Weekly market update - 14th of August 2023
Written and accurate as at: Aug 14, 2023 Current Stats & Facts
Reporting Season Enters Its Third Week in Australia
As the third week of the reporting season commences in Australia, momentum is building. The past week indicated further signs of a slowing cycle in response to RBA rate hikes, but resilience prevails amidst various headwinds, with results largely aligning with expectations.
Direct Portfolio Stocks Performance
James Hardie posted a strong positive surprise in its Q.1 result (higher than expected sales and margins), CBA reported an essentially in-line result. At the same time, QBE missed estimates at the headline level (high catastrophe claims) but reiterated full-year expectations of 'mid-teen' return on equity.
US Market Analysis
An in-line US CPI result, with core CPI of +0.2% in July and annual core inflation of 4.7%, continues to support the current disinflation narrative. Equity markets continue to price in a soft landing, although the US 2-year-10-year yield remains inverted, typically signalling elevated recession risk.
Australian and US Market Performance
The Australian S&P/ASX 200 was +0.2% for the week, while the S&P 500 in the US was -0.3% (NASDAQ -1.9%).
Key Market Drivers
- An in-line July US headline and core CPI print support the disinflation and 'peak Fed' narrative.
- Early days in the domestic earnings season with resilience amidst headwinds.
- Chevron and Woodside attempt to avert strikes in the North West Shelf that threaten to disrupt up to 10% of global LNG supplies.
- China reports weak economic data with declines in exports and imports.
Macro/Economic Newsflow
- The July US CPI print was in line, confirming a disinflationary theme.
- The NAB Business Survey maintained business conditions in July at above-average levels.
- The Westpac Consumer Sentiment Index fell slightly in August.
- RBA Governor Lowe characterized the RBA as being in a ‘calibration phase’, stressing a patient approach.
Major Share Price Moves in S&P/ASX 200
- Boral Limited: +14.3% due to strong volumes at their result.
- AMP Limited: +13.7% with an ambitious cost-save target by FY25.
- James Hardie: +13.4% with a Q1 result 16% ahead of consensus.
- Core Lithium: -10.2% as the company transitions to a producer amid softer pricing.
- Resmed Inc: -10.5% continuing to sell off after a drop in gross margins.
- Block Inc: -12.8% after a Q2 update highlighting softer market conditions.
The resilience observed in the face of headwinds during Australia's reporting season reflects an intriguing financial landscape. Various factors, from domestic earnings to international economic shifts, offer a comprehensive view of the market dynamics. The close interplay between different economic elements warrants a strategic and vigilant approach for investors and financial professionals alike.