The ASX is likely to be down today, with ASX 200 futures trading one point lower this morning.
A red start to the week follows the lower finishes of the S&P 500 and Nasdaq. The one bright spot for Wall St was the blue-chip Dow, which added 130 points. For the week, the S&P500 fell 0.28%, the Dow Jones fell 0.13% and the Nasdaq added 0.43%.
IG Markets' Tony Sycamore writes, “After last week’s rebound in retail sales and stronger-than-expected CPI and PPI data, the market is now fully priced for 25bp rate hikes in March and May and 70% priced for a 25bp rate hike in June which would take the Feds target rate to 5.25-5.50%.
“In the past, the expectation of additional rate Fed rate hikes would have undercut equities and other risk assets. However, with the market swapping the ‘hard landing’ narrative of Q4 2022 to one of ‘no landing’ in Q1 2023, speculative assets have been well supported, including Bitcoin up 13% last week."
The best and worst-performing sectors last week?
Best-performing sectors included Healthcare up 4.81%, Information Technology 4.30% and Consumer Staples up 2.90%. The worst-performing sectors were Materials down 2.18%, Energy down 2.14% and Utilities down 0.46%.
The best-performing stocks in the ASX top 100 included Charter Hall Group (ASX:CHC) up 10.80% followed by SEEK Ltd up 9.81% and James Hardie Industries plc (ASX:JHX) up 9.54%. The worst-performing stocks included IGO Ltd down 7.40% followed by Insurance Australia Group Ltd down 6.89% and Incitec Pivot Ltd (ASX:IPL) down 6.30%.
Here’s what we saw (source Commsec):
- The Euro rose from US$1.0610 to near US$1.0700 and was at US$1.0694 at the US close.
- The Aussie dollar rose from US68.10 cents to US68.85 cents and was near session highs at the US close.
- The Japanese yen rose from 135.10 yen per US dollar to JPY134.05 and was near JPY134.15 at the US close.
- Global oil prices slumped by near 2.5% on Friday. Investors worried that continued US rate increases would result in weaker energy demand. Also weighing on prices were media reports claiming that Russian oil producers will maintain current volumes of crude oil exports.
- The Brent crude oil price fell by US$2.14 or 2.5% to US$83.00 a barrel.
- The US Nymex crude oil price slid by US$2.15 or 2.7% to US$76.34 a barrel. Over the week Brent crude lost 3.9% and Nymex crude fell by 4.2%.
- Base metal prices generally fell Friday. The copper futures price lost 1.2%. The aluminium futures price fell by 0.8%. Over the week copper rose 2.1% and aluminium fell by 3.5%.
- The gold futures price fell by US$1.60 or 0.1% to US$1,850.20 an ounce. Spot gold was trading near US$1,841 an ounce at the US close.
- Over the week gold fell by 1.3%.
- Iron ore futures lifted US25 cents or 0.2% to US$124.94 a tonne. Over the week iron ore fell by US20 cents or 0.2%.
What's next for Australian stock market?
Wealth Within co-founder and chief analyst Dale Gillham gives his take on what to expect from the stock market.
In just 22 trading days so far in 2023, the All Ordinaries Index has really stunned many investors, as it has traded up 8.98% and is still rising. On four of those days, it closed lower while on three it failed to break the high of the previous day, but by any measure, the market had a stellar rise in January.
So, is the market’s performance in January an indication of things to come? If we look back at the last 10 years, the market rose five times in January and fell five times.
Of the five where the market fell, only once did it end the year down. In the four years prior to 2023 where it rose, the All Ordinaries Index finished the year higher on three occasions.
While we have to wait until the end of this year to see what transpires, the data is pretty conclusive that regardless of what happens in January, the probability indicates that the market will rise. Given this, it is safe to assume that 2023 will finish higher than it opened.
Even with such a strong rise on the stock market, we still need to expect one or two down weeks in the next month before rising to the next major high. That said, the move up out of the low in October 2022 ran for eight weeks with the market rising 12% before falling away in December 2022. So, while I say we need to expect a fall, it doesn’t mean it will occur, but it is far better to expect it than to be surprised by it.
