ASX market wrap: ‘Political shocks are turning into economic shocks’

Results season continues this week on the ASX amid international volatility.


  • Australia’s unemployment rate and interest rates unchanged
  • China-US trade tensions continue: Trump hits out at China trade as a “very unfair trading relationship”
  • Reserve Bank boss says the trade war is hurting the Australian economy
  • ASX update: It was a positive week on the local market despite the trade war fallout
  • Results season continues for Australian listed companies, including Lendlease, BHP, Crown, Coles Group and Qantas Group.

Dozens of listed companies, from miner Fortescue Metals to retailer Wesfarmers, supermarket Woolworths and Virgin Airlines, will open their books this week, the final week of this reporting season.

They will announce their results amid ongoing volatility over global trade and politics that last week sent the US S&P500 tumbling.

This morning, the local share market reflected the US experience, falling sharply after opening – the ASX 200 dropping from its Friday afternoon close of 6523 points to 6409 points just after 10am today.

S&P and All Ords Movements (16/08/2019 to 23/08/2019)
  Closing Points % Change
S&P/ASX 200 (XJO) 6,523 1.84%
All Ordinaries (XAO) 6,614 1.99%
Prepared by Canstar. Points taken as of Monday open to Friday close.

 

ASX Sector Movements, 16-23 August, 2019
  Closing Points % Change
Consumer Discretionary (XDJ) 2,449 3.41%
Consumer Staples (XSJ) 12,157 2.48%
Energy (XEJ) 10,485 5.48%
Financials (XFJ) 6,160 1.73%
Health Care (XHJ) 36,357 4.38%
Industrials (XNJ) 6,739 1.29%
Information Technology (XIJ) 1,320 7.03%
Materials (XMJ) 12,727 -2.49%
Telecommunication Service (XTJ) 1,310 1.85%
Utilities (XUJ) 7,960 1.48%
Prepared by Canstar. Points taken as of Monday open to Friday close.

Australian Economic News Update

1. Australia’s unemployment rate and interest rates unchanged

unemployment hits cyclical low

Last week Australia’s unemployment rate for August remained the same as the previous month, at 5.2% seasonally adjusted, in data released last week.

The release of the Reserve Bank of Australia’s minutes revealed its last board meeting flagged “a further easing of monetary policy” if needed. Many economists are tipping further rate cuts.

Official figures due for release from the Australian Bureau of Statistics this week are completed construction works, private capital spending, monthly building permits, and yearly private sector credit.

2. China-US trade tensions continue: Trump hits out at China trade as a “very unfair trading relationship”

The US market was buoyed mid-week after President Donald Trump said his administration would reach an agreement with China regarding their ongoing trade tensions. But by the end of the week, President Trump told the world he would hike tariffs on some Chinese goods from October 1 in a tit-for-tat move, sparking more concerns over trade wars. He announced the increased tariffs in a series of strongly-worded tweets that accused China of “taking advantage of the United States on Trade, Intellectual Property Theft, and much more”.

This lead to a fall of around AU$1 trillion on the US S&P500 on Friday.

His actions were in retaliation to China’s declaration that it planned to increase duties by between 5% and 10% on more than 5,000 US products, and also to reimpose a 25% duty increase on US car imports. 

3. Reserve Bank boss says the trade war is hurting the Australian economy

The news of the trade war intensification came just before the start of one of the biggest meetings of the world’s central bankers – the Economic Policy Symposium at Jackson Hole in the US – which carried the theme of Challenges for Monetary Policy.

Among attendees was Australia’s Reserve Bank Governor Philip Lowe, who said ending political uncertainty would assist to reform economies. Dr Lowe repeated the message that governments needed to help when it came to stimulus measures.

“Political shocks are turning into economic shocks,” he said. 

“The challenge we face is monetary policy is carrying too much of a burden.”

 

4. ASX update: It was a positive week on the local market despite the trade war fallout

ASX 200 – Top 5 Market Capitalisation Gains, 16-23 August, 2019
Rank Company $ Change in Market Cap Closing Share Price % Change in Share Price
1 CSL Ltd (CSL) $4,961,868,020 $238.35 4.8%
2 Commonwealth Bank (CBA) $4,036,146,076 $77.40 3.0%
3 Macquarie Group Ltd (MQG) $2,127,393,650 $124.79 5.3%
4 Wisetech Global Ltd (WTC) $2,084,091,137 $33.25 24.5%
5 Lendlease Group (LLC) $1,765,730,255 $16.67 23.1%
Prepared by Canstar. Prices taken as of week to week close.

 

ASX 200 – Top 5 Share Price Gains, 16-23 August, 2019
Rank Company Closing Share Price % Change
1 Mcmillan Shakespeare (MMS) $16.03 30.6%
2 Wisetech Global Ltd (WTC) $33.25 24.5%
3 Lendlease Group (LLC) $16.67 23.1%
4 Beach Energy Ltd (BPT) $2.22 23.0%
5 Smartgroup Corporation (SIQ) $10.86 20.1%
Prepared by Canstar. Prices taken as of week to week close.

