18 November 2024 | Weekly Snapshot

Did you know?

Trump will be looking for ways to cut government spending and reduce taxes. The below table lays bare the situation at hand. Reducing the $912b of spending going to the health sector seems high on the agenda, along with a cut in corporate taxes.

Market Movements

The ASX 200 finished Friday on a positive note, however still down 0.12% over the week. US equities were lower on Friday to close out a down week as the big post-election rally took a breather after pushing equity valuations further into expensive territory. The Dow was down 1.24%, the S&P 500 down 2.08%, and Nasdaq down 3.15% last week, all retreating from record highs.

The ASX 200 fell -0.12% last week, reversing some of the strong gains of +2.17% the previous week. The number of new jobs in Australia came in lower at 15,900 over October, compared with the estimate of 25,000, however the unemployment rate remained unchanged at 4.1%. James Hardie Industries, the building products manufacturer, gained 16.59% last week after reporting a Q2 result that while it was a 12% decline Year on Year (YoY), it beat market estimates. Paladin Energy fell -25.0% after it withdrew all cost and pricing guidance after slashing the 2024-25 production target from between 4 million and 4.5 million pounds to between 3 million and 3.6 million pounds. Paladin CEO, Ian Purdy, has blamed market uncertainty about progress with its $1.5bn acquisition of Canada’s Fission Uranium for “excessive volatility” in the company’s share price.

The ASX Information Technology Index, for the second week in a row, was the strongest group gaining 4.63% (on top of last week’s 5.83% gain), led by Megaport Ltd, the software-based connectivity provider, up 12.43% and XERO Ltd, the Accounting Software company, up 9.94%, who reported a solid result. The Materials Index fell -5.56%, driven by Mineral Resources Ltd which fell -9.93% after announcing the closure of its Bald Hill Lithium Mine, placing it into care and maintenance, as well as ongoing governance issues and leadership changes.

In the USA October retail sales were up 0.4% for the month, higher than the expected 0.3% increase with a large upward revision to the prior month to 0.8% from 0.4% with another piece of data supporting Fed chair Powell’s comments late last week that the economy was signalling there was no hurry to cut rates which also seemed to weigh on equities. On the S&P 500 Walt Disney was the strongest performer, gaining 16.22% after reporting strong quarterly earnings that included its media streaming business (which includes Disney+ and Hulu) achieving an operating profit marking a significant turnaround from a loss in the previous year. Moderna Inc, the biotechnology company that develops RNA therapeutics and vaccines, was one of the weakest companies after falling 21.3% primarily due to investor concerns over potential policy changes following the nomination of Robert F. Kennedy Jr. as Secretary of Health and Human Services by President-elect Donald Trump. Kennedy is known for his vaccine scepticism. His appointment has raised fears about future vaccine policies, leading to a sell-off in vaccine manufacturer stocks.

This week some large US retailer report results as the Q3 reporting season winds up, along with Nvidia.

Portfolio Movements

REA group reports strong Q1

• REA Group, the owner of leading real estate web portal Realestate.com.au, reported a strong Q1 with revenue of $413m up 21% YoY, and EBITDA excluding associates of $243m, up 23% with realestate.com.au remained the number one property site, strengthening its audience leadership position further.
• CEO Owen Wilson commented: “Seller confidence continued to drive a strong listings environment in Q1, delivering greater choice for buyers and some moderation in house price growth. In this healthy market, we hit new audience records and our customers increasingly leveraged the value of our premium products to differentiate their properties. This underpinned the strength of our financial performance.”

James Hardie reports Q2 earnings

• Leading fibre cement and homebuilding products manufacturer James Hardie reported Q2 results and lowered full year guidance citing greater market headwinds than it had anticipated during their Q1 results a few months ago.
• The company said it now expected volumes of at least 2.95 billion standard feet in its key North America business for the full year which is at the lower end of a prior target for between 2.95 billion and 3.15 billion. Still, shares rose strongly with what seems to be solid market support for some ASX listed companies with large US revenue bases following the US election.
• CEO Aaron Erter said the demand environment has been challenging over the past six months but “We are encouraged by the prospect of improvements in consumer sentiment and homeowner affordability as borrowing costs normalize”

CBA provides Q1 update

• CBA, our largest lender and largest listed company, provided a Q1 update, rounding out the local bank reporting season with Q1 cash net profit flat on Q1 last year at $2.41 billion with total operating income up 2% to $6.76 Billion and operating expenses up 3%.
• CEO Matt Comyn commented: These results demonstrate ongoing focus on delivering for our customers and disciplined operational and strategic execution. Inflation is moderating, but at a slowing pace, and global geopolitical tensions are creating uncertainty. Growth in the Australian economy remains slow, as higher rates continue to weigh on consumer demand and bring inflation back to the target range. We remain optimistic on the overall outlook and the Australian economy remains fundamentally sound.

The Week Ahead

• Wednesday: US Housing Starts are expected to be 1.337m for October, slightly down on the previous 1.354m. UK CPI Month on Month (MoM) is expected to be 0.5% compared with the previous reading of 0.0% and Year on Year (YoY) 2.2% compared with 1.7%
• Friday: US Existing Homes Sales are expected to be 3.94m and Initial Jobless Claims are expected to be 220K compared with 217k last week.
• Saturday: US University of Michigan Sentiment is expected to rise to 73.5 from 73.