Earnings results to come this week
a2 Milk Company, Ampol Ltd, Bendigo & Adelaide Bank Ltd, Bluescope Steel Limited, Iress Ltd, Northern Star Resources Ltd (ASX:NST) and Silver Lake Resources Ltd are all expected to issue earnings results.
Bendigo and Adelaide Bank (ASX:BEN)’s 2023 interim financial result was pleasing for the bank.
“This is a strong result that has been made possible by disciplined execution across the business. Bendigo and Adelaide Bank has delivered on all key metrics with cash earnings, return on equity and capital ratios all improving over the half,” CEO and managing director Marnie Baker said.
“We have delivered strong income growth and managed our costs prudently. We have continued to deliver on our transformation agenda, made significant progress on our goal of a cost-to-income ratio of towards 50% and grown our customer base, while maintaining a strong balance sheet and preserving our credit quality.
“We are Australia’s most trusted bank with market-leading customer advocacy and satisfaction scores. Our customer numbers are growing because customers are attracted to our products, digital capability, service levels and our longstanding purpose of feeding into the prosperity of the community.”
Results included:
- Statutory net profit: $249 million, up 49.3%
- Cash earnings after tax: $294.7 million, up 22.9%
- Net interest margin: 1.88%, up 19 basis points
- Total income on a cash basis: $958.2 million, up 14.5%
- Credit expenses: $5.6 million vs net writeback of $9.4 million
- Cost to income ratio: 54.6%, an improvement of 500 basis points
- CET1: 10.13%, up 45 basis points
- Cash earnings per share: 52.2c, up 22.2%
- Fully Franked Dividend: 29 cents per share, up 9.4%
- Total lending: $77.0 billion, down 1.1%
- Residential lending: 1.0x system on a rolling 12-month basis
- Total deposits: $76.5 billion, up 2.5%
- Total funding: $88.9 billion up 1.5%, with customer deposits representing 73.9% of total funding.
Looking ahead, Baker said, “We expect interest rates to peak or plateau in 2023, however, the longer-term trend will not be decided until inflation returns to within the RBA’s target range.
"While credit expenses are benign, they are likely to come under pressure as the tightening cycle continues and move closer toward historical averages for the bank, which are low by industry standards.
“Borrowers remain well positioned with 43% at least one year ahead on repayments and 33% two years ahead on repayments. We have seen very little deterioration in these numbers with 84% of home loan customers maintaining a financial buffer.
“At this point in the interest rate cycle, it is reasonable to expect house prices to continue to moderate, which in turn, will lead to lower system credit growth.
“We are seeing a continued contest for market share play out, primarily amongst the big four banks, using incentives in the form of cash-back offers for housing loans. Our unique Community Bank model has proven its strong retail deposit gathering capability with the network of 302 branches contributing approximately $10 billion in net funding.
“Our business is well positioned to perform in this environment and we are targeting growth at or better than system whilst generating appropriate returns on equity. We will continue to take opportunities when we see them, supported by our ongoing focus on margins and volume management, while preparing for and meeting challenges as they arise.
“This includes the natural disasters which have devastated communities around Australia in recent times. We continue to support customers affected by natural disasters because we recognise that recovery is a marathon, not a sprint. We stand ready to support our customers when they need help.
“Our work on cyber and information security are among our top priorities and we remain on high alert, looking for new ways to detect and neutralise threats to customer safety. We continue to invest in our capabilities and work closely with industry bodies, cyber security agencies and intelligence services.
“We expect the accelerated pace of change from the last few years to continue. Customer expectations will continue to grow and competition will intensify. We are confident we can succeed in this environment because our multichannel strategy combined with our customer value proposition, trust scores and market-leading NPS provide us with a competitive edge. “Importantly our portfolios remain well positioned, underpinned by strong sources of funding and capital levels.”