28 October 2024 | Weekly Snapshot

Did you know?

The number of large (‘hyperscale’) data centres will increase by approx. 40% by the turn of the decade. This will be led by the majors, Alibaba, Amazon (Amazon Web Services or AWS), Microsoft (Azure or AZS), Alphabet (Google Cloud Platform or GCP) and Oracle.

Market Movements

The ASX fell 0.87% over the week, reversing the 0.84% rise the week before. QANTAS Airways was up 8.96% over the week after its new Chief Executive, Vanessa Hudson, told investors at its Annual General Meeting that it is succeeding in its campaign to win back the hearts of customers as the airline assured travellers that a strike by hundreds of its engineers would not disrupt services. Mineral Resources fell 25.6% over the week after the Founder and CEO, Chris Ellison, admitted to failing to disclose revenue on certain sales contracts with the Company to the ATO. Since the issue, Ellson has self-reported to the ATO, repaid amounts owed, and disclosed the matter to the Mineral Resources Board.

The ASX Consumer Staples Index was the strongest group last week, and the only group to finish higher, gaining 0.02%, led by Treasury Wine Estates up 1.99%, Coles Group up 1.57% and Elders up 0.93%. While the ASX Information and Technology Index fell -3.98%, driven by WiseTech Global, the technology company specialising in software solutions for the logistics and supply chain industries, after it fell 8.56% and NextDC, the company that specialises in data centre services, fell -7.03%.

US equities were mostly lower last week on the first big week of the third quarter reporting season. The Dow fell 2.68%, the S&P 500 fell 0.96%, while the Nasdaq eked out a small +0.16% gain as over 100 companies reported. The S&P 500 snapped a 6-week winning streak although the Nasdaq gained for the seventh-straight week. Tesla was the strongest performer, gaining 21.97% after reporting third quarter earnings well ahead of market forecasts, and its CEO, Elon Musk, discussing a strong outlook and plans to produce robots and self-driving cars. Newmont Corp, a top gold producer, was one of the weakest stocks, falling 15.97%, following reporting its third quarter result that missed analysts expectations and investor concerns that the Company is struggling to control mining costs and capitalise on the surging gold price.

Portfolio Movements

 US Stock Market – Q3 earnings season now 37% complete with 169 companies due to report this week

• 37% of S&P 500 companies have reported actual Q3 results which at this stage would be best generalised as ‘mixed’. As a result, the index is reporting lower earnings relative to the end of the previous quarter with the blended annual earnings growth rate for Q3 currently at 3.6%, compared to the 4.3% expected at the start of reporting season.
• Net profit margins are a bright spot at 12.0% for the S&P 500 which is below the previous quarter’s net profit margin of 12.2% and below the year-ago net profit margin of 12.2%, but still well above the 5-year average of 11.5%.
• The forward 12-month P/E ratio for the S&P 500 is currently 21.7, above the 5-year average of 19.6 and above the 10-year average of 18.1

CME Group reports record revenue and earnings

• CME Group, the world’s leading derivatives marketplace, reported Q3 EPS of $2.68, ahead of the $2.65 expected. Q3 revenue of $1.58B was largely in line with the $1.59B estimate.
• Q3 2024 was a record high for revenue, adjusted operating income, adjusted net income and adjusted EPS for CME.
• Over the quarter Average Daily Volume (ADV) was a record 28.3M contracts, including record non-U.S. average daily volume, with EMEA up 30% and Asia up 28% versus the same period last year.
• CEO Terry Duffy said: “This marks the second consecutive quarter of volume and open interest increases across every asset class. Our financial product volumes rose 28%, reflecting a 36% jump in interest rates to a record ADV (average daily volume) of 14.9M contracts. This was driven by a 35% rise in SOFR (Secured Overnight Financing Rate) futures to a record ADV of 4.1M contracts and 31% growth in Treasuries to a record ADV of 8.4M contracts. In addition, our commodities volume was up 20%, options increased 27% and international ADV was a record 8.4M contracts.”

Thermo Fisher Scientific post slight beat – Reaffirms guidance

• Leading life sciences business Thermo Fisher Scientific reported Q3 EPS of $5.28, which was slightly ahead of the $5.24 expected. Q3 revenue of $10.60B was slightly below the $10.63B estimate.
• During the quarter TMO announced a partnership with the National Cancer Institute on the myeloMATCH precision medicine umbrella trial, which will leverage next-generation sequencing technology. In the pharma services business, they announced the expansion of our Cincinnati, Ohio, and Bend, Oregon, sites to further enhance solid dose formulation capabilities for its pharma and biotech customers. In the clinical research business, they announced the expansion of the global laboratory services network with a new bioanalytical lab in Sweden.
• The Company maintained its FY guidance, with the lower end of the estimate revised slightly higher to EPS $21.35-22.07 ex-items vs prior guidance $21.29-22.07 and in line with the $21.71 FY consensus estimate.

The Week Ahead

• Tuesday: US Dallas Fed Manufacturing Activity is expected to be -9.2, compared with the previous month of -9.0.
• Wednesday: US the Conference Board Consumer Confidence Index is expected to show a slight improvement to 99.3 compared the prior reading of 98.7, Q3 GDP is expected to show annualised quarter on quarter from of 3.0%, in line with the previous quarter growth of 3.0%, Personal Consumption is expected to have grown at 3.2% in Q3 versus 2.8% in the previous quarter and the Core PCE (Personal Consumption Expenditures) Price Index is expected to show slower growth of 2.1% compared with the previous quarter of 2.8%. Australia CPI QoQ is expected to be 0.3% for Q3 compared with 1.0% in the prior quarter, and YoY CPI is expected to have grown at 2.9%, down from the previous quarter of 3.8%
• Thursday: US Personal Income is expected to show 0.3% growth over the month compared with the previous reading of 0.2% growth and Personal Spending is expected to show 0.4% growth over the month. US Initial Jobless Claims are expected to be 232k for the week (prior 227k) and Continuing Claims are expected to show a slight contraction to 1,878k compared to the previous 1,897k. Australia Building Approvals are expected to show a MoM increase of 2.1%, a large change in the -6.1% recorded in the previous quarter, Retail Sales MoM are expected to show slower growth of 0.3% versus the previous 0.7%.
• Friday: US Change in Nonfarm Payrolls is expected to show 110k increase compared with the prior month’s 254k and the Unemployment rate is expected to hold steady at 4.1%