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Earnings season heats up on ASX

Daily Market Update

Assessing profit results is the main game on the Australian market at present, and the upshot of Wednesday’s action was the benchmark S&P/ASX 200 giving up 78.7 points, or 1.1 per cent, to 7,352.2, while the broader All Ordinaries index retreated 69.5 points, or 0.9 per cent, to 7,559.1.

Commonwealth Bank reported a record half-year profit of $5.15 billion, up 9 per cent and matching expectations, as home and business lending grew. The bank raised its interim dividend by 20 per cent to $2.10, fully franked, but the shares fell $6.25, or 5.7 per cent, to $103.00, as analysts emphasised that the bank’s profit margin may have peaked.

CBA’s struggles dragged the banking sector lower, and it ended the day as the worst sectoral performer, down 3.4 per cent, as Westpac fell $1.03, or 4.3 per cent, to $22.83;

  • NAB retreated $1.30, or 4.1 per cent, to $30.31; and ANZ declined 97 cents, or 3.8 per cent, to $24.78.

    Global hearing solutions leader Cochlear jumped $16.20, or 7.8 per cent, to $225.28, after comfortably beating profit expectations, despite half-year profit falling 16 per cent. Investors also cheered a share buyback and the confirmation of full-year profit guidance, which predicts a 5 per cent–10 per cent full-year increase. 

    Wesfarmers gained 65 cents, or 1.3 per cent, to $49.35, as the owner of Kmart, Bunnings and Officeworks owner reported a 14.1 per cent rise in net profit to $1.384 billion, a record half-year profit, and lifted its interim dividend 8 cents, to 88 cents.  

    Medical imaging IT provider Pro Medicus reported a record half-year result, which saw revenue jump by 28.3 per cent, to $56.9 million, and net profit surge 31.5 per cent, to $27.2 million. Pro Medicus gained 42 cents, or 0.7 per cent, to $65.47.

    Corporate Travel Management slid $1.50, or 8.7 per cent, to $15.75 after its half-year result came in weaker than expected.

    Star Entertainment spiked 19 cents, or 14.4 per cent, to $1.47, recovering partially from heavy losses earlier in the week. The troubled casino group is still down 21.8 per cent this week.

    Lower iron ore price hits Fortescue

    Fortescue Metals gave up 18 cents, or 0.8 per cent lower, to $22.00 after it announced a 15 per cent slump in half-year profit, to $US2.36 billion ($3.4 billion), on the back of lower iron ore prices. The company lowered its dividend payout ratio to 65 per cent of profits, from 70 per cent a year ago. BHP advanced 22 cents, or 0.5 per cent, to $47.94; and Rio Tinto surged $1.83, or 1.5 per cent, to $123.33.

    In coal, Whitehaven Coal gained 28 cents, or 3.5 per cent, to $8.19; New Hope Corporation advanced 32 cents, or 5.9 per cent, to $5.73; Coronado Global Resources rose 5 cents, or 2.4 per cent, to $2.16; Yancoal Australia added 13 cents, or 2.3 per cent, to $5.77; and Stanmore Resources spiked 26 cents, or 7.3 per cent, higher to $3.83.

    Among the lithium cohort, Allkem slid 17 cents, or 1.4 per cent, to $12.33; and fellow producer Pilbara Minerals eased 13 cents, or 2.7 per cent, to $4.72. Project developer Lake Resources lost 3.5 cents, or 5.1 per cent, to 64 cents; Liontown Resources shed 3.5 cents, or 2.5 per cent, to $1.34; Core Lithium dropped 4 cents, or 4 per cent, to 97 cents; but US-based Piedmont Lithium, which has sales agreements with Tesla, went against the trend, putting on 4.5 cents, or 4.8 per cent, to 98 cents.  

    US tills humming, feeding inflation

    The major US indices all rose, as investors assesses strong retail sales numbers and what that might mean for interest rates. January retail sales in the US came in 3 per cent higher, much stronger than the 1.9 per cent rise expected. The figure indicated that inflation is likely to remain higher than perhaps the Federal Reserve would want.

    The 30-stock Dow Jones Industrial Average added 38.78 points, or 0.1 per cent, recovering from an early fall to close at 34,128.05. The broader S&P 500 index gained 11.5 points, or 0.3 per cent, to 4,147.60, while the tech-heavy Nasdaq Composite Index rose 110.4 points, or 0.9 per cent, helped by Airbnb, which surged 13.4 per cent after beating earnings expectations.

    After the surprise retail sales data the US 10-year bond yield pushed to its highest level of the year, up 4.6 basis points to 3.807 per cent, while the more policy-sensitive 2-year yield crept 0.2 basis points higher, to 4.624 per cent. The moves show that investors expect the Federal Reserve to keep lifting rates.

    On the commodities front, gold slid US$18.87, or 1 per cent, to US$1,836.02 an ounce, the global benchmark Brent crude oil grade eased 36 cents, or 0.4 per cent, to US$85.22 a barrel, and US West Texas Intermediate crude closed 55 cents, or 0.7 per cent, lower at US$78.51 a barrel.

    The Australian dollar is buying 69.03 US cents this morning, down one-third of a cent from the local close on Wednesday.

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