The ASX has ended lower on a raft of mixed earnings reports from JB Hi-Fi, Aurizon, IAG, Endeavour and others, while casino operator Star has plunged on a write-down warning.
Look back on how the trading day unfolded, and also read some interesting economic analysis from the ABC's expert writers.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
Market snapshot at 4:35pm AEDT
By Michael Janda
ASX 200: -0.2% to 7,418 points
All Ords: -0.2% to 7,615 points
Australian dollar: -0.1% to 69.1 US cents
Hang Seng: -0.2% to 21,143
Nikkei: -1% to 27,402
Dow Jones (Friday close): +0.5% to 33,869 points
S&P 500 (Friday close): +0.2% to 4,090 points
Nasdaq (Friday close): -0.6% to 11,718 points
FTSE (Friday close): -0.4% to 7,882 points
EuroStoxx 600 (Friday close): -1% to 458 points
Brent crude: -1% to $US85.52/barrel
Spot gold: -0.3% to $US1,859/ounce
Iron ore: Flat at $US124/tonne
Bitcoin: +1.5% to $US21,851
Market moves little during the session, ASX ends down
By Michael Janda
Well, the headline figures aren't cause for much excitement.
The ASX 200 and All Ordinaries indices were down around 0.3 per cent earlier in the day, and both closed 0.2 per cent lower.
But, while the overall market didn't move much, there was some serious price action for a handful of companies.
On the downside:
- Star Entertainment Group: -20.8% to $1.485
- Imugene: -10.3% to $0.13
- Aurizon Holdings: -6.5% to $3.45
- Fletcher Building: -6.3% to $4.63
- LendLease Group: -6.1% to $7.79
- JB Hi-Fi: -5.1% to $44.25
On the upside:
- Insurance Australia Group: +4.5% to $4.92
- Endeavour Group: +4.1% to $7.10
- Coronado Global Resources: +3.6% to $2.02
- Karoon Energy: +3.2% to $2.23
- Johns Lyng Group: +3.2% to $5.76
- Silver Lake Resources: +3.2% to $1.145
Of those big movers, Star crashed because of a shock earnings downgrade and write-down warning, rail freight company Aurizon fell amid an earnings downgrade it blamed on rain disrupting Queensland coal haulage and JB Hi-Fi fell on early signs the consumer might be starting to cut back this year.
IAG and Endeavour Group both benefited from warmly welcomed profit results.
I must confess I had to Google Johns Lyng Group - it's apparently "Australia's leading integrated building services provider". Unfortunately neither Google nor its ASX company announcements page could explain exactly why it was among today's top gainers.
That's it from me today, tomorrow you'll have Sue Lannin to take you through the market action.
Why the latest crude shock in oil prices?
By Michael Janda
If you're wondering why the energy sector on the ASX is having a great day today, it's again thanks to Vladimir Putin.
Russia's government announced on Friday that it would cut oil production in March by around half a million barrels a day, or about 5 per cent of its current output.
"As of today, we are fully selling the entire volume of oil produced, however, as stated earlier, we will not sell oil to those who directly or indirectly adhere to the principles of the 'price cap'," Russia's deputy prime minister Alexander Novak said in a statement.
"In this regard, Russia will voluntarily reduce production by 500,000 barrels per day in March. This will contribute to the restoration of market relations."
The G7, the European Union and Australia agreed to ban the use of Western-supplied maritime insurance, finance and brokering for seaborne Russian oil priced above $US60 per barrel from December 5 as part of Western sanctions on Moscow over the conflict in Ukraine.
The EU also imposed a ban on purchases of Russian oil products and set price caps from February 5. In turn, Russia has banned deals involving any application of the price cap mechanisms.
Rabobank global strategist Michael Every sees broader geopolitical tactics behind Russia's move.
"That’s supply destruction that helps to ensure countries like Japan and Europe run trade and fiscal deficits, with downwards pressure on FX or upwards pressure on bond yields, both making higher defence spending harder to sustain."
Brent crude prices rose around 2.5 per cent on the news, to $US86.60/barrel and had eased back only slightly today to $US85.66.
-With Reuters
Further proof of price-wage spiral in profits
By Michael Janda
Reporting season so far has seen a lot of companies reporting much stronger profits on the back of smaller increases in revenue.
That would tend to indicate their profit margins are going up and driving earnings growth.
The Reserve Bank has noted this, with a deliberate shift away from the usual economic term "wage-price spiral" to instead warn of the risk of a "prices-wages spiral", where rising prices force workers to seek bigger pay rises, thus further entrenching inflation.
That resulted in RBA governor Philip Lowe putting big business on notice, along with workers, in his statement after the RBA's latest rate rise last week.
"Given the importance of avoiding a prices-wages spiral, the board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead."
Which is something my colleague David Taylor from ABC's The Drum wrote about over the weekend.
