29 April 2024 | Weekly Snapshot

Did you know?

The United states consumer has seemingly spent its way through their savings buffer, which was accumulated post the outbreak of COVID-19 (Mar-2020) and the resulting fiscal injection of more than 20% of GDP. From here, the US consumer, which makes up 70% of the economy, will be standing on its own two feet.

Market Movements

The Australian market rebounded 0.5% this week. The energy sector was the worst performer (down 3.0%, Woodside down 4.0%) and the health sector the best (up 1.9%, Ramsay up 1.9%)
Australia’s March inflation reading came in higher than expected, with the monthly indicator showing a 3.5% annualised rate.

In the USA, GDP figures were a bit softer, with a quarterly reading of 1.6% (vs. 2.2% expected) and below the previous Q4 reading of 3.4%. In addition, the core (PCE) inflation reading of 3.7% was higher than expected (3.4%). Overall, this continues to paint the picture for soft growth and higher inflation or ‘stagflation’.

Shares in London-listed Anglo America rose 17% after a $56 billion takeover offer from BHP. If the deal goes ahead, Anglo shareholders will receive 0.71 BHP shares for each Anglo share held or 34% of the merged entity in total. If successful, it would push BHP ahead of rivals for copper production, but it will be left with multiple other assets that seem ‘non-core’.

Newmont, the world’s largest gold company and recent acquirer of Newcrest, reported strong earnings-per-share at $0.55 for the March quarter vs $0.36 expected. Newmont rose 14% in Australian trade after the results.

Alphabet (owner of Google, YouTube) reported strong quarterly results for the March period, with revenues rising 18% and operating income rising 45%. Earnings were well above expectations for the quarter at $1.89/share vs $1.51 expected. The ‘Google services’ division (google ad-words and YouTube) makes up 89% of total revenue and 96% of earnings. In a show of confidence for the future, the company announced it’s first dividend and a $70b buyback of shares. The share price rose 11% for the week.

Portfolio Movements

Thermo Fisher, strong quarterly results, shares up 5.3% for the week.

• Quarterly earnings results were strong ($5.11) vs expected ($4.71) and upgraded their outlook. Sales were also higher (US$10.3 billion) vs expected ($10.17 billion). They raised their full-year earnings guidance from $21.53/share to $21.70.
• What do they do? Thermo Fisher are end-to-end drug developers, operating in 65 countries and is the 31st largest company in the US equity index (S&P500) with a market value of US$218 billion.

Verizon, reasonable quarterly results, shares down 2.5% for the week.

• US telco giant Verizon reported Q1 earnings-per-share of $1.15, ahead of the $1.12 estimate, whilst Q1 revenue of $33.0B was a slight miss on the $33.2B expected.
• Full year guidance was also reaffirmed for earnings-per-share (EPS) in the $4.50-$4.70 range, in line with the consensus midpoint of $4.59.
• What do they do? Verizon was formed in the year 2000 and is a global leader in technology and communication services. Based in New York, they are the 46th largest company in the USA with a market value of US$164 billion.

Freeport-McMoran, strong earnings results, shares down 0.4% for the week.

• Leading global copper producer Freeport-McMoRan reported strong Q1 results with March-quarter EPS of $0.32, materially above the $0.27 expected. Q1 revenue of $6.32B was a decent beat on the $5.70B estimate.
• Average realized prices were $3.94 per pound for copper and $2,145 per ounce for gold. Current copper and gold prices are both approx. 15% above March-quarter levels, which is a strong prelude for continued profit growth.
• What do they do? Freeport is one of the largest copper producers in the world, headquartered in Arizona (USA), producing over 1 billion tons of copper p.a. including ownership of the giant ‘Grasberg’ mine (Indonesia).

The Week Ahead

•  Tuesday: Amazon will report quarterly earnings, where the consensus estimate stands at $0.84/share (up from $0.31 on the Mar-23 quarter). Eli Lilly also reports, with consensus earnings at $2.47/share (up from $1.49 on the Mar-23 quarter)
• Wednesday: The US Federal reserve will make an announcement on interest rates. The current interest rate is 5.5% and market expectations are for no change. Markets are ascribing a 41% probability for a rate cut in July and a 71% chance of a rate cut in September. This comes as a reasonable shift since the start of the year, whereby 3 rate cuts were more likely than not before the end of the year. Driving this shift has been continued strength in both the labour markets and inflation. Unemployment stands at 3.8%, inflation at 3.5% whereas the target inflation rate is 2%.
• Thursday: Apple march-quarter earnings where consensus estimates are US$1.50/share.
• Friday: We have employment data in the USA (non-farm payrolls). Last month there were 303,000 new jobs added, which was very strong. Expectations are for 243,000 new jobs, which would be another strong result.