ASX News LIVE | ASX Set for Deep Red Along with Wall St; Bank of England Cuts Rates, First Time in Four Years

Investors are eagerly anticipating tonight’s US nonfarm payrolls report, which could potentially intensify the ongoing stock market retreat if it falls short of expectations.

Analysts predict the addition of 175,000 jobs in July, a decrease from June’s 206,000. The unemployment rate is expected to remain steady at 4.1%.

Average hourly earnings are forecast to show a 0.3% increase on the month and 3.7% from a year ago. If those predictions stand, it will represent the lowest earnings increase since May 2021.

However, this report is known for its unpredictability and could deliver unexpected results, adding another layer of uncertainty to the already volatile market conditions.

The U.S. Department of Justice (DOJ) has initiated an investigation into Nvidia, following complaints from competitors alleging potential abuse of its market dominance in the sale of chips powering artificial intelligence.

According to sources involved in the discussions, DOJ investigators are examining whether Nvidia exerted pressure on cloud providers to purchase multiple Nvidia products.

The probe also extends to allegations that Nvidia may be charging higher prices for networking equipment to customers who express interest in acquiring AI chips from rival companies like Advanced Micro Devices and Intel.

Nvidia currently holds approximately 80% of the AI chip market share.

A Nvidia spokesperson responded to the allegations, saying:

‘We compete based on decades of investment and innovation, scrupulously adhering to all laws, making Nvidia openly available in every cloud and on-prem for every enterprise, and ensuring that customers can choose whatever solution is best for them.’

ResMed [ASX:RMD] shares have swung sharply today, starting the day with positive gains before falling back with the wider market.

The initial upswing as it reported a 9% revenue increase to US$1.2 billion in Q4, driven by higher demand for sleep devices and masks and strong SaaS growth.

U.S., Canada, and Latin America revenue grew 10%, while Europe, Asia, and other markets saw 8% growth.

Gross margin improved by 350 basis points to 58.5%, leading to quarterly earnings of US$1.98 per share. The board also announced a higher quarterly dividend of 10% to US$0.53 per share.

For FY 2024, revenue rose 11% to US$4.7 billion, with earnings per share at US$6.92 (US$7.72 non-GAAP). The results exceeded market expectations, with earnings surpassing the consensus estimate of US$2.09 per share and beating Macquarie’s projected quarterly gross margin of 58.3%.

Shares are currently down by -1.6%, trading at $31.87 per share.

Australian shares plummeted this morning, with the ASX 200 down 2% in the largest single-day decline since March.

The move comes just a day after reaching an all-time closing high of 8114.7. Despite this drop, the index was still on course to finish the week 0.7% higher.

This morning’s move mirrored a sharp downturn on Wall Street amid concerns that the Federal Reserve is lagging in reducing interest rates.

All eleven sectors of the benchmark index were in the red, with financial and energy stocks leading the decline.

Among the major banks, National Bank was hit hardest, dropping by over 3.6%. Commonwealth Bank declined 3%, Westpac fell 2.5%, and ANZ decreased by 2.4%.

The mining sector also saw significant losses, with Rio Tinto falling 2.2%, BHP down 1.7%, and Fortescue dropping 2.2%.

Energy companies were not immune to the downturn despite oil prices showing signs of recovery after earlier falls this week.

Santos declined by 2%, and Woodside decreased by 2.2%. Paladin Energy emerged as the biggest loser of the ASX 200, plummeting over 12%.

Block Inc stood out as one of the few gainers today, climbing 7% after upgrading its full-year guidance and announcing a new US$3 billion ($4.6 billion) share buyback program.

Sleep apnoea devices manufacturer ResMed initially rallied but later reversed course, falling 2.1% despite reporting a 9% increase in revenue for April-June and raising quarterly dividends by 10% to US53¢ per share.

Block [ASX:SQ2] shares are up by +7% to $101.90 after posting stronger-than-expected earnings last night.

The California-based company expects third-quarter adjusted core earnings of US$695 million, above analysts’ expectations of US$679.7 million.

