ASX edges lower in morning trading, reporting season kicks off: Aus shares down 0.2% at noon

Market Reports

by Paul Sanger

On the ASX this week we kick off the earnings season with 17 major ASX 200 companies reporting, including Suncorp (ASX:SUN) (today and more on its proposed bank sale to the ANZ), Computershare (ASX:CPU) and CBA (Wednesday) (ASX:CBA), Mirvac (ASX:MGR), AMP (ASX:AMP), QBE (ASX:QBE) and Telstra (Thursday) (ASX:TLS) Insurance Australia Group (Friday) (AS:IAG).

At noon, the S&P/ASX 200 is 0.21 per cent or 14.70 points lower at 7000.90.

The SPI futures are pointing to a fall of 16 points.

Best and worst performers

The best-performing sector is Materials, up 1.44 per cent. The worst-performing sector is Real Estate Investment Trusts, down 1.88 per cent.

The best-performing stock in the S&P/ASX 200 is OZ Minerals (ASX:OZL), trading 34.88 per cent higher at $25.52. It is followed by shares in Sandfire Resources (ASX:SFR) and Imugene (ASX:IMU).

The worst-performing stock in the S&P/ASX 200 is Pinnacle Investment (ASX:PNI), trading 5.95 per cent lower at $10.44. It is followed by shares in Suncorp Group (ASX:SUN) and Aurizon Holdings (ASX:AZJ).

Global markets

Shares in the Asia-Pacific traded lower Monday, with SoftBank set to report earnings after the market close. The Nikkei 225 in Japan fell 0.23 per cent while the Topix index slipped 0.29 per cent. South Korea’s Kospi declined 0.34 per cent and the Kosdaq shed 0.38 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.21 per cent.

Over the weekend, China reported trade data for July that showed dollar-denominated exports grew 18 per cent compared to a year ago. That’s the fastest pace of growth this year and beat analysts’ expectations for a 15 per cent increase, Reuters reported.

China’s dollar-denominated imports increased 2.3 per cent in July compared to the same period in 2021, lower than the expected 3.7 per cent gain.

US equities were mixed in Friday trading, though finished well off morning lows.

Stocks wavered Friday in a volatile trading session after the July jobs report was much better than expected, as investors assessed what a strong labour market would mean for the Federal Reserve’s rate tightening campaign.

The labour market added 528,000 jobs in July, easily beating a Dow Jones estimate of a 258,000 increase. The unemployment rate ticked down to 3.5 per cent, below the 3.6 per cent estimate. Jerome Powell, the Fed chair, has described the labour market, as “unsustainably hot”.

Economists and politicians have spent weeks arguing about whether the United States is in a recession. If it is, the recession is unlike any previous one given the extraordinary growth in jobs in July. For US consumers, of course, the argument is that the economy doesn’t feel like a boom. Measures of consumer confidence are at record lows, and Americans overwhelmingly say they are dissatisfied with the economy. That perception is grounded in reality: high inflation is eroding -- and in some cases erasing -- the benefits of a strong job market for many workers.

This week, markets will also be eagerly awaiting the US July consumer price inflation data midweek for a further read on US inflation.

On Friday the Dow Jones Industrial Average gained 0.23 per cent, the S&P 500 shed 0.16 per cent to end at 4,145.19, and the Nasdaq Composite lost 0.50 per cent Friday, falling to 12,657.56.

Losses were offset by bank stocks, which rose on hopes that interest rate hikes will continue at a solid clip. Energy stocks also gained, but technology companies slumped.

US corporate earnings have come out stronger than expected for the second quarter, with some 87 per cent of S&P 500 companies having reported, with 75 per cent beating earnings estimates.

Disney, Fox Corp and News Corp are the media companies reporting this week.

Outlook comments have been mixed reflecting the uncertainty regarding the growth outlook but not overwhelmingly negative.

On Friday, the energy sector was the best performer. Of note, the utilities and energy sectors are the only S&P 500 sectors with stock price gains year-to-date.

Earnings from Exxon, Chevron, Shell, BP and others have boosted US profit numbers. In fact, According to FactSet, earnings would be 3.7 per cent lower year-over-year for the second quarter if the energy sector were excluded from the calculation.

Overnight Senate Democrats narrowly passed a sweeping climate and economic package. The 755-page bill includes $430 billion to combat climate change and extend health care coverage. The bulk of the spending -- more than $300 billion -- is investments to tackle climate change and boost clean energy.

Company news

Kazia Therapeutics (ASX:KZA), an oncology-focused drug development company, is pleased to announce the presentation of promising new data from an ongoing phase 1 clinical trial of paxalisib in combination with radiotherapy for the treatment of brain cancer. Shares are trading at 6 per cent higher at 26.5 cents.

Mesoblast (ASX:MSB) today requested voluntary suspension for its shares. Mesoblast shares went into a trading halt on 4 August to allow a capital raising to take place in an orderly fashion. Mesoblast is still trying to finalise the capital raising and needs more time to complete that process, particularly given the global nature of the placement. The company anticipates that the voluntary suspension will cease upon it announcing the outcome of the capital raising, which is expected to occur on or before Wednesday. Shares last traded at 93 cents.

BHP (ASX:BHP) today submitted a non-binding indicative proposal to the board of OZ Minerals ( ASX:OZL) to acquire 100 per cent of its issued share capital by way of a scheme of arrangement. The proposal is to acquire all of OZL’s shares for cash consideration of A$25.00 per share. Oz Minerals' board was quick to respond and rejected the bid, saying that the indicative proposal significantly undervalues OZL and is not in the best interests of shareholders. Shares in BHP are trading 0.39 per cent lower at $38.96. Shares in Oz Minerals are trading 34.51 per cent higher at $25.45.

Commodities and the dollar

Gold is trading at US$1775.49 an ounce.
Iron ore futures are pointing to a rise of 4.66 per cent.
One Australian dollar is buying 69.20 US cents.

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