Brambles buoys market, ASX gains, Rio Tinto sinks as Dominos burned
The busiest week of reporting season ended on a positive note, with the industrials and technology sectors, up 1.4 and 2.4 per cent respectively, contributing to a 0.3 per cent gain for the market. The materials sector was the main detractor, falling 1.2 per cent as Rio Tinto (ASX:RIO) dropped 3.6 per cent as the iron ore price continues to weaken, but it was all about Brambles (ASX:BXB) which gained 7.5 per cent after delivering a better than expected result. Management reported a 9 per cent increase in profit to US$331 million with some US$416 million in cost increases combining with the slow return of ‘hoarded’ pallets to drive revenue growth of 7 per cent. Block (ASX:SQ2) also performed strongly, gaining 5.9 per cent as the Afterpay owner solidifies its position as a global fintech leader. Gross profit was $2.4 billion for the quarter as payment volumes increase 15 per cent, while the Cash App now has more than 51 million monthly users. Across the week the utilities sector outperformed, gaining 6.1 per cent, benefitting from the confirmed takeover offer for Origin (ASX:ORG) which gained 15.4 per cent. Materials was the primary detractor, down 3 per cent, while Domino’s Pizza (ASX:DMP) fell by more than a quarter after an underwhelming forecast.
Inflation threat remains in focus, Carvana tanks, Boeing forced into recall
All three US benchmarks finished lower on Friday, hit by renewed concerns of sticker than expected inflation. The Dow Jones fell 1 per cent, S&P500, 1.1 and the Nasdaq 1.7 per cent, sending the market to a fourth straight week of losses. The biggest driver was a higher than expected increase in the personal consumption expenditure or PCE price index, where the price of goods and services was 0.6 per cent higher in January and accelerated to 5.4 per cent over the 12 months. This came as consumer spending also rose by 1.8 per cent in January. Once loved tech company Carvana (NYSE:CVNA) continued its incredible decline, falling 20 per cent after announcing its intention to cut US$1 billion in costs, as they seek to avoid mass layoffs. Similarly, Boeing (NYSE:BA) fell by close to 5 per cent after the company was forced to halt deliveries of the 787 Dreamliner on safety concerns. Across the week the S&P500 outperformed, falling 2.7 per cent, the Nasdaq was 3.3 per cent lower and the Dow Jones 3 per cent.
Understanding the data, superannuation in focus, passing through costs
With reporting season nearing an end, those with a keen eye are getting a reminder of the unique nature of financial reporting. On the one hand, the government and central banks are worried about inflation, at the same time that many companies are significantly increasing their prices, and contributing to the spiral. On the other, both retail sales and standard revenue data is not reported in inflation adjusted terms, thus for the case of retail sales, even a positive sales result could have been solely driven by price increases. Having attended the SMSF Association conference this week it couldn’t have been timelier, with news the government was considering a new cap on superannuation balances. Any tinkering of the system will further reduce the populations confidence in super contributions, potentially leading to even less engagement. On the other hand, despite a cap it will remain by far the best place to hold retirement capital.