16 December 2024 | Weekly Snapshot

Did you know?

Broadcom became the 8th trillion-dollar company on the US market behind

• Apple (US$3.75T),
• Microsoft (US$3.3T),
• Nvidia (US$3.3T),
• Amazon (US$2.4T),
• Alphabet (US$2.3T),
• Meta (US$1.6T) and
• Tesla (US$1.4T)

Broadcom is a critical enabler of ‘AI’ infrastructure and recently reported earnings growth of 29% to US$23.7 billion. Broadcom was founded in 1961, with its head office in California.

Market Movements

The ASX200 fell -1.48% last week, extending the -0.18% fall the previous week. US equities were mostly lower on Friday night, closing out a down week in which the Dow fell 1.82%, the S&P eased 0.64%, although the Nasdaq eked out a 0.34% gain. Momentum following the Trump election rally seemed to stall further last week with Friday making the 10th straight session in which more constituents declined than advanced, the longest streak since 2021. There was no real news behind the decline with valuations the likely culprit after the November surge in equities prices had pushed broader market valuation metrics further into expensive territory.

Insignia Financial, (formerly IOOF Holdings) an Australian wealth management company that provides a broad range of financial services was the best performing Australian Company last week rising +17.21% following a non-binding indicative takeover proposal from Bain Capital. LIFE360, whose mobile apps provides safety and location sharing solutions, fell -10.84%, making it one of the largest decliners on the market, while Domino’s Pizza fell -9.33% following Macquarie downgrading its shares from ‘neutral’ to ‘underperform’ over concerns were raised about pressures on franchisee profits potentially affecting store openings and leading to earnings below consensus in the medium term.

The ASX Consumer Staples index was the best performing sector last week after it rose 0.08%, which was driven by Treasury Wine Estates, the vineyard and wineries operator who also owns and produces Penfold’s wines. The Information and Technology sector was the weakest the last week, falling -5.73%, led by LIFE360, down -10.84% and Wisetech Global, down –7.57%.

On the S&P500 Broadcom Inc, a global technology leader specializing in the design, development, and supply of a broad range of semiconductor and infrastructure software solutions, rose 25.22% following the Company’s optimistic projections regarding the artificial intelligence (AI) market. Broadcom reported a 220% increase in AI revenue for the fiscal year 2024, amounting to $12.2 billion. CEO Hock Tan highlighted that the AI market opportunity for Broadcom is estimated to be between $60 billion and $90 billion by 2027. Super Micro Computer, a provider of high-performance, high-efficiency server technology and related hardware solutions, fell -17.03% making it the worst performer for the week, reversing some its gains the previous week when it rose 34.59%.

Portfolio Movements

Broadcom reports in line Q4 – Ups guidance and dividend – Shares surge

• Nasdaq listed Broadcom, a global technology leader that designs, develops and supplies a broad range of semiconductor, enterprise software and security solutions, reported an in line Q4 on Friday with Q4 EPS of $1.42 ex-items a slight beat on the $1.39 expected. Although shares surged on the improved guidance, margin expansion and outlook statement.
• Broadcom’s category-leading product portfolio serves critical markets including cloud, data centre, networking, broadband, wireless, storage, industrial and enterprise software.
• Q1 guidance for revenue of ~$14.6B was ahead of the $14.55B consensus. Adjusted EBITDA guidance of ~66% of projected revenue, or ~$9.64B was well ahead of the $9.23B consensus.
• The quarterly dividend was also increased by 11% from the prior quarter to $0.59 per share from $0.53.

RBA holds rates as expected – Leans dovish with expected rate cuts brought forward

• The RBA left the cash rate unchanged at 4.35% last week, which was as expected. However, it made some notable dovish tweaks with the board seemingly gaining confidence inflation is returning sustainably to target.
• They dropped the line about board not ruling anything in or out with respect to rates and noted upside inflation risks appear to have eased, also removing the line around need to remain vigilant to upside risks and noted the consumption recovery is weaker than forecast following the weak Q3 GDP print although indicators continue to suggest labour market conditions remain tight.
• The Australian dollar and AGB yields moved lower on the announcement with markets now pricing in ~63% chance of February rate cut vs 50% prior to RBA decision with the first rate cut by April now fully priced.

ANZ appoints new CEO – Shares fall

• ANZ announced that Nuno Matos will become Chief Executive Officer on 3 July 2025, succeeding Shayne Elliott who is retiring from ANZ after nine years in the role.
• Matos joined HSBC in 2015 from Santander where he was most recently Global Head of Consumer in its Retail and Commercial Division. At HSBC Mr Matos held senior roles including Chief Executive Officer of HSBC Bank plc and HSBC Europe, where he oversaw the transformation of its European business. He had previously also served as CEO Mexico, one of HSBC’s largest markets, and Regional Head of Retail Banking in Latin America.
• Outgoing CEO Elliott said: “Leading ANZ over the last nine years has been the highlight of my career. I’m proud to be leaving the bank in such a strong position, particularly the work we have done to simplify the business, transforming institutional into one of the world’s best and preparing our retail bank for the future. The recent Suncorp Bank acquisition will also benefit ANZ for years to come.

The Week Ahead

• Monday: China Industrial Production YoY for November is to be 5.4% compared with 5.3% in October and Retail Sales YoY expected to be 5.0% in November compared to 4.8% in October while Retail Sales YTD YoY expected to be 3.6% in November up from 3.5% in October.
• Tuesday: USA Empire Manufacturing expected to be a reading of 10, indicating expansion, however below Novembers reading of 31.2, S&P Global US Manufacturing PMI expected to be 49.5 compared to the previous of 49.7 and the Services PMI is expected to be 55.1 versus 54.9 last in October.
• Wednesday: USA Retail Sales Month on Month (MoM) for November expected at 0.5% compared to 0.4% in October, Industrial Production for November MoM expected to be 0.3% compared with -0.3% in October.
• Thursday: US FOMC Rate decision expected to be a range of 4.25 to 4.50% from current range of 4.5% to 4.75% indicating the expectation of a 25 bps cut, Housing Starts for November are expected to be 1.343m compared with Octobers print of 1.311m
• Friday: US GDP Annualised QoQ expected to be 2.8%, in line with the Q2 print of 2.8%, Personal Consumption for Q3 expected to be 3.7% up from 3.5% in Q2, Existing Home Sales in November are expected to be 4.08m compared with 3.96m in the previous month and Initial Jobless Claims are expected to be 229K compared with 242k last week