The Match Out: ASX storms higher on growing signs interest rates have peaked

Bang! Weak building approvals and a softer-than-expected read on inflation had the bulls charging today, and an already positive lead from the US overnight on weaker jobs data was supercharged by our own soft economic reads at 11.30 a.m., which should see the RBA hold fire from here, making 4.1% the peak in interest rates!

• The ASX 200 finished up +87pts/ +1.21% at 7297.
• The Industrial sector was best on ground (+2.14%) while Healthcare (+1.81%) & IT (+1.63%) were the other standouts.
• Communications (-0.20%) and Utilities (-0.02%) the weakest links, although Telstra (TLS) did trade ex-dividend.
• Economic data today confirmed the RBA should remain on hold, building approvals -8.1% in July (v -0.5% exp) and revisions down on the prior month.
• Inflation data was also more benign, printing 4.9% v 5.2% expected – more on that below.
• The Aussie Dollar fell sharply at 11.30am when the news broke to hit 64.45c before recovering to be down only a touch at 64.75c.
• Markets are pricing only a ~40% probability of a 25bps hike in November, while a move in September is pretty much off the table.
• Mineral Resources (ASX: MIN) +1.78% saw multiple broker upgrades today following Monday's result.,
• Brambles (ASX: BXB) +7.07% rallied to an all-time high on a good result, at the high end of their FY23 guidance range + FY24 outlook was solid. Good for BXB and a good read-through for global trade.
• Flight Centre (ASX: FLT) –2.81% fell despite a great FY23, where demand, particularly in Leisure was very strong, and they are now back up above pre-pandemic levels.
• Helius (ASX: HLS) +7.75% on the other hand was still grappling with the COVID hangover, although there are signs a turnaround is on the cards. Shares rallied.
• EML Payments (ASX: EML) +9.69% rallied for a 2nd session post yesterday's results that were a lot better than expected. A long way to go!
• Johns Lyng Group (ASX: JLG) +4.79% reported better revenue & earnings than hoped yesterday and the rally continued today.
• Qantas (ASX: QAN) CEO Alan Joyce is copping a hiding in the press, Joe Aston (afr.com) igniting the fire that has now spread more mainstream.
• Solly Lew has bought another 3% of Myer (ASX: MYR) +5.6% worth around $16m - Premier (ASX: PMV) which we hold, now owns just under ~30% of MYR.
• Orora (ASX: ORA) moved from a halt to a suspension today to provide more time to negotiate with French glass bottles maker Saverglass SAS – we covered ORA this morning Here.
• Iron Ore was up 1.7% in Asia as China eases policy.
• Gold edged higher overnight before trading flat today at US$1937 at our close.
• Asian stocks were mostly higher, Hong Kong up +0.37%, Japan +0.33% while China was flat.
• US Futures are flat.

ASX 200 - Intraday 

ASX 200 - Daily 

Inflation

A sharper-than-expected slowdown of inflation in July reinforces our view the Reserve Bank will hold fire at its next meeting on Sept. 5. Today’s number along with slower-than-expected wage growth and disappointing jobs numbers recently should see the RBA sit pat. There is still lingering inflation in rents and electricity prices, which means they’ll still probably talk tough (hawkish) but the job seems done, at least for now, and we will likely hear growing discussions of rate cuts commencing at some point in 2024.

Inflation printed 4.9% YoY today (v 5.2% exp), however on a month-on-month basis the CPI rose 0.3% in July, annualise that and we get 3.6% - clearly heading in the right direction.

Brambles (ASX: BXB) $15.15

BXB +7.07%: The global supply chain business delivered a good result today, at the high end of their FY23 guidance range, benefitting from falling input costs (mainly lumber), solid pricing and a good mix of earnings drivers, while they talked to positive momentum and ongoing improvements operationally i.e. there was plenty to like in today’s update.

FY23 sales grew 14% YoY (constant currency) to $6.08b thanks largely to higher prices which drove a 19% uplift in underlying profit to $1.07bn. For FY24, they expect sales revenue growth between 6-8% and underlying profit growth of between 9-12%.

• On 18.5x FY24 BXB is not cheap however if they deliver what they said, the outlook is solid and the valuation seems justified in MM’s view

Flight Centre (ASX: FLT) $21.46

FLT -2.81%: Fell today after reporting good numbers for FY23 but no guidance for FY24, other than to say that momentum remains solid right across their business. FY23 EBITDA of $301.6m was in line with guidance ($295-305m) and ahead of consensus ($296.3m) while underlying pre-tax profit of $106m compared well to expectations for $104.6m. Leisure drove the beat with earnings 18% ahead while corporate was 7% below - better margins in leisure v softer margins in corporate while they also reinstated the dividend which suggests some confidence in the outlook.

• For FY24 to date they said the business is performing in line with expectations with strong TTV & profit growth to date.

Healius (ASX: HLS) $2.92

HLS +7.75%: A tough year for HLS culminated in a poor result, although it was not as poor as the market was expecting, EBITDA was actually a touch better however net profit was weaker given higher interest expense. Revenue of $1.7bn dropped down to just $25m in profit as they grappled with multiple challenges which caused them to scrap their final dividend – a prudent move given gearing remains too high. In terms of commentary, imaging with solid while pathology was turning, and given the cost out and improving demand, FY24 should be a better year.

• No quantitative guidance was given other than to say they expect to stay within their debt covenants in FY24 – a positive but slightly scary proposition.

Broker Moves

• EML Payments Raised to Market-Weight at Wilsons

• Tyro Payments Raised to Market-Weight at Wilsons; PT A$1.37

• Star Entertainment Raised to Outperform at Macquarie; PT A$1.25

• Adbri Cut to Underperform at Macquarie; PT A$2

• Resimac Group Cut to Neutral at Citi; PT A$1.10

• Cooper Energy Raised to Neutral at Goldman

• Mineral Resources Raised to Buy at Citi; PT A$79

• F&P Healthcare Raised to Accumulate at CLSA; PT NZ$24.47

• Adbri Raised to Neutral at JPMorgan; PT A$2.31

• EML Payments Raised to Outperform at RBC; PT A$1.40

• Star Entertainment Raised to Buy at Jefferies; PT A$1.33

• New Hope Rated New Hold at Jefferies; PT A$5.40

• Mineral Resources Raised to Positive at Evans & Partners Pty Ltd

• APM Human Services Raised to Buy at Bell Potter; PT A$2.21

• Clean Seas Seafood Raised to Buy at Bell Potter

• Adbri Raised to Hold at Jefferies; PT A$2.30

• Tyro Payments Raised to Buy at Jefferies; PT A$1.60

• F&P Healthcare Raised to Sector Perform at RBC; PT NZ$21

Major Movers Today 

Enjoy your evening
The Market Matters Team

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