After three weeks of share market losses amid uncertainty in the global economy, the Australian All Ordinaries recorded a 1.99% overall increase (the market closed before Mr Trump made his China trade comments on Twitter). Last Monday it had its best day of trade since June. 

Biomedical and biotech company CSL generated the biggest market gains this week – up 4.8%, or almost $5 billion in market capitalisation – after releasing its $US1.9 billion profit announcement on August 14.

The share price of Australia’s biggest bank, the Commonwealth Bank, increased by 3% to $77.40.

Into this more buoyant environment, dozens of companies released their annual results.

ASX 200 – Top 5 Share Price Losses,  16-23 August, 2019
Rank Company Closing Share Price % Change
1 Pilbara Min Ltd (PLS) $0.39 -16.3%
2 St Barbara Ltd (SBM) $3.19 -15.2%
3 Lynas Corporation (LYC) $2.27 -13.7%
4 Idp Education Ltd (IEL) $16.66 -11.6%
5 Saracen Mineral (SAR) $3.47 -11.3%
Prepared by Canstar. Prices taken as of week to week close.

 

ASX 200 – Top 5 Market Capitalisation Losses, 16-23 August, 2019
Rank Company $ Change in Market Cap Closing Share Price % Change in Share Price
1 BHP Group Ltd (BHP) -$2,209,388,546 $35.42 -2.1%
2 Brambles Ltd (BXB) -$2,192,495,559 $11.28 -10.9%
3 SOUTH32 Ltd (S32) -$1,501,651,072 $2.46 -10.9%
4 Newcrest Mining (NCM) -$1,390,940,458 $34.45 -5.0%
5 The a2 Milk Company (A2M) -$904,148,001 $13.59 -8.3%
Prepared by Canstar. Prices taken as of week to week close.


5. Results season continues for Australian listed companies:

Lendlease: 

The developer of Sydney’s Barangaroo and Melbourne Quarter on Collins Street generated big moves on the ASX this week. Lendlease Group announced last Monday that its profit after tax attributable to shareholders was down to $467 million, a drop of 41.1% compared to last year. But while CEO Steve McCann said it was a “difficult year”, he also announced the company would sell its engineering business, which lost $461m in fiscal 2019. Investors reacted positively, and  Lendlease’s share price grew 23.1% over the week to close at $16.67.

BHP:

BHP Group reported a bumper profit after tax, up 124% to more than $8.3 billion. But its underlying profit didn’t reach expectations and sent the stock price lower, shedding over $2 billion and ending the week 2.1% lower at $35.42. CEO Andrew Mackenzie pointed to slower Chinese growth of around 6.25% in 2019, but said the company had “positive momentum”.

Crown: 

Gaming and entertainment company Crown reported a 5% decline in its operating revenue to $2.93 billion, following what Chair John Alexander called “subdued trading conditions”. This was Crown’s first results announcement since rich-lister James Packer’s private investment company Consolidated Press Holdings sold down its stake in the company. Crown said high-rolling VIP revenue in Australia was down 26.1%. Crown’s share price – which has been trending upwards since 15 August, when it was $11.15 at close – finished at $11.72 on Friday.Domino’s: 

Pizza is big business and revenue at international operator Domino’s Pizza Enterprises was up 24% to $1.43 billion. However, profit from ordinary activities after tax was down 6%. The company pointed to a strong performance from its online division, which processed more than 66 million orders – more than two orders every second.

Coles Group: 

Coles-Wesfarmers demerger impacts ASX 200
Source: ArliftAtoz2205 (Shutterstock)

The supermarket giant reported its first full-year results since splitting out from former parent company Wesfarmers. It recorded its 47th consecutive growth result in its supermarkets, for comparable sales. But despite those boosts, the chain reported 1.7% overall lower revenue of $38.46 billion and 0.9% lower earnings before interest and tax this financial year. CEO Steven Cain said the company was “heading into the most competitive period in Coles’ history”. The company’s share price rose to $13.84 at close on Friday, up from the previous week’s close of $13.14.

Qantas Group: 

Australia’s flagship airline pointed to a weaker market for “price sensitive leisure” travellers domestically, and profits after tax of $891 million were down by 6.5% on last year, although revenue was up 4.9% to almost $18 billion. Qantas Group CEO Alan Joyce said the overall result was positive given mixed market conditions.

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About Rosanne Barrett: 

Photograph of Rosanne BarrettRosanne Barrett writes stories that inform, entertain and inspire. She has more than 15 years’ experience in daily news media in Australia and Hong Kong, including eight years as a staff reporter at The Australian. Ms Barrett produces journalism, content and copywriting across a range of industries.

 

 

 

 

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