ASX rallies to seven-week high, posting fourth straight gain for the week: Aus shares close up 0.8%

Market Reports

by Paul Sanger

The Australian stock market closed higher once again on Friday, extending the gains of the previous three sessions, following broadly positive cues from US markets overnight. At the closing bell, the S&P/ASX 200 was 0.81 per cent or 55.50 points higher at 6945.20. Over the week, it closed 2.21 per cent or 153.7 points higher.

Over the last four trading days, the Dow Jones gained 1.94 per cent, the S&P 500 gained 2.72 per cent and the Nasdaq gained 2.70 per cent.

Asian stocks rose Friday after data showing another contraction in the US economy boosted hopes that the Federal Reserve will slow its pace of interest rate hikes. The Nikkei is up 0.26 per cent, the Hang Seng is 2.30 per cent higher, and the Shanghai Composite has gained 0.72 per cent.

Alibaba is weighing on the Hang Seng following reports Jack Ma will cede control of Ant Group. Declines are also picking up on mainland China.

Taiwanese and Korean markets are outperforming.

The Bank of Japan Summary of Opinions reiterated the need for continued easing amid downside risks from commodity prices, Covid-19, Fed tightening and the risk of US recession. Tokyo core inflation rose further above BOJ's 2 per cent target. Retail sales undershot but METI upgraded its industrial production outlook. South Korean industrial production rose as manufacturing output quickened, but retail sales fell for a fourth consecutive month.

After an extended period of pessimism on trading floors fuelled by soaring inflation and the central bank’s monetary tightening campaign, investors are beginning to speculate that the market may have reached its nadir.

The Dow Jones futures are pointing to a rise of 41 points.
The S&P 500 futures are pointing to a rise of 30 points.
The Nasdaq futures are pointing to a rise of 180.25 points.
The SPI futures are pointing to a rise of 70 points when the market next opens.

In local economic news, bonds are mixed, with JGB, Australian and New Zealand curves steepening further while Treasury yields have reversed higher.

Best and worst performers

The best-performing sector was Real Estate Investment Trusts, up 2.94 per cent. The worst-performing sector was Health Care, down 0.06 per cent.

The best-performing stock in the S&P/ASX 200 was St Barbara (ASX:SBM), closing 9.76 per cent higher at $1.13. It was followed by shares in EML Payments (ASX:EML) and Clinuvel Pharmaceuticals (ASX:CUV).

The worst-performing stock in the S&P/ASX 200 was Zip Co (ASX:ZIP), closing 25.33 per cent lower at $1.14. It was followed by shares in Brainchip (ASX:BRN) and PointsBet Holdings (ASX:PBH).

Company news

Buy now, pay later player Sezzle (ASX:SZL) says total revenue grew 6.8 per cent in the June quarter to US$29.3 million. Total merchant sales are up 1.9 per cent to US$419.1 million. Total active merchants climbed 19 per cent year-on-year to 47,900. Sezzle said it’s targeting US$40 million in annualised revenue and cost savings via staff redundancies and new deals with merchants. It said it received US$11 million in compensation from Zip after the merger deal was called off. Shares in SZL closed down 19.61 per cent at 82 cents.

Origin Energy (ASX:ORG) has a $2.2bn writedown for the 2022 financial year after revising the value of its energy markets business, while bumper gas prices delivered a bump in quarterly revenue from its LNG unit. The electricity and gas retailer said the non-cash impairment was sparked by a $4.4bn rise of in-the-money derivative assets connected with the hedging of high wholesale electricity and gas prices. Origin said the carrying value of the energy markets business is assessed independently of the derivatives and does not take into account the benefit of positive hedge contracts. Shares in ORG closed up 4.21 per cent at $5.94.

Lithium explorer Lake Resources (ASX:LKE) has reported an operating cash loss of $7.2 million for the 12 months to June 30. It reported an investing cash outflow of $23.5 million, with $21.7 million spent on exploration and development. As at the period end it had cash on hand of $175.1 million. The company owns the Kachi lithium deposit in Argentina and said it expects to reach production by 2024 using a new direct lithium extraction technology which is not yet proven at commercial scale. It said it expected to complete drafts of its definitive feasibility study towards the end of the third quarter of 2022. Shares in Lake closed up 4.52 per cent at 81 cents.

Marley spoon (ASX:MMM) today shared with investors highlights from the quarter ended Q2 2022. Q2 2022 net revenue was 109 mil euros (+35 per cent growth year over year). H1 2022 net revenue was 212 million euros (+34 per cent year over year). Operating EBITDA showed a loss of 3 million euros, a sequential improvement versus Q1 2022. CEO, Fabian Siegel highlighted, "In the second quarter we continued to see good growth that was driven by the successful execution of all three pillars of our growth strategy. We continue to acquire subscribers at attractive unit economics, we have increased average order volumes by expanding." Shares in MMM closed up 10.42 per cent at 26.5 cents.

Laybuy Group (ASX:LBY) released its latest quarterly business activities update for 1Q FY23 last night, together with the outcome of the strategic review announced in April. In summary, the company has had a very good quarter, with significant improvement in net transaction margin and operating cash flow on the back of better fraud prevention and credit risk management. The improved NTM and further planned cuts to overheads means that the path to profitability has become much clearer, with Laybuy now targeting 4Q FY23 to reach profitability (that is, the March quarter, 2023). This will make Laybuy one of the first, if not the first, profitable pure-play BNPL company on the ASX. As a consequence, the strategic review has concluded that a sale or partial sale of the business is not currently in the best interests of shareholders. The company has also indicated that the shortened path to profitability removes the need for a capital raising in the medium term. Shares in LBY closed down 23.33 per cent at 11.5 cents.

Commodities and the dollar

Gold is trading at US$1766.08 an ounce.
Iron ore is 6.2 per cent higher at US$117.95 a tonne.
Iron ore futures are pointing to a rise of 0.91 per cent.
Light crude is trading $0.34 higher at US$96.76 a barrel.
One Australian dollar is buying 70.11 US cents.

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