The share market defied weak leads from Wall Street as gains in defensive sectors helped keep it on track for its best monthly return in more than two years.
The S&P/ASX 200 rallied 11 points or 0.14 percent to 7493. Today’s advance extended the benchmark’s advance for the month to almost 6.5 percent, its best return since a 9.95 percent surge in November 2020.
Supermarkets and healthcare companies provided much of the momentum, supported by bulk metal miners and some of the banks. Tech stocks and battery metal miners dragged.
What’s driving the market
The Australian benchmark looked set to end a strong month at a fresh nine-month high. Today’s advance carried the index to within 1.9 percent of its 2021 record.
The market extended its gains after a collapse in retail sales alleviated pressure on the Reserve Bank to raise benchmark rates next week. Retail turnover contracted 3.9 percent last month as the increasing cost of living dampened buying. The decline was the first in 12 months.
“The large fall in December suggests that retail spending is slowing due to high cost-of-living pressures. Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event,” Ben Dorber, head of retail statistics at the Australian Bureau of Statistics, said.
The Reserve Bank meets next week for the first policy meeting of 2023. The bank is widely expected to hike the cash rate target by 25 basis points following the biggest increase in annual inflation since 1990.
Consumer confidence continued to recover from recession levels. The ANZ-Roy Morgan confidence index edged up 0.9 percent to 86.8. While the index remained far below the long-term average, the four-week moving average rose to its highest since June.
Investors have taken advantage of a two-month break since the last central bank meetings to drive global equities sharply higher. Expectations for a slowdown in rate increases will be tested this week by meetings of the US Federal Reserve, European Central Bank and Bank of England.
US stocks retreated overnight ahead of rates decisions, earnings from the market’s biggest companies and December jobs data. The S&P 500 fell 1.3 percent.
Going up
Supermarkets Woolworths and Coles were among the morning’s best performers following upgrades from Credit Suisse. Woolworths rallied 2.73 percent. Coles gained 2.25 percent.
Healthcare was the session’s other big winner. ResMed led with a rise of 2.07 percent. Healius added 1.25 percent, CSL 0.82 percent and Cochlear 0.73 percent.
Beach Energy rallied 3.82 percent after reaffirming its confidence in the prospects for the Perth Basin despite downgrading its reserves there. CEO Morne Englebrecht said the firm was confident it would meet its domestic demand commitments.
Record quarterly production lifted Nickel Industries 2.05 percent. The Indonesia-focussed miner produced 23,072 tonnes of nickel metal, up from 20,275 tonnes the previous quarter. Record sales of US$371.2 million helped generate record earnings of US$90 million.
Centuria Industrial REIT climbed 0.3 percent to a seven-month high after reaffirming guidance for its full-year distribution and funds from operations. The firm’s returns were supported by an acceleration in industrial market rents due to low vacancies and solid demand.
Flight Centre entered a trading halt to raise funds to acquire luxury travel brand Scott Dunn. The travel agent will pay $211 million for the UK firm, which specialises in tailor-made high-end holidays. The acquisition will be funded via a $180 million institutional placement and a $40 million retail share purchase offer.
Going down
Network connectivity specialist Megaport tumbled 22.66 percent amid signs of slowing growth last quarter. The company said “current economic certainty seems to be delaying customer decision making”. Customer numbers increased just 1 percent from the previous quarter. Monthly recurring revenues grew 7 percent.
A record half-year profit failed to keep nickel miner IGO in positive territory during a tough session for battery metal producers. The miner increased its first-half profit sixfold to $591 million from $91 million in 1H22. Revenue increased 43 percent to $542 million. Shares in the firm dropped 3.25 percent.
Other battery metal producers to feel the heat from an overnight softening in sentiment were Novonix -6.46 percent, Sayona Mining -4.24 percent and Core Lithium -4.27 percent.
A revenue and earnings downgrade just weeks after returning to the boards drove beauty and personal care retailer BWX down 10.42 percent. The company lowered its revenue guidance from $205-$230 million to $170-$190 million. Forecast earnings dropped to $10-$15 million from previous guidance of $25-$30 million. Weak US sales and stock shortages were cited as causes for the downgrade.
Infant formula specialist Bubs dropped 7.04 percent after China’s Covid-19 lockdowns caused a slump in a key market. Chinese revenues contracted by 66 percent in the second quarter, comparted to the prior corresponding period. Group revenues declined 28 percent to $14.3 million.
Vicinity Centres dipped 0.48 percent after appointing Peter Huddle as CEO and Managing Director. Huddle joined the firm as Chief Operating Officer in 2019 and had been acting CEO since mid-November.
Other markets
Asian markets were mixed. The Asia Dow firmed 0.13 percent. Hong Kong’s Hang Seng gained 0.55 percent. China’s Shanghai Composite shed 0.1 percent. Japan’s Nikkei eased 0.11 percent.
S&P 500 futures bounced four points or 0.1 percent.
Oil added to last night’s 2 percent decline. Brent crude slid five US cents or less than 0.1 percent to US$84.45 a barrel.
Gold dipped 20 US cents or 0.01 percent to US$1,922.70 an ounce.
The dollar was steady at 70.57 US cents.
Comments