ASX News LIVE | XJO Opens Up as Safe-Haven Assets See Flurry of Demand; Gold, Silver & Oil All Lift

Australian shares rally back above 7000

The S&P/ASX 200 closed 70.4 points, or 1%, higher at 7040.6 today, its best one-day performance so far this month. The rally was fueled by a dovish shift in rhetoric from US Federal Reserve members and early signs of inflation easing in Australia from the NAB business survey.

US Fed hints at slower rate rises

Federal Reserve Vice Chairman Philip Jefferson and Bank of Dallas president Lorie Logan suggested that the recent surge in long-term Treasury yields may reduce the need for the US central bank to raise its benchmark interest rate again. This was seen as a sign that the Fed may be slowing down its aggressive rate hike campaign.

Australian inflation easing

NAB’s monthly business survey showed that labour cost growth eased to 2% in quarterly equivalent terms in September, and purchase cost growth declined to 1.8%. Overall price growth eased to 1%. This suggests that inflation may be peaking in Australia, which could give the RBA more room to pause its rate hike cycle.

Interest rate-sensitive sectors surge

Interest rate-sensitive sectors surged on the ASX, with the tech sector a standout, gaining 3.02%. Other sectors that performed included Telecoms (+2.24%) and Real Estate (+1.80%).

Utilities stocks lead the way

Utilities stocks were the best-performing sector on the benchmark, up 4.17% buoyed by a 5.5% gain by Origin Energy to $9.21. The rally came after Australia’s competition watchdog approved an $18.7 billion buyout offer for the electricity and gas wholesaler. Fellow utilities heavyweight AGL also rallied 3.9% to $10.89.

The outlook for Australian shares remains positive in the short term, with investors likely to remain focused on the Fed’s next policy meeting in November. If the Fed signals a more dovish stance, it could provide further support for Australian equities. However, investors will also need to keep an eye on risks such as the ongoing conflict in the Middle East and the potential for a recession in the US.

Virgin Australia has reported its first profit in 11 years.

The company reported a statutory net profit after tax of $129 million for FY23. This is a significant gain from its $565.5 million in 2022.

The report also showed revenue more than doubled to $5 billion as customers took holidays that were put off due to COVID-19 restrictions and concerns.

CEO Jayne Hrdlicka said today’s return to profitability was an ‘important milestone’ for the airline.

‘By creating a systemically lower cost base and a conservative balance sheet as well as investing heavily in technology and our frontline, we are well positioned for the future,’ she said.

Virgin Australia is owned by US private equity firm Bain Capital, who bought the airline back in 2020 for $3.5 billion after the company went into voluntary administration as costs and debt overcame the airline during Australian travel restrictions.

Now, Bain has been eyeing a potential public listing, while Virgin says it will hire 1,500 frontline staff next year.

According to Bloomberg sources, Bain Capital has pushed back the IPO launch to 2024, citing market conditions.

The Virgin IPO launch was set to be the largest this year, and a rapid return to public markets after less than three years since it was overcome by debt.

Life360 [ASX:360] shares are up by nearly 6% today after responding to what it called ‘inaccurate information’ from unnamed broker research that affected its share price yesterday.

In an announcement today Life360 responded by saying:

‘Life360 notes broker research citing Monthly Active User (MAU) data based on inaccurate information from a third-party provider. At September 30, 2023, Life360’s global MAU were 58.4 million, a quarter-on-quarter uplift of 8.1% from 54.0 million at June 30, 2023. U.S. MAU of 35.4 million increased 5.3% quarter-on-quarter from 33.6 million at June 30, 2023.’

The company also announced that its next report on Q3 earnings will be released on 15 November 2023.

It’s been a tough year for commodity prices. A high USD and China’s slowdown have all weighed on prices.

Now we are seeing gold, silver and oil recover, whats next?

Here’s a nice quick overview of what’s been the problems so far.