"There's no doubt that corporations have taken advantage of the supply chain problems and the desperation of consumers to jack up prices far more than required to cover their own costs, and their record profits have made this inflation far worse," economist Jim Stanford, from the Centre for Future Work, told The Drum.
You can read the rest of David's analysis here.
Auction market heating up and cooling down
By Michael Janda
With autumn approaching, the property market is heating up, at least for listings.
CoreLogic figures show 1,467 capital city auctions took place last week, up 11 per cent from the week before.
However, fewer of those properties sold, with a preliminary clearance rate around 65 per cent and likely to be revised lower still when the final results arrive.
There's also still a lot less properties on the market than this time last year, when 2,401 homes went under the hammer.
CoreLogic economist Kaytlin Ezzy said there are other signs the residential real estate market is about to take a further leg lower.
"An increase in the withdrawal rate, from 9.3% to 13.4% this week, could signal a worsening in vendor confidence following the more pessimistic inflation outlook and expectation for further rate hikes from the RBA.
"Once final figures are reported, it's likely we'll also see a rise in the portion of properties passed in at auction.
"As we navigate an uncertain interest rate environment, clearance rates and auction activity will continue to be an important marker for both buyer and vendor confidence.
"With just shy of 2,000 capital city auctions expected, next week will provide a timely test of market demand."
Hotel, liquor and pokies operator Endeavour books profit growth
By Michael Janda
The liquor retailing, hotels and poker machine operation spun out of Woolworths a while back has increased its profits.
Endeavour Group reported a 17 per cent surge in profit to $364 million based on a 2.6 per cent rise in revenue to $6.5 billion for the first half of its financial year (from June 27 2022 to January 1 2023).
A 5 per cent decline in liquor stores sales at its outlets, such as Dan Murphys and BWS, was more than made up for by a 55 per cent jump in hotel sales as the company enjoyed a COVID-restriction free half-year, compared to lockdowns in 2021.
"Our team has delivered strong results group-wide, with a standout December from the first restriction-free festive season in three years," said CEO Steve Donohue.
The company's results announcement also revealed some modest growth in profit margins.
"Consumer preferences for premium categories and new products have continued to underpin a strong gross profit outcome.
"Additionally we have generated margin improvements through initiatives such as personalisation and promotional optimisation. These gains more than offset the impact of higher levels of promotion and increased supply chain costs.
"Gross profit margin for the half was 23.8%, representing an improvement of 12 bps [basis points]."
Endeavour was optimistic about the outlook, despite the effect of rising interest rates on consumer spending.
"In the first 5 weeks of H2 F23 [second half, financial year 2023], we have continued to see trading stabilise across the group.
"Retail sales were in line with prior year (+0.2%). Our Hotels business also performed well in this period, with sales up 31.5% on last year, which was impacted by reduced patronage and team shortages due to the Omicron outbreak (particularly in January 2022.
"While we expect to see some volatility ahead, we have demonstrated our resilience and stability as a business.
"We have not yet seen any material softening in key customer indicators but we are monitoring these closely as broader economic uncertainty continues."
I guess the company is banking on Aussies switching from celebrating the end of lockdowns to drowning our sorrows as many people's surging mortgage repayments chew up their spare income.
The company increased its interim dividend to 14.3 cents per share, up from 12.5 cents per share last year.
Its share price was up 3.2 per cent to $7.04 by 1:35pm AEDT.
Market snapshot at 12:35pm AEDT
By Michael Janda
ASX 200: -0.3% to 7,412 points
All Ords: -0.3% to 7,609 points
Australian dollar: -0.3% to 68.96 US cents
Dow Jones (Friday close): +0.5% to 33,869 points
S&P 500 (Friday close): +0.2% to 4,090 points
Nasdaq (Friday close): -0.6% to 11,718 points
FTSE (Friday close): -0.4% to 7,882 points
EuroStoxx 600 (Friday close): -1% to 458 points
Brent crude: -1% to $US85.55/barrel
Spot gold: -0.3% to $US1,859/ounce
Iron ore: Flat at $US124/tonne
Bitcoin: +0.9% to $US21,732
Not much changed on the ASX around midday
By Michael Janda
If you're coming back to the blog while tucking into your lunch, you haven't missed too much since the market open.
To paraphrase the song Higher Ground, the winners keep on winning, and the losers just keep losing.
Casino operator Star has extended its fall, now down more than 20 per cent to $1.49 on a pretty dire revenue, profit and write-down warning.
The rest of the bottom five are pretty much who was there just after the open.
