ASX Update: Wesfarmers, Woolworths up, Rio Tinto, BHP down

The Australian stock market set a new record last week, with strong trading by the major banks helping to smash the All Ordinaries Index’s pre-Global Financial Crisis high.

 The All Ords reached 6862.4 on Wednesday, the highest point it has been since 1 November, 2007, when it was 6853.6. On Friday, the index finished at 6879 points, which was 1.37% per cent higher than the previous week’s close.

The S&P/ASX200 almost rewrote the record books, too, but it just fell short of the November, 2007 benchmark of 6828.7 points, to close last week at 6793 points, which was up 1.39% for the week. 

Mining giant Rio Tinto will deliver its first-half earnings on Thursday at the start of the corporate earnings season in Australia.

The company has flagged its iron ore earnings in the past six months will be $US12.1 billion, up $US2.4 billion from the same time last year, largely as a result of higher commodity prices. Analysts expect Rio will report a $US5.38 billion net profit after tax for the half. Despite that, though, Rio Tinto’s share price dropped 4% for the week. The fall wiped $1.5 billion off Rio Tinto’s market capitalisation.

It was a soft week for many of the major resources companies, with Fortescue Metals dropping 4.7%, Iluka Resources tumbling 14.7%, BHP losing 0.5% and Regis Resources slipping 13.5%. The falls came after investment bank analysts said the current high in commodity prices, especially iron ore, could be short-lived.

On the upside, Canstar Research tables show the Australian share market gains last week were driven by three of the four major banks and the blue chip stocks Wesfarmers and Woolworths.

The National Australia Bank (NAB) led the gains among the banks. Its share price rose by 3.6% for the week, as investors continued to react positively to the appointment of Ross McEwan as its next chief executive officer.

Influential UBS analyst Jonathan Mott wrote during the week that Mr McEwan’s appointment was a major positive for the bank to help rectify its reputation following the royal commission.

During the week, Westpac’s share price also gained 2.5%, while ANZ’s went up 1.5%. 

Wesfarmers, which owns businesses such as Bunnings, Kmart and Officeworks, gained 3.4%, while Woolworths was up 2.6%. Wesfarmers is performing strongly, with commentators noting that the company’s share price has lifted 22% since the start of the year. Some analysts have identified its earlier demerger from supermarket giant Coles as one of the major drivers of this growth.  

On the economic front, Australia’s second quarter inflation rate will be published on Thursday, and economists expect the headline rate will increase from 1.3% to around 1.5%, primarily as a result of higher petrol prices.

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