ASX LIVE | ASX Falls with Global Markets; Earnings Reports For Dexus, PGH, NWL, BAP, TCL

ASX 200 closed down 1.50% as stronger-than-expected US retail sales pushed expectations of potential interest rate hikes by the US Fed. Further disappointing news from China also stoked fears of a deflationary slowdown occurring within the economy, and a general property slump dragged iron ore prices down, affecting the materials sector.

All 11 Sectors finished in the red today, with IT and Materials the worst hit.

ASX 200 Sector Worst Performance

• Information Technology down -2.93%
• Materials down -2.63%
• Financials down -1.71%

The best individual performers:

• PSC Insurance Group [ASX:PSI], up 5.77%
• Bapcor [ASX:BAP], up 5.45%
• Mirvac Group [ASX:MGR], up 5.26%
• Super Retail Group[ASX:SUL], up 4.14%
• Summerset Group [ASX:SNZ], up 3.10%

The worst individual performers:

• Fletcher Building[ASX:FBU], down 9.27%
• Megaport [ASX:MP1], down 5.72%
• Champion Iron[ASX:CIA], down 4.92%
• IPH Ltd [ASX:IPH], down 4.81%
• Seek Ltd [ASX:SEK], down 4.62%

All figures shown are from 4:36pm AEST

According to the Atlanta Fed’s GDPNow model, real GDP growth in the third quarter of 2023 is now forecast to be 5.0%, up from 4.1% on August 8.

The increase in the forecast is due to stronger-than-expected consumer spending, which is now expected to contribute 3.0% to GDP growth.

Housing is expected to neither add nor subtract from growth, while the change in inventories is expected to add 1.17% to headline growth.

Source: Federal Reserve Bank of Atlanta

The XIJ Information Technology Sector was the worst hit by today’s sell-off, down 3.04% this afternoon.

Despite the rough day, the index has only lost 0.50% in the past month as it has tracked positive sentiment seen in the Nasdaq as investors FOMO into AI and Tech stocks.

In the wider ASX, all 11 sectors are down, with IT and Materials the worst hit.

The Offshore Alliance and unions representing workers at Woodsides offshore LNG operations say negotiations are yet to resolve over wage prices.

The 99%of workers voted in favour of industrial action, but a decision looms sometime this week if they will strike.

Woodside Energy said today that ‘positive progress’ was being made on wage disputes, even as the union alliance said key differences remained.

Meanwhile, Chevron is preparing to bypass unions and put its pay offer to a direct vote at its Gorgon and Wheatstone operations.

There are around 500 Chevron workers that will vote, with the ballot to finish next week.

Global gas markets are anxiously watching the progress of the talks, with TTF Gas prices up 12.72% today and 54.63% up this month already as supply shortfalls in Europe are feared.

Here’s a great chart from the world of finance.

Below we see the equity risk premium of the S&P 500 over time.

The equity risk premium is a long-term prediction of how much the stock market will outperform risk-free debt instruments such as 10-year government bonds)

Source: Game of Trades

It begs the question, is the same thing happening in the ASX, and what does that mean for your trades.

Here are some of my thoughts below:

https://www.moneymorning.com.au/20230815/are-the-biggest-asx-stocks-overvalued.html

Bapcor, the automotive parts group, said in its earnings report today that its retail stores are facing an uncertain trading environment, but its trade business is on solid ground.

The retail side of the business, which includes the flagship Autobarn stores, was affected by high inflation, higher interest rates, and increased payroll taxes.

EBITDA margins in the retail arm fell to 15.9% from 16.9% a year ago. Overall net profit after tax was down 15.4% to $106 million for the 12 months ended June 30, with revenue up 9.7% to $2.02 billion.

The company maintained its final dividend at 11.5 cents per share.

CEO Noel Meehan said that the group would try to mitigate the tougher economic conditions by increasing sales of its house brand range, which makes up about 34% of the products on shelves at its company-owned stores.

ASX 200 drops 1.26% to 7,212.7 as a tough day on the market has only the Real Estate sector up by a hair at 0.10%.

The worst hit by midday was the Information Technology sector, down 2.97%, followed by materials, down nearly 2% after signs of a struggling Chinese property sector have swiped down Iron Ore prices again.

