Coles signals higher costs as inflation bites, WiseTech jumps on earnings, ASX rises
Australian stocks rose after two consecutive sessions of falls, with energy and mining stocks leading the rally on firm commodity prices, while worries about aggressive rate hikes and slowing growth across the world dampened risk appetite.
- Overnight, the Dow Jones index fell 0.5%, the S&P 500 lost 0.2% and the Nasdaq Composite closed flat
- The pan-European STOXX 600 index lost 0.5%
- Oil rebounds as Saudis talk production cuts
Market participants are awaiting a US Federal Reserve rally later this week in Jackson Hole, Wyoming, where Chairman Jerome Powell is expected to reinforce his firm commitment to stamping out inflation that has hit its highest level in four decades.
The ASX 200 rose 40 points or 0.6% to 7,002 by midday, after losing 2.2% in the previous two sessions.
At the same time, the Australian dollar was down at 69.05 US cents.
Leading the gains, energy stocks rose 2.3% to their highest level since June 14 after oil prices jumped nearly 4% overnight on possible cuts in the OPEC+ production.
Sector majors Santos and Woodside Energy rose 0.7% and 2.1% respectively.
Miners rose 1.3% to their highest level since mid-June, with BHP and Fortescue adding 1.7% and 0.4% respectively.
Gold miners fell 0.7%, with Newcrest, the country’s largest gold miner, losing as much as 1%.
Among individual stocks, AUB Group gained 5.6%, after the insurance company posted a 14.5% rise in full-year profit.
Software solutions provider WiseTech rose 10.8% after the company increased its dividend and announced an increase in its annual profit.
WiseTech recorded an 80% increase in profits to $194.6 million in fiscal 2022 and the company’s revenue also increased by 25%.
On the other hand, Coles fell 3.6% after the Melbourne-based retailer announced a cost hike for the 2023 financial year.
Coles posted a 4.3% rise in annual profit on Wednesday, boosted by online sales as people stocked up on essential items during extended first-half shutdowns.
The nation’s second-largest grocer said sales in supermarkets, its main unit, stood at $34.62 billion even as it faced store closures, supply problems due flooding and widespread staff absenteeism due to the Omicron COVID-19 outbreak.
The unit had recorded sales of $33.87 billion a year earlier.
The 100-plus-year-old Melbourne-based retailer incurred $240m in COVID-related costs, up from around $130m last year.
Coles reported net income after tax of $1.05 billion for the year ended June 30, up from $1.01 billion a year earlier, and a dividend of 63 cents a share.
However, the company forecast higher costs for fiscal 2023 as inflationary pressures continue to impact operations, and added that the COVID-19 pandemic and flu season contributed to the increase in absenteeism costs of team members.
He said capital spending is expected to be between $1.2 billion and $1.4 billion in fiscal 2023, compared to net investment of $1.14 billion this year.
The cost of doing business as a percentage of sales rose 50 basis points to 21.4% in 2022 due to rising fuel costs and underlying cost inflation, Coles said.
“Consistent with our suppliers and customers, we are also seeing inflationary pressures impacting our own cost base with rising wages, rent, fuel, supply chain and capital costs,” the company said in a statement.
Retailers around the world have warned that rising energy, fuel and ingredient costs will continue to be reflected in higher prices as they strive to protect their margins, even as shoppers turn to low-cost products in a context of squeezing the cost of living.
Global stocks fall
Wall Street ended lower on Tuesday as investors focused on data showing a slowing economy ahead of a US Federal Reserve rally this week in Jackson Hole, Wyoming.
The S&P 500 fell after data showed U.S. private sector business activity contracted for a second straight month in August, with particular weakness in the services sector as demand weakened in the face of inflation and tighter financial conditions.
The S&P Global Flash Composite Purchasing Managers Index, or PMI, for August fell to 45, the lowest since February 2021, from 47.7 in July. A reading below 50 indicates contraction in activity.
Stocks have fallen in recent sessions ahead of this week’s central bank rally in Jackson Hole, where Fed Chairman Jerome Powell is expected to reinforce on Friday his strong commitment to stamping out inflation that has soared. level in four decades.
Traders are torn between expecting a 50-75 basis point hike from the central bank after several policymakers recently pushed back on expectations of a dovish pivot and underlined the Fed’s commitment to fight. against inflation.
“What we’ve seen in the last week is the realization that the Fed could raise interest rates another 75 basis points in September,” said Jake Dollarhide, managing director of Longbow Asset Management in Tulsa. , Oklahoma.
“The market fears that Powell could return to a hawkish position.”
The benchmark 10-year rate hit its highest level since late July.
Zoom Video Communications fell nearly 17% after the former darling of housekeeping stocks slashed its full-year profit and revenue forecast.
Of the 11 S&P 500 sector indices, seven fell, led by real estate, down 1.5%, followed by a 1.4% loss in health care.
The S&P 500 fell 0.2% to end the session at 4,129 points.
The Nasdaq was unchanged at 12,381 points, while the Dow Jones Industrial Average fell 0.5 to 32,910 points.
Gold ended a six-game losing streak as the dollar weakened while oil rose nearly 4% after Saudi Arabia floated the idea of production cuts from of the Organization of the Petroleum Exporting Countries and its allies.
As of 7:13 a.m. AEST, Brent crude oil was up, trading at US$100.22 a barrel.
The MSCI global stock index slid 0.3%, while the STOXX index of European company stocks closed down 0.4%, after falling for nearly a week.