The ASX hit a four-week low today. The S&P/ASX200 is lower, dropping 21.60 points or 0.29% to 7,412.10.
Bottom-performing stocks in the index were The Star Entertainment Group Ltd and Imugene Ltd (ASX:IMU, OTC:IUGNF) down 20.27% and 8.62% respectively.
Star hit a record low after the casino operator warned of up to a $1.6 billion first-half earnings impact. It is fair to say the company hasn’t fared well from the Bell and Gotterson Reviews into its behaviour or increased competition with Crown in Sydney.
The Star reported underlying EBITDA of $195 million to $205 million in the first half of the financial year and expects to report underlying EBITDA of $330 million to $360 million for the year ending June 30, 2023.
The guidance includes estimated remediation costs of $35 million to $45 million in FY23: 50% is expected to be recurring from FY24.
A non-cash impairment charge in relation to its NSW business in the range of $400 million to $1.6 billion in its first-half results is included.
This is based on the implementation of NSW casino duty rate increases proposed by the NSW Government in December 2022.
Shares in Star were down 18.7% to $1.52 at in morning trading and dropped further to 20.27% to finish at $1.48 – the lowest close ever.
Overall, the index lost 1.68% for the last five days but sits 2.79% below its 52-week high.
The market was impacted by mixed company earnings. However, energy stocks were elevated by Russia’s plans to curb supply in retaliation for Western sanctions.
Russia intends to reduce oil production by 500,000 barrels per day from March, following the European Union, G7 and countries including Australia’s decision to impose a price cap.
Woodside Energy Group was a winner up by 2.01% to $36.58, while Santos Ltd (ASX:STO) gained 2.3% and Beach Energy Ltd was 0.33% higher.
Looking at the sectors, only Energy was in the green to the tune of 1.82%, while Consumer Discretionary was the hardest hit, down 1.47%.
3 things to watch for the week ahead
eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. ASX200: Reporting season shifts up a gear
It’s been a choppy start to the reporting season, but earnings growth has been pretty resilient at 10%, with over a quarter of the index reporting. The materials sector is leading the way with 40% growth, beating estimates, whilst financials are also outperforming, unsurprisingly.
The RBA’s fastest interest rate cycle for decades is a win for banking margins. Banks have been quick to pass on rate rises to borrowers but not so quick to savers, boosting net interest income, which will continue to be a theme across reporting season for financials.
One name to watch for this week is JB-HiFi on February 14. Consumer discretionary stocks have been the standout surprise in US earnings season, and local retailers could have a similar fate. Consumers continued to spend in the second half of 2022, particularly around Black Friday, which could be a huge boost for JB-Hifi.
However, as always, outlooks will be the key, and this will be a focal point for retailers, particularly if the RBA’s financial tightening continues to dampen consumer spending.
Another key sector to watch will be Materials, and Whitehaven Coal will be on the top of many investors' lists this week. With many other miners set to lower dividends, Whitehaven looks set for another increase after its mammoth year. Its guidance on growing costs with inflation biting will also be watched, but with coal prices staying elevated, investors could continue to be rewarded in 2023.
2. Australian unemployment rate - peak unemployment is behind us
Last month Australia’s unemployment rate stayed near decade lows at 3.5% and January’s reading this week (February 16) is expected to show the rate unchanged. This is, of course, a good sign, as a strong labour market helps Australia avoid a recession.
However, a low unemployment rate is a double-edged sword, as a tight labour market means wage growth continues to rise.
The RBA doesn’t want wages to spiral as they are a key contributor to inflation, the very thing they’re trying to control. However, the good news or maybe the bad news for some, is that we’ve likely seen the peak of Australian unemployment, particularly with the recent surge in migration, and wages may cool in the coming months.
3. US CPI - A 7th straight decline on the cards
The Federal Reserve lifted interest rates by 25bps in their first meeting of 2023 as they look to combat soaring inflation. After peaking in June, US CPI has fallen for six consecutive months, so will January’s (February 15) reading be seven?
Inflation has trended lower with energy and food costs easing but services inflation is still sticky, which is what the Fed is trying to get under control and why Jerome Powell has implied that the inflation fight is not over. The common theme is likely to be that inflation is declining again. However, the risk is that prices aren’t falling as quickly as the Fed desires and would justify further rate hikes.
Essentially, the Fed has no incentive to take its foot off the gas with a dovish approach, if they give an inch, the market will take a mile, and it's easier to cut if they make a mistake rather than re-tighten. The RBA pointed towards global inflation in its statement after hiking rates last week, so another fall in inflation across the pond will also be critical for the RBA.
Five at five
Xantippe Resources up 20% on uncovering further thick lithium pegmatite at Blanche
Xantippe Resources Ltd (ASX:XTC, OTC:XTCPF) is trading higher on intersecting additional two thick intervals of lithium pegmatites from reverse circulation (RC) drilling at Blanche Prospect within its Southern Cross Project in Western Australia.
Jindalee Resources teams with POSCO to optimise McDermitt lithium processing
Jindalee Resources Ltd (ASX:JRL) has teamed up with major Korean lithium producer and NYSE-lister POSCO Holdings to investigate the McDermitt Lithium Project in Oregon, US.
Emyria secures clinical-grade MDMA supply for Australia following TGA reschedule on July 1
Emyria Ltd (ASX:EMD) has inked an agreement with Canadian manufacturer PharmAla for the supply of clinical-grade MDMA, facilitated by Mind Medicine Australia, to support MDMA-assisted trials once the Therapeutic Goods Administration (TGA) reschedules MDMA and psilocybin to Schedule 8 (Controlled Drugs) on July 1, 2023.
Parabellum Resources delivers in excess of 2.2 million tonnes rare earth oxides in maiden Khotgor resource
Parabellum Resources Ltd (ASX:PBL) has delivered more than 2.2 million tonnes of rare earth oxides (REO) in a highly encouraging maiden mineral resource estimate (MRE) for the Khotgor REE Project in Mongolia.
Azure Minerals uncovers high-grade lithium at Andover, up to 1.51% over 7.2 metres in lithium-rich pegmatite
Azure Minerals Ltd (ASX:AZS) has fielded results for several diamond holes drilled in late 2022, which intersected lithium-bearing pegmatites at the Andover Project which is 60% owned by Azure and 40% by the Creasy Group.
On your six
China reopening fuels rebound in oil demand but Russian supplies hampered by sanctions
Global oil demand is set to rise by 1.9 million barrels a day (mb/d) in 2023 to a record 101.7 mb/d, with nearly half the gain from China following the lifting of its COVID restrictions, according to International Energy Agency’s (IEA) latest oil market report.
The one to watch
Parabellum Resources welcomes significant rare earth oxide resource at Khotgor
Parabellum Resources Ltd (ASX:PBL) executive director Peter Secker talks Proactive through its significant maiden JORC resource for the Khotgor REE Project in Mongolia.