China’s property woes have compounded recently as news of China’s largest property developer Country Garden failing to pay bonds has spread to the country’s opaque Trust banking sector. The shadow banking sector has traditionally been seen as solid by regular Chinese, who often used it as a safe haven investment.

The latest company raising concerns is Zhongzhi Enterprise Group, which has hit the headlines after failing to pay its latest round of payments.

The company has approximately $213 billion in assets under management.

Fletcher Building’s latest earnings report has sent shares tumbling this morning as the Australian building products group posted flat revenue of $8.47 billion.

Key Numbers:

• The group’s EBIT was $798m, up 5.5% from FY22,
• NPAT was down nearly 46% at $235m from $432m
• Underlying profit was $798m from $756m

The company reduced its full-year dividend to 34 cents per share from 40 cents last year.

Fletcher chief executive Ross Taylor said the underlying profit rose by 6%, which was a ‘good performance in a slowing market’.

However, the bottom line was hit by significant costs of $301 million.

‘The significant items related mainly to additional provisions of $255m on the New Zealand International Convention Centre and Hobson Street Hotel (‘NZICC’) project,’ Taylor said.

Real wages growth in Australia is still negative, but at least it’s becoming less so.

The latest data from the Australian Bureau of Statistics shows that the Wage Price Index (measures changes in the price of labour) rose 0.8% in the June quarter of 2023, and 3.6% over the year.

The private sector rose 0.8%, and the public sector rose 0.7%.

The industry with the most significant contributions to wage growth was construction, with 1.3%.

Real wages growth in Australia is still negative – but at least its becoming less so…expect a cross over next year. pic.twitter.com/0cJFckHKqS

— Shane Oliver (@ShaneOliverAMP) August 15, 2023

Packaging supplier Pact Group Holdings announced the sale of 50% of its Crate Pooling business to Morrison & Co, a global infrastructure investment manager and the creation of a new joint venture in an attempt to reignite growth.

Revenue for the year was up 6% to $1.97 billion for the company, but NPAT showed a loss of $7 million.

EBITDA was down 4% to $277 million.

Chief executive Sanjay Dayal said tougher economic conditions and higher inflation meant softening demand for packaging in consumer products.

Investors appeared excited about the change in strategy with the share price up 11% this morning.

ASX Landlord and fund manager Dexus reported a full-year statutory net loss after tax of $752.7 million in 2023.

This was a significant reversal from the previous year’s profit of $1.6 billion. The loss was mainly due to $1.2 billion of fair valuation losses booked on the company’s investment properties.

Funds from operations (FFO), the standard earnings measure in the property sector, fell 2.5% to $738.5 million in 2023.

Distributions also fell 3% to 51.6¢ per share.

Dexus CEO Darren Steinberg said he expects the challenging conditions to continue in 2024.

‘We anticipate that FY24 will remain a challenging period as capital flows and market sentiment continue to be impacted by inflation, higher interest rates and geopolitical risks,’ Steinberg said

ASX opened down 0.69% to 7,254.4 as a global market sell-off occurred overnight as opposite stories prevailed.

Strong retail data from the US showed retail spending was up 3.17% YoY in July, well above the forecasted 1.50% and the previous 1.59%. These numbers’ strength raised fears that the Fed would have to keep interest rates higher for longer to keep inflation under control.

Meanwhile, in China, the central bank unexpectedly cut rates for the second time in three months as it released weak retail sales data. The central authority has been trying to spur the economy without large stimulus packages but has yet to achieve much.

• $AUD up +0.04% at 64.56 US cents
• ASX futures flat +0.00% to 7,165.0
• S&P 500 Down -1.16%
• NASDAQ Down -1.14%
• DOW Down -1.02%
• FTSE Down -1.57%
• STOXX Down -1.08%
• SSE Down -0.071%
• Bitcoin Down -0.72% to $US 29,198.98
• Spot gold down -0.29% to $US 1,902.14
• Iron ore down -0.70% to $US 104.63
• Brent Crude down -0.22% to $US 85.08pb

All figures shown are from 10:15am AEST