Commodity prices have been sliding. What’s causing 2023’s commodities slump? Presented by @CMEGroup pic.twitter.com/CfrLBYNv4G

— Bloomberg Markets (@markets) October 10, 2023

 

Australian building permits rebounded in August 2023, increasing by 7.0% from the previous month’s -7.4% drop. This was the first increase in three months and was mainly driven by a recovery in approvals for private-sector dwellings, excluding houses (9.4% vs -14.6% in July).

Approvals for private sector houses also increased but at a slower pace. Victoria, New South Wales, and Western Australia all saw strong increases in approvals, while Queensland, Tasmania, and South Australia saw declines.

Over the year to August, dwellings approved have slumped -22.9%.

Source: TradingEconomics

‘The survey showed some positive signs for inflation with cost pressures and price growth easing in the month,’ said NAB chief economist Alan Oster.

‘Minimum wage impacts and movements in oil prices have caused some volatility in cost pressures recently but the September survey results suggest the easing trend seen earlier in the year may continue.’

With two consumer surveys out today, we can take an effective gauge of how the public is feeling moving into the end of the year.

The ANZ-Roy Morgan Consumer Confidence index found that confidence in the economy was up 1.9pts to 80.1.

This would take confidence up to its highest point since February, as interest rates remain on hold.

At a per-state level, confidence was up in NSW, Victoria, and QLD but down in WA and SA.

ANZ Senior Economist Adeliade Timbrell commented on the results today, saying that personal finances were the significant factor in today’s results:

‘One less encouraging reason “current finances’ confidence is likely trending up may be because the question asks participants to compare their current finances to a year ago, and inflation and interest rates were already a central issue for households in late 2022.’

Meanwhile, the Westpac-Melbourne Institute index was up 2.9% this month after falling 1.5% last month.

Senior Economist at Westpac Matthew Hassan thought that inflation was still the biggest thing weighing on consumers, saying:

‘While there are still some glimmers of hope around family finances and the outlook for jobs, these are being overshadowed by still high inflation and renewed rate rise concerns.’

The ASX 200 has seen strong gains throughout the morning up 1.12% to 7,048.5 as all sectors gained today.

The Utilities sector is the strongest performer this morning up 3.46% as investors flood into Origin after the ACCC gave the greenlight on the takeover by North American private equity. AGL is also gaining today, up 3.15%.

Info-Tech has also outperformed today, up 2.10%, bouncing from a tough month that has seen it fall -5.51%.

Oil has held onto its jump after the conflict in Israel but appears to be slowing for now, with Brent prices down 0.23% in intraday trading so far.

The Australian dollar continues to make ground on its American counterpart, up 0.16% today at US64.20 cents, recovering from its 11-month low at the end of last week.

Gold continues to gain, up 0.84%, while BTC has fallen since midday after gains seen in the morning and is now trading at US$27,541.

Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC), has given the green light for the acquisition of ASX energy powerhouse Origin Energy by Brookfield and MidOcean.

The deal, valued at a staggering $18.7 billion, could be a significant milestone in the energy sector, which eyes a higher renewables mix of power.

Under the terms of the agreement, each share of Origin Energy will be purchased at a rate of approximately $8.91 a share.

Gina Cass-Gottlieb, the Chairwoman of the ACCC, stated that the commission meticulously evaluated the potential impacts of this acquisition on Australia’s competitive landscape. After a thorough analysis, the ACCC concluded that the benefits arising from this transaction, specifically in the context of Australia’s transition towards renewable energy sources, would far outweigh any potential drawbacks.

The decision had been delayed twice before the decision today as the ACCC weighed the risks on competition. In a statement today Ms Cass-Gottlieb said:

‘On the first limb of the test, we are not satisfied that the proposed acquisition would not be likely to substantially lessen competition. However, after a detailed review, we are satisfied that the proposed acquisition is likely to result in public benefits that would outweigh the likely public detriments.’

‘We found that the public benefits and public detriments in this matter were finely balanced. Likely detriments, particularly anticompetitive effects from vertical integration, had to be weighed against likely benefits to Australia’s renewable energy transition. We considered undertakings offered by Brookfield, AusNet and MidOcean in this weighing process.’

With the ACCC’s tick the deal now goes to a shareholder vote, which is likely to pass.