Join our daily newsletter At The Bell to receive exclusive market insights
The share market advanced for the first time in four sessions, but not by enough to avert a third straight weekly loss as investment markets steeled for more interest rate hikes.
The S&P/ASX 200 bounced 21.6 points or 0.3 per cent from a five-week low to 7307. Today’s advance trimmed the index’s weekly deficit to 40 points or roughly 0.5 per cent.
Gains in the big banks and well-received trading updates from Brambles, Aristocrat Leisure and Afterpay owner Block helped offset declines in bulk metal producers. Lithium miners rallied after reporting massively increased profits.
What moved the market
Stocks continued to lose altitude this week as the major banks increased their interest rate forecasts to reflect hawkish Reserve Bank commentary. Westpac this morning joined ANZ and NAB in raising its peak rate forecast to 4.1 per cent.
With the cash rate currently sitting at 3.35 per cent, the new target implies three more quarter-point increases.
“We still see the date of the peak as May 2023 but now see that peak as slightly higher,” Westpac’s chief economist Bill Evans said.
“At 4.1%, the cash rate will be in deeply contractionary territory and a pause will be appropriate,” he added. Evans then foresees no change in rates until the March quarter of next year.
The ASX 200 has given up roughly half of its 2023 gains since the new year rally topped out on February 3.
“If there is one thing that has been weighing heavily on equities since last year, it is hawkish central banks willing to sacrifice economic growth to focus exclusively on their mandate of bringing inflation down to acceptable levels. January was about no rate hikes, with the economy showing resilience and inflation showing some easing, which probably pushed equities higher,” Kunal Sawhney, CEO of research group Kalkine, said.
“However, indices have been paring their January gains after this month’s monetary policy meetings. What happens over the near term may depend on forces that drive price growth and ultimately shape central banks’ rate decisions.”
The S&P 500’s first rise in five sessions provided a base for today’s rebound. The broadest of Wall Street’s major indices bounced 0.53 per cent after data suggested the US economy was not running as hot at the end of last year as previously feared.
Winners’ circle
Afterpay owner Block jumped 5.86 per cent after a profit beat helped offset an earnings miss. The payments company reported a 40 per cent increase in fourth-quarter gross profit to US$1.66 billion. Earnings came in short of consensus expectations at 22 cents per share, versus an expected 30 cps.
A guidance upgrade lifted transport logistics business Brambles 7.46 per cent. A strong first half prompted the company to raise its full-year revenue growth forecast to 12-14 per cent and its profit growth forecast to 15-18 per cent. First-half profit climbed 20 per cent on a constant currency basis to US$331.1 million.
Aristocrat Leisure firmed 2.76 per cent after CEO Trevor Croker reaffirmed full-year guidance at this morning’s AGM. The pokie-maker expects net profit growth over the full year, underpinned by its gaming operations.
Link Administration tacked on 0.47 per cent after beating its first-half earnings guidance. At $80.2 million, operating earnings were just ahead of guidance of $75-$80 million. Group revenues improved 1.9 per cent in constant currency terms.
Pilbara Minerals rose 1.12 per cent after reporting a staggering 989 per cent lift in first-half profits amid unprecedented demand for lithium. Sales increased by 305 per cent from the prior corresponding period. Revenues jumped 647 per cent and earnings by 1,091 per cent. Statutory net profit after tax soared from $114 million to $1.24 billion.
Allkem saw a similar explosion in first-half net profit from US$12.7 million to US$219.2 million. Revenues were a record US$557.9 million. The share price firmed 3.66 per cent.
Beleaguered casino group Star Entertainment climbed 8.57 per cent after raising capital to shore up its balance sheet. The company raised $595 million from institutional investors. The company yesterday posted a $1.3 billion loss for the last half.
Bega Cheese reversed much of yesterday’s post-earnings plunge with a bounce of 7.53 per cent.
The big four high-street banks rallied between 0.12 and 1.32 per cent.
Doghouse
Payments firm EML dived 9.48 per cent after its Irish subsidiary was warned it was not doing enough to meet Irish regulatory requirements. The Central Bank of Ireland said PFS Card Services Ireland had made only limited progress in fixing deficiencies in its anti-money laundering and counter-terrorist financing controls. The central bank was “minded” to impose a freeze on payments growth.
Iron ore producers BHP and Rio Tinto retreated in the wake of price falls in Chinese ore after the exchange operator imposed a trading cap to curb speculation. Rio Tinto shed 3.63 per cent. BHP lost 1.61 per cent. Fortescue Metals gave up 1.71 per cent.
Several companies traded ex-dividend. Deterra dropped 2.36 per cent, Newcrest 2.54 per cent and BlueScope Steel 0.7 per cent.
Among other companies reporting earnings, Jumbo Interactive fell 0.89 per cent, Prospa 1.82 per cent, Universal Store 1.92 per cent and Austal 0.81 per cent.
Other markets
Japan’s Nikkei index rallied 1.1 per cent as trade resumed after yesterday’s public holiday. The Asia Dow dropped 0.56 per cent, China’s Shanghai Composite 0.7 per cent and Hong Kong’s Hang Seng 1.41 per cent.
US futures were little changed ahead of tonight’s inflation data. S&P 500 futures dipped four points or 0.1 per cent.
Oil built on its first advance in seven sessions. Brent crude climbed 73 US cents or 0.9 per cent to US$82.68 a barrel.
Gold bounced US$6.10 or 0.3 per cent off a near two-month low to US$1,832.90 an ounce.
The dollar firmed 0.1 per cent to 68.14 US cents.
