Investment Ideas From the Edge of the Bell Curve
Here’s a great post from IFM economist Alex Joiner about the latest job data from the Australian Bureau of Statistics.
The key takeaways are that the Australian Economy added 47,500 new jobs in August.
Much of that appears to be Australia absorbing new immigrants, but there were some positive signs of strength.
Unemployment remained stable at 4.1%, and participation was also flat at 67%.
This likely means that expectations of earlier cuts from the RBA are unrealistic at this point.
Until things look markedly weaker for the labour market, the RBA will likely keep rates higher for longer.
Here’s Alex’s thoughts on the data today:
The RBA’s point about the labour market being tight remains intact, means that rates will stayed elevated for longer. https://t.co/uQlReluYIn
— Alex Joiner 🇦🇺 (@IFM_Economist) September 19, 2024
The ASX 200 is up by +0.3% around midday as markets touched a record high this morning before falling back to flat and then gaining again.
Markets are likely to continue seeing choppy trading. Commodity markets and tech stocks remain in flux as they absorb the news of the Fed’s overnight 50bp cut.
Just before midday, we also received the latest data from the Australian Bureau of Statistics, which showed that the Australian economy added 47,500 jobs in August.
That figure was above forecasts, showing the unemployment rate held steady at 4.2%.
In company-specific moves on the ASX, we’ve seen ALS fall -10% after a troubling trading update said its minerals business was facing ‘volume headwinds’.
Commercial explosives maker Orica saw its shares gain +1.6% after an update, which said it expects improved earnings in the second half of this year.
Scrap metal recycler Sims is up around +11% despite seeing continued challenges in its ANZ business segment. Despite this, its performance and margins were showing strength in other regions.
Major metal recycler Sims [ASX:SGM] is up by nearly 7% in trading this morning after releasing a fairly positive trading update.
The update expanded on their recent improvement in second-half-year trading and gave guidance for Q1 FY25.
The main takeaway was:
‘Despite ongoing market challenges across all regions, the Metal businesses are projected to deliver an estimated EBIT of circa $55 million in Q1 FY25.’
‘All the Metal businesses are on track to contribute to this good start to FY25, particularly North America Metal (“NAM”), which is estimated to deliver $29 million in EBIT and 22% in Trading Margin.’
NAM’s recent performance is thanks to is strategy pivot where it has focused on margins, including buying more unprocessed material and targeting the most favourable markets.
Sims’ 50% share of SA Recycling’s earnings is expected to deliver EBIT of $24 million for the first quarter of FY25 above its 2H FY24 run rate and at a Trading Margin of 29%.
While its ANZ division still see’s issues ahead:
‘Australia and New Zealand Metal (“ANZ”) continued to face challenging market conditions, impacted by increased Chinese exports into Asia and a slowdown in the domestic market.’
‘While its estimated EBIT contribution of $13 million for the first quarter of FY25 is below the 2H FY24 run rate, it marks a solid start to FY25 with an expected Trading Margin of 27% for the quarter.’
Stephen Mikkelsen, CEO and Managing Director of Sims Limited, said:
“It is encouraging to see the improved performance of our Metal businesses despite the challenging market conditions, particularly as we refocused our portfolio. I am especially pleased with the strong results in NAM, which highlight the successful execution of our strategy in a difficult market and the team’s commitment to organisational adjustments.”
Brisbane-based ALS [ASX:ALQ] the professional testing giants have seen their shares drop by over 10% on the opening bell today.
The drop comes after the company released a trading update where it warned that the ‘business has recently encountered volume headwinds within the Minerals division’.
As was already raised in the recent AGM, the company repeated:
“Volumes in geochemistry and metallurgy remain patchy and fluctuations have become even more pronounced in July and August.”
While its North American volumes have been more steady, other divisions have been ‘relatively stable‘ the note said.
The impact of this is expected to be underlying EBIT slightly ahead of the prior period, while Net profit after tax (NPAT) is expected to be down ~5%.
A further update and outlook is expected with the 1H24 results, which are due 19 November 2024.
The ASX 200 shrugged off the weak lead by international markets to open at a fresh record high of 8,177 before easing back slightly.
Currently, the major benchmark is up +0.34% at 8,169.5 as ASX 200 futures turned positive in the 15 minutes before market open today.
Expect further choppiness in trading today as we await Australian Jobs Data being released at 11:30 am (AEST).
Similar to the US Fed’s moves overnight, employment data will be the main factor determining the RBA’s decision to cut rates sooner rather than later.
Many economists have tipped rates to come down in February next year.
However, as last night showed, 105 out of 114 economists also thought the Fed’s cut last night was only going to be 0.25 basis points.
Similarly, many economists believed the RBNZ when it said it was not going to cut rates for some time.
As soon as a bad labour market print occurs, these central banks tend to move very quickly to steer the market away from a recession.
Good morning. Charlie here,
Overnight markets shifted up, then down again as the Fed announced a mammoth double-cut overnight.
This was the first time interest rates were cut in the US since March 2020, and markets sold on the news after a week of running up in anticipation.
Double cuts (50 basis points) like this are fairly rare. The last two times the Fed cut rates by 50bp was in January 2001, just before the dot-com bubble burst and in September 2007, in the early phase of the GFC.
This isn’t necessarily a sign that things are going to crash from here. The Fed very much attempted to paint the cut as ‘not an emergency cut,’ which 50bp cuts are usually framed as.
Instead, J Powell signalled that it was instead a pre-emptive strike rather than playing catch-up to save the US labour market.
‘We, don’t think we’re behind,’ Powell said last night, ‘You can take this as a sign of our commitment not to get behind.’
Wall St seemed visibly confused about the move, with major benchmarks climbing up and then selling on the news and closing down.
Similar moves are expected on the ASX today, with ASX 200 Futures swapping to higher in the last minutes before open.
However, expect a fairly choppy day on the market as investors absorb the news and quiet commodity markets.
Name | Value | % Chg | |
---|---|---|---|
Major Indices | |||
S&P 500 | 5,618 | -0.29% | |
Dow Jones | 41,503 | -0.25% | |
NASDAQ Comp | 17,573 | -0.31% | |
Russell 2000 | 2,206 | +0.04% | |
Country Indices | |||
UK | 8,253 | -0.68% | |
Germany | 18,711 | -0.08% | |
Japan | 36,380 | +0.49% | |
Hong Kong | 17,660 | +1.37% | |
Euro | 4,835 | -0.45% |
Name | Value | % Chg | |
---|---|---|---|
Commodities (USD) | |||
Gold | 2,558 | -0.61% | |
Silver | 30.19 | -1.78% | |
Iron Ore | 91.20 | +0.43% | |
Copper | 4.213 | -0.30% | |
WTI Oil | 70.52 | -0.55% | |
Currency | |||
![]() | AUD/USD | 67.65¢ | +0.02% |
Cryptocurrency | |||
![]() | Bitcoin (USD) | 62,034 | +3.11% |
Ethereum (USD) | 2,383 | +2.10% |
1:00 pm — September 19, 2024
12:51 pm — September 19, 2024
10:49 am — September 19, 2024
10:39 am — September 19, 2024
10:23 am — September 19, 2024
9:54 am — September 19, 2024
Investment ideas from the edge of the bell curve.
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