)), up 7.3% on analyst assessments. Think data centres.

Cooling product company PWR Holdings ((PWH)) reported on Thursday and on Friday jumped 8.6%. Inghams Group ((ING)) similarly jumped 6.0%, after jumping 15% on Thursday.

Amcor rose 5.5%.

There were also losers.

Super Retail ((SUL)) rose on Thursday and fell -6.9% on Friday. Growthpoint Properties ((GOZ)) fell slightly on Thursday and -5.5% on Friday.

GWA Group ((GWA)) fell -7.5% on Friday but only because it went ex. Imugene ((IMU)) lost -12.2% after announcing a capital raising.

Sector-wise, utilities were strong (+1.2%) after Origin Energy ((ORG)) kicked on from Thursday’s result. Analysts did not like Telstra’s axing of its planned InfraCo sale, announced in its Thursday report, and it dragged communication services down -1.9%.

Healthcare was up 0.5% on another strong session for Cochlear ((COH)). Materials rose 0.8% as the iron ore price confounds the analysts. The banks fell -0.5%, to kill the mood, despite the ten-year yield falling -9 points.

Friday will no doubt be a precursor to what we’ll see this week – by far the biggest week in the earnings season.

With Wall Street flattish, our futures were down -23 points on Saturday morning.

When the chips are down

There is only one stock Wall Street is talking about right now, and that’s Nvidia. The AI chipmaker blew the market away with its March quarter results, and specifically its June quarter guidance. The day of reckoning comes on Wednesday night when Nvidia reports.

Is all the AI hype warranted? A weak result could really send Wall Street into a tailspin of Big Tech revaluation. The other problem is the stock is up nearly 200% year to date, and 42% since June quarter guidance was issued. It is a perfect candidate for sell-the-fact.

The other event to look forward to is Jackson Hole on Thursday night, although this time Wall Street does not expect anything significantly different, policy-wise, from Jerome Powell. Certainly not another fire and brimstone attack like last year’s address.

After yet another week of losses for US indices, Wall Street finally saw some consolidation on Friday night. Apple, which fell -11% to be the biggest market influence both in cap-weight and sentiment since the highs, rose 0.3%.

Yet the Nasdaq posted its longest weekly losing streak since December last year.

Concerning investors on Friday night was Chinese property giant Evergrande filing for bankruptcy in the US. This follows fellow giant Country Garden missing debt payments during the week.

Helping to settle the market was a -5 point fall in the US ten-year yield. Japanese inflation did not spark another rush out of US bonds.

Wall Street nonetheless remains skittish. Fingers crossed for Wednesday night.

Commodities

It’s hard to find an analyst who does does expect iron ore prices to fall, as they keep rising.

There’s no stopping the oils for now.

The Aussie is flat at US$0.6405.

The SPI Overnight closed down -23 points or -0.3% on Saturday morning.

The Week Ahead

At the end of last week around 110 companies have reported earnings from at least 350 expected this season covered by FNArena. The bulk of the balance will report this week.

To date, assessed beats are ahead of misses, but we ain’t seen nothing yet.

Ex-dividends are now also coming thicker and faster but will ramp up in earnest in September.

It’s all quiet on the economic front locally this week.

In the US, Fed chair Jerome Powell speaks at the Jackson Hole symposium on Thursday night.

Before that, the US will see numbers for consumer confidence, new and existing home sales and durable goods orders.

Wednesday sees flash estimates of PMIs from across the globe.

Today’s reporters include Breville Group ((BRG)), BlueScope Steel ((BSL)), Charter Hall ((CHC)), Insurance Australia Group ((IAG)) and Reliance Worldwide ((RWC)).

Westpac ((WBC)) provides a quarterly update.

For all company reporting dates, please refer to the FNArena Calendar (https://www.fnarena.com/index.php/financial-news/calendar/) or the Corporate Results Monitor (https://www.fnarena.com/index.php/reporting_season/). The latter summarises result responses from brokers following each day’s result releases.

The Australian share market over the past thirty days…

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

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