The fintech company that owns Afterpay now expects annual adjusted core earnings of at least US$2.90 billion, higher than its prior forecast of US$2.76 billion.

Chief Financial Officer of Block, Amrita Ahuja said:

‘Our strong second quarter results and improved outlook for the remainder of the year have allowed us to raise our full-year guidance’

 

‘We’re focused on achieving Rule of 40 in 2026, and our updated guidance for this year puts us on track for Rule of 35, an improvement from our prior guidance.’

The ‘rule of 40’ is a common goal for SaaS and tech companies, which means your revenue growth rate and profit margin combined should be at or greater than 40%.

For the third quarter, Block expects gross profit of US$2.22 billion, representing a 17% YoY growth and adjusted operating income of $320 million with a 14% margin.

That would put them at 31% for the rule of 40, below the goal but a marked improvement from its prior quarter.

With the ASX 200 down by -2% coming into midday, only 15 stocks are in the green. The top five performers so far today are:

Block, up +7.76%

Pinnacle Investment +2.77%

Clarity Pharmaceuticals +2.46%

Gold Road Resources +1.45%

BSP Financial +0.61%

The rest are eeking small gains today which is better than the loss leaders:

Paladin Energy -10.6%

Arcadium Lithium -6.8%

Champion Iron -6.4%

Alcoa Corporation -5.65%

Pilbara Minerals -5.4%

As concerns about global growth persist expect more volatile days, but opportunities remain.

As Warren Buffet said: ‘Remember that the stock market is a manic depressive.‘

It will have big days down and up, so remember to keep to your long-term plan.

As the ASX and Wall Street fall sharply today on revived recession fears, it’s helpful to remember that Interest rate cuts usually come at a time of economic weakness, not strength.

The major data point that scared Wall St last night was in manufacturing. The US manufacturing sector contracted for the fourth consecutive month in July, as high interest rates in the US continued to weaken demand for new orders.

Meanwhile, consumer confidence is at an eight-month low there, both strong signals that high interest rates have run their course through the economy and they are ready for cuts/

One more strong signal that cuts will very likely be coming in September from the Fed was in employment.

Here are the latest figures from Shane Oliver, Head of Investing Strategy and Chief Economist at AMP.

Strong US June qtr productivity +2.3% at annual rate.
It’s up 2.7%yoy, labour compensation is +3.2%yoy so unit labour costs are just +0.5%yoy…well below the 2% inflation target.
So supports Fed rate cuts ahead.
(EvercoreISI chart) pic.twitter.com/kcyg5omRuv

— Shane Oliver (@ShaneOliverAMP) August 1, 2024

NexGen Energy [ASX:NXG], a uranium mining company dual-listed on the ASX and CAC stock exchanges, has seen its shares sink by -13.6% to $8.99 per share this morning after updating its financial projections for its Rook project in Alberta, Canada

The company now anticipates pre-production capital costs to reach C$2.2 billion (approximately US$2.4 billion).

Over the project’s lifespan, NexGen expects average cash operating costs to be C$13.86 per pound of uranium produced. Additionally, the company forecasts annual sustaining capital costs to average around C$70 million.

These revised figures were said to consider inflationary pressures and other factors, including changes in engineering and procurement processes.

To secure funding for the Rook project, NexGen is currently engaged in discussions with various potential financiers. These include commercial banks, export credit agencies, and alternative funding sources.

Good morning. Charlie here,

The ASX 200 dived on opening today, falling by -2.17% to 7,938.6 after an extremely red day on Wall Street. Market jitters have returned as poor manufacturing and employment data revived recession fears in the US.

Following more disappointing earnings from the mega-cap stocks, the Mag 7 also took a hit, with Nvidia and Tesla down around 6.7%.

Amazon fell -1.6% in the session and is down by -7% in after-hours trading as its latest earnings disappointed. Intel also tumbled in after-hours trading as it announced layoffs for 15% of its workforce.

Volatility and uncertainty have certainly been injected back into the market, with the VIX, or volatility index, surging 13.6% to hit a nine-month high.

Meanwhile, the Bank of England cut interest rates for the first time in four years, cutting them by 25 basis points as expected.