The Monday Report – 28 August 2023

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This story features WESFARMERS LIMITED, and other companies.
For more info SHARE ANALYSIS: WES
The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Holding Support

The ASX200 followed Wall Street on Friday by plunging -90 points from the open before quickly regaining the 7100 level, where it largely remained for the rest of the session. The index matched the lows of last Tuesday and July, and held support.

Wall Street was happy enough with Powell’s speech on Friday night and indices rebounded, but our futures were only up an indifferent 20 points on Saturday morning.

Earnings results dominated last week under a difficult macro cloud and this week there’s four more days of reports to go.

Only two sectors closed in the green on Friday, being the consumer sectors. Staples rose 0.7% and played an old familiar defensive rose, with Woolworths gaining another 0.9% post result.

Its antithesis discretionary rose 0.3%, thanks to a 3.2% gain on result from Wesfarmers ((WES)). Lovisa Holdings ((LOV)) kicked on 6.3% post result and footwear retailer Accent Group ((AX1)) jumped 17.1% on its result, but is not in the index.

It was another down day for technology as the swings and roundabouts continued. It fell -2.5% and will be up today on the Nasdaq rebound. We might also note US BNPL player Affirm reported its earnings on Friday night and jumped 30%.

Otherwise it were materials (-1.6%) and the banks (-1.1%) that clobbered the market. All the big mining names were down and the banks didn’t fare much better, with bond yields up 5 points.

Energy lost -1.4% on lower oil prices and utilities fell -1.3%.

Individual result winners on the day included Jumbo Interactive ((JIN)), up 3.8%, and Aussie Broadband ((ABB)), up 11.0%.

Pilbara Minerals ((PLS)) was a loser, down -8.0%, while there was kick-on selling in Judo Capital ((JDO)), down -8.9%, Tabcorp Holdings ((TAH)), -7.8%, and Whitehaven Coal ((WHC)), -6.4%.

Along with the last of the earnings reports – and there’s still plenty to come this week – we’ll see some important data, including retail sales today, CPI on Wednesday, and the first of the GDP segments of construction work and capex ahead of next week’s June quarter GDP result.

No Idea

“Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment. Doing too much could also do unnecessary harm to the economy.

“As is often the case, we are navigating by the stars under cloudy skies.”

Thank Jay, that should clear things up.

Not that anyone assumes the Fed has a crystal ball, but Jerome Powell’s Jackson Hole speech held nothing new and provided nothing definitive. The market still has the odds of a September rate hike at 20% and November at just over 50% (no October meeting).

The US stock market was at least relieved it was not a fire and brimstone delivery as was the case last year, accepts that the Fed is data-dependent, and is less worried about maybe one more hike than it is about how long rates will be held at the level for next year. On potential cuts, Powell said nothing.

Still the S&P500 and Nasdaq managed to close a volatile week higher after three weeks of losses.

The US two-year bond moved up a bit, the ten-year was steady.

Attention now turns to this week’s jobs numbers, PCE inflation report and revision of June quarter GDP. It is anticipated that headline PCE will have moved higher, as was the case with the CPI, but the core remains uncertain. As energy and food prices rebound, headline inflation may well rise in August as well.

With August all but over, and the US result season winding down, we then move into September, the weakest month, and October, the scariest.

Commodities

Oil futures climbed to a one-week high on Friday night as US diesel prices soared, the number of oil rigs dropped and a fire broke out at a refinery in Louisiana.

“The main thing was concern about diesel prices, the diesel crack spread [to the crude price] and worries about diesel shortages when refineries go into maintenance,” said one commentator, after the diesel price jumped 5%.

The Aussie is down -0.2% at US$0.6410.

The SPI Overnight closed up 20 points or 0.3% on Saturday morning.

The Week Ahead

The local result season will continue through to Thursday. While most of the big names have now reported there are still a few to come, such as Fortescue Metals ((FMG)) (today), Mineral Resources ((MIN)), Brambles ((BXB)) and Harvey Norman ((HVN)).

We also begin the countdown to Australia’s June quarter GDP release, with numbers due for construction work and private sector capex.

And we’ll see July retail sales, CPI, building approvals, house prices and housing finance.

China releases August PMIs on Thursday and everyone follows with manufacturing PMIs on Friday.

For the US, it's consumer confidence, PCE inflation, private sector jobs and non-farm payrolls, plus a revision of GDP.

The UK is closed tonight, so no base metal trading.

With earnings season ramping down this week, ex-dividend season ramps up. Each day will thus begin with a handicap for the ASX200.

Today’s list of ex-divs includes Aurizon Holdings ((AZJ)), Challenger ((CGF)), Domino’s Pizza ((DMP)) and Santos ((STO)).

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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