In this week’s update, Global markets saw modest gains, with the S&P 500 rising slightly, while the ASX 200 dipped amid mixed performances across sectors. Key corporate results from Coles and Lovisa highlighted growth and challenges in the Australian market. Managing Director and Senior Financial Advisor Tyson Roberts explains more.
Global Market Overview
The global markets experienced a relatively calm trading session overnight, with the S&P 500 inching up by 9 points to close 0.2% higher at 5,626. The Technology sector led the gains, rising by 0.6%, while other sectors remained relatively steady. This quiet market movement is reflective of investors awaiting more significant economic data, particularly the upcoming Personal Consumption Expenditures (PCE) inflation report, which is expected to provide clearer insights into the current economic environment.
In the bond market, the US 10-year Treasury yield saw a slight increase of 1 basis point, bringing it to 3.82%. This marginal rise suggests cautious optimism among investors, who continue to weigh the prospects of future interest rate changes. Meanwhile, the US Dollar Index declined by 0.3%, settling at 100.552. The drop in the dollar's value could be attributed to growing expectations that the Federal Reserve might slow down its pace of interest rate hikes if inflation data continues to show signs of moderation.
On the economic front, the consumer confidence index in the US defied expectations by rising to 103.3 in August. This was a surprise to many, as analysts had predicted a decline to 100.1 from the previously revised figure of 101.9. The unexpected boost in consumer confidence signals resilience in the US economy, which could support consumer spending in the coming months. However, whether this trend will continue remains to be seen, particularly in light of the inflation data due later in the week.
Local Market Wrap
In Australia, the ASX 200 faced a downturn, falling by 13 points to close 0.2% lower at 8,071. The Information Technology sector was the weakest performer, declining by 1.3%, while six out of the eleven sectors ended the day in negative territory. The market’s softness reflects a cautious sentiment among investors, possibly influenced by the mixed performance of global markets and the anticipation of key economic data releases.
The SPI Futures Index indicated a further dip this morning, trading 29 points lower at 7,996. This suggests a continuation of the downward trend, with investors remaining wary of potential economic headwinds. In the bond market, the 10-year Treasury yield in Australia increased by 6 basis points to 3.91%, signaling rising expectations of future interest rate adjustments by the Reserve Bank of Australia (RBA). Additionally, the Australian dollar strengthened slightly against the US dollar, rising by 0.3% to 0.6793, reflecting a modest increase in market confidence.
Corporate Highlights
Coles Group Limited (COL) reported its FY24 financial results, showcasing a 5.7% increase in normalised revenue to $43.6 billion. This growth was primarily driven by a 4.3% rise in Supermarket sales, which benefitted from the success of the value campaign promotion, improved product availability, and the launch of new collectable items. The company’s underlying Earnings Before Interest and Taxes (EBIT) from continuing operations also rose by 5.7%, excluding a $107 million investment in major projects, including two automated Coles Group Centres (CGC). As a result, the Board declared a second-half dividend of 32 cents per share, bringing the total dividends for the year to 68 cents per share. COL shares responded positively to the news, rising by 1.7% to close at $18.77.
In the first eight weeks of the new financial year, supermarket revenue increased by 3.7%, while liquor sales saw a slight decline of 1.4%. The decrease in liquor sales was partly attributed to the impact of the CrowdStrike outage in July, which disrupted operations. Despite this, the company remains optimistic about its growth prospects, with FY24 capital expenditure guidance set at approximately $1.2 billion, indicating continued investment in key areas of the business.
Lovisa Holdings Limited (LOV) also released its FY24 results, reporting a 17% increase in revenue, although like-for-like sales were down by 2%. The company's revenue growth was supported by its ongoing store rollout, with 128 new stores opened during the year, expanding its global footprint to 900 stores across 46 markets. Operating cashflows increased by 27%, thanks to a strong focus on working capital management and improved supplier terms. Despite the growth, LOV shares fell by 13% to close at $32.45, as investors reacted to the challenges posed by inflationary pressures and rising wage costs.
The company's gross margin improved by 110 basis points to 81% in the second half of FY24, driven by effective price and promotion management. However, the higher cost of doing business, influenced by inflation and wage increases, remains a concern. Trading in the first eight weeks of FY25 has been solid, with like-for-like sales up by 2% and total sales increasing by 13% compared to the previous corresponding period.
ASX 200 Movers
The ASX 200 saw significant movements among individual stocks, with Nanosonics Ltd (NAN) leading the gainers, soaring by 22.6% to close at $3.31. This sharp rise was followed by Strike Energy Ltd (STX), which jumped 21.2% to $0.20, and IDP Education Ltd (IEL), which climbed 5.5% to $15.87. NIB Holdings Ltd (NHF) and Woodside Energy Group Ltd (WDS) also posted strong performances, rising by 4.5% and 3.9% respectively.
On the other hand, Johns Lyng Group Ltd (JLG) suffered the biggest loss, plummeting by 27.1% to close at $4.06. Lovisa Holdings Ltd (LOV) followed with a 13% decline, while Smartgroup Corporation Ltd (SIQ), Deterra Royalties Ltd (DRR), and IPH Ltd (IPH) also ended the day in the red, with losses ranging from 5.4% to 7.9%.
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Global Market Indices and Commodities
Looking at global equity indices, the S&P/ASX 200 Index fell by 0.2%, while the S&P 500 in the US gained 0.2%. Other major indices, including the NASDAQ, Dow Jones, FTSE 100, and DAX, posted modest gains, reflecting a generally positive sentiment in global markets. However, the Hang Seng Index in Hong Kong and the Shanghai Index in China faced challenges, with the latter falling by 0.6%.
In the commodities market, Brent Oil dropped by 2.3% to $79.55 per barrel, while Gold prices edged up by 0.3% to $2,524.64 per ounce. Copper and Iron Ore saw modest increases of 0.5% and 0.4% respectively, indicating steady demand in the industrial sector.
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Currencies
The Australian dollar strengthened against the US dollar, rising by 0.3% to 0.6793, while it remained relatively stable against other major currencies. The US Dollar Index fell by 0.3%, reflecting broader market movements and shifting investor sentiment.
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