2 September 2024 | Weekly Snapshot

Did you know?

The below map shows an interesting summary of the world’s largest copper mines. The largest mines are overwhelmingly in South America, whilst the Democratic Republic of the Congo (DRC) has emerged as a significant producer over the past decade.

Market Movements

The Australian market fell 0.3% last week having largely completed another full-year reporting season, which showed that for each ASX company upgrading their profit outlook, we had two companies downgrade. Mineral resources (down 10.4%) was among the worst performers, having reported a weak profit result amidst ongoing lithium price weakness. Financials (up 1.1%) were among the best performers despite a mixed bag of earnings results, including CBA, who’s profits fell but shares moved higher. Downer was among the best performers (up 15.7%) after a strong profit result.

Australia’s July CPI came in at 3.5% for the year, which did little to sway interest rate opinions. Interesting chart below showing Australian house prices, which reveals strong divergence between cities. Falling interest rates could result in more uniform price rises.

In the USA, the S&P500 rose 0.6%. There was a broad contribution from sectors, with Financials the strongest (up 1.8%) followed by Industrials (up 1.4%). Dual listed ResMed was one of the strongest shares in the USA (up 8.1%). ResMed shares powered higher after another strong earnings result amidst ongoing concerns of future competitive threats from weight loss drugs. Super Micro computer was among the worst performers (down 28.6%) after a short selling report highlighted some potential accounting ‘red flags’. This wasn’t helped by the fact that the company announced that they will not file their annual report on time. Nvidia reported continued earnings growth but at a rate which disappointed the market, with shares trading lower by approx. 7%.

On the macro, USA’s weekly initial jobless claims were steady at 231K and remain historically low. Powell (Fed Chair) is also on the record saying “the time has come for policy to adjust” at the Jackson Hole Symposium, in line with expectations for the first rate cut at the upcoming FOMC meeting next month. Markets are expecting US interest rates to move from 5.35% to 4.35% by end of this year.

Portfolio Movements

BHP earnings up 2% vs last year, dividend cut to fund growth.

• BHP Group, the world’s largest mining company, reported results (all in USD) with earnings per share of $2.70 up 2% on last year. Revenue of $55.66B was up 3% for the year.
• A final dividend of 74 cents a share was declared, down 59% from a year ago, or a payout ratio falling to 53% with the company spending more on it’s growth projects including the recently acquired Filo (Copper, South America)
• FY25 production guidance is unchanged with Copper (Kt) 1,845-2,045, Iron ore (Mt) 255-265.5, Met coal (Mt) 16.5-19, and Energy coal (Mt) 13-15.

Woolworths reports improving sales momentum, higher dividend

• Our largest grocery retailer Woolworths reported full year profits of $1.71B, down 0.6% on last year.
• The fully franked dividend of $1.44 is above the $1.34 expected, and up from $1.04 in the prior year, boosted by a special dividend of 40 cents, reflecting proceeds from its sale of a stake in Endeavour.
• Woolworths said its efforts to attract customers are paying off with sales momentum improved in the fiscal fourth quarter and has continued into FY 2025 with sales had increased about 3% in the first eight weeks in the key Australian food business.
• Outgoing CEO Brad Banducci commented: “Looking ahead, improving Customer scores, item growth, and lower inflation provide reason for optimism. However, we also know that our customers remain under significant mortgage and rent-related financial stress and anticipate them to remain cautious with the trading environment expected to be challenging for the rest of the financial year.”

Wesfarmers earnings higher by 3.7% – Kmart strong

• Wesfarmers has reported FY results with NPAT of $2.56B up 3.7% on last year. FY revenue of $44.19B was up 1.5% on last year. A final dividend of $1.07 was declared taking the FY dividend to $1.98, up from $1.91 cents last year.
• The Kmart retail group was a standout with revenue growth of 4.4% in the 2024 fiscal year. The Bunnings hardware chain also demonstrated resilience, with revenue growth of 2.3%. That was offset by a decline in its smaller business including chemicals, energy and fertilizers, which saw revenue drop by nearly 17%.
• “We expected a challenging year and there were numerous headwinds to navigate with cost-of-living pressures, rising costs of doing business, subdued activity in residential construction and significant volatility in key commodities,” Managing Director Rob Scott said.

The Week Ahead

• Monday: (PMI) Manufacturing data in USA with expectations for continued decline and a reading of 47.8, which is a slight improvement from 46.8 on the previous month
• Tuesday: Australia’s GDP reading for the quarter is expected to be 0.3%, which is a modest improvement from the first quarter of 0.1%. In the USA, markets are expecting 8.1m job openings, which is consistent with the previous month and modestly above pre-COVID levels of 7 million.
• Thursday: In the USA, markets are expecting a services PMI reading of 51.5, which is basically flat on the previous month. The RBA’s Bullock will give a speech, hopefully with some clues around the next interest rate move.
• Friday: In the USA, expectations are for 163k new jobs, up from 114k in the previous month.