14 AUG 2023 – Monday Market Highlights – Transcript

Good Morning, it’s Monday the 14th August and I’m Will from Milford.

US CPI was the key macro focus for the market last week. Headline and core both printed inline with market expectations, with month on month coming in at 0.2%, while annual headline inflation was 3.2% vs core at 4.7%. Large energy price rises from last year keep rolling off reducing the headline number, while strong services inflation keeps the core measure elevated.

Overall it is was a relatively quiet week for macro, with focus on the Australian company reporting season which kicked off last week with a raft of big results.

Building product manufacturer James Hardie produced a cracking result on Tuesday sending the stock soaring up 15%. The result was driven mainly by their US business posting very strong margins helped by falling freight costs, which is particularly impressive considering the slowing consumption backdrop. Guidance was also improved for new housing construction in the US, however repair and remodel was slightly reduced.

CBA’s result was generally inline with the market, with the stock finishing up 2.5% on result day. NPAT and NIM were as expected with much of the focus on the guidance and broader macro comments. Arrears have started to move higher, which is to be expected considering the move in interest rates and cost of living pressures, and are focused mainly in personal loans. CBA included an interesting chart in their release showing the distribution of loans vs savings, and changes in savings and spending in the last year. The 65+ cohort continue to have very low loan balances, with strong increases in savings and spending which is in contrast to under 34s, who are seeing reductions in savings and spending accelerate. This lines up with the view that Australia is currently a ‘2 speed economy’, where those with debt are struggling with rate rises causing a pull back in spending, but those without are still enjoying life with the increased interest of savings accounts and term deposits!

Insurers Suncorp and QBE both posted weaker results, falling 1.5% and 1.2% respectively when they reported. Suncorp reported a softer insurance margin combined with a poor dividend payout, weaker bank result and outlook. QBE had a messy result due to some accounting changes, where NPAT was a small miss due to tax changes. Outlook however was more positive with the exit margin a slight beat.

In the deal space there was also plenty of action, with 2 new binding deals.

Estia health finalised their binding deal with private equity player Bain Capital at $3.20 per share. A vote with shareholders is expected in late November followed by settlement in December.

Meanwhile, funeral business Invocare finalised their takeover from TPG private equity after some back and forth over price. The 2 parties settled on $12.70 per share, a reduction of the previous bid of $13, which is expected to be finalised in November this year.

This week reporting season continues at pace in Australia with a large portion of the index reporting. Over the week we should have JB Hifi, CSL, TWE, EDV, TCL and TLS among others.

Economic releases to watch will include the 2nd quarter wages for Australia which are expected to see a rise of 3.7% along with the monthly employment numbers. Offshore the FOMC July minutes will be released on Thursday, and the RBNZ monetary policy decision on Wednesday which the bank is expected to keep rates on hold.

Thanks for listening, have a great week.