Bottom five ASX 200 stocks:
- Star Entertainment: -20.5% to $1.49
- Lynas Rare Earths: -7.7% to $8.105
- Fletchers Building: -6.7% to $4.61
- Aurizon Holdings: -5.8% to $3.475
- Lend Lease: -5.6% to $7.835
Top five ASX 200 stocks:
- IAG: +5.2% to $4.955
- De Grey Mining: +3.2% to $1.44
- Whitehaven Coal: +3.1% to $7.98
- Johns Lyng Group: +3.1% to $5.75
- Ampol: +2.9% to $31.67
Sector-wise, energy stocks are the big winners, up nearly 2 per cent on the day so far.
Consumer cyclicals have been the big losers, down 1.4 per cent, amid signs that the last six months of 2022 might have been the zenith of household profligacy, while 2023 will be a year of tightened belts.
The big miners and banks sitting in the red account for the bulk of the fall for the ASX 200 overall.
The benchmark index was off 0.2 per cent to 7,417 by 12:24pm AEDT, with its broader All Ordinaries cousin also down 0.2 per cent to 7,615.
Are interest rates the best way to stop inflation?
By Michael Janda
If you've read Ian Verrender's piece on how rate rises might have to send us into recession to try and solve the inflation problem, then why not look at Gareth Hutchens's investigation of some alternatives.
"If the RBA is going to force households to hand over more of their income during an inflationary episode to stop them spending, why shouldn't households get to keep that money and have access to it later, once the inflationary wave has passed?
"It could go into their superannuation accounts, where it could generate returns for those households and build their future wealth.
"That way, we'd manage inflation with savings and delayed consumption, rather than usury."
Gareth didn't come up with this idea all by himself, a few economists have put forward proposals along similar lines it for a long time, including John Maynard Keynes and Australia's own Nicholas Gruen and Lachlan Kerwood-McCall.
How orthodox economists could cause the recession we didn't have to have
By Michael Janda
The latest column from the ABC's business editor Ian Verrender, questioning whether some key tenets of orthodox economic theory have failed us during the latest inflationary spike.
"The RBA remains fixated on the notion that if jobs numbers remain strong, inflation could become entrenched, which has only hardened its resolve to keep pushing rates higher.
"Eventually, they'll get there. Higher interest rates at some stage will curb spending, cut profits and result in mass layoffs.
"It could well be recession we didn't have to have."
Well worth the five minutes to read it.
Star profit downgrade, write-down warning smashes share price
By Michael Janda
Casino operator Star Entertainment Group has seen its shares plunge 15.7 per cent to $1.58 in the first hour of trade after a shock profit and downgrade warning.
The biggest surprise is the flagging of a write-down in the value of the Star's assets by between $400 million to $1.6 billion based on operational changes made as a result of the Bell Review, which found the company "unsuitable" to operate a casino, as well as a proposed increase to NSW state casino duty rates.
Star said it remains in discussions with the NSW Government over the proposed duty increases adding:
"In their current form, the proposed duty rate increases would have a significant adverse impact on the profitability of The Star Sydney."
Star also noted that changes implemented as a result of the Bell Review had negatively affected revenue at the Sydney casino.
"This saw an increase in the number of excluded patrons and a reduced level of complimentary services and benefits in private gaming areas (impacting both slots and table games performance).
"The Star has also been impacted by increased competition since the opening of Crown Sydney in August 2022."
The company says its investment to improve compliance with its anti-money laundering obligations and to prevent fraud and exploitation of the casino by organised crime groups totalled around $20 million for the half year ended December 31.
It expects around half of these costs will be ongoing as it maintains improved compliance.
The Star Sydney saw its domestic revenue fall 13.5 per cent on pre-COVID levels, while the company's two Queensland casinos saw large revenue increases (30 per cent on the Gold Coast and 9 per cent in Brisbane).
Overall, the group saw revenue fall around 1 per cent compared to pre-COVID levels.
Market snapshot at 10:40am AEDT
By Michael Janda
ASX 200: -0.3% to 7,409 points
All Ords: -0.3% to 7,607 points
Australian dollar: Flat at 69.14 US cents
Dow Jones (Friday close): +0.5% to 33,869 points
S&P 500 (Friday close): +0.2% to 4,090 points
Nasdaq (Friday close): -0.6% to 11,718 points
FTSE (Friday close): -0.4% to 7,882 points
EuroStoxx 600 (Friday close): -1% to 458 points
Brent crude: -0.5% to $US85.97/barrel
Spot gold: -0.1% to $US1,863/ounce
Iron ore: Flat at $US124/tonne
Bitcoin: +1.2% to $US21,796
ASX opens lower as Star shocks and JB Hi-Fi disappoints
By Michael Janda
The Australian share market has posted modest fall in early trade, with the big mining and financial sectors both slightly in the red.
The biggest fall among the top 200 companies in early trade was Star Entertainment Group, with the casino operator flagging a potential $1.6 billion non-cash hit to the value of its business if a proposed increase in New South Wales casino duties goes ahead as planned in July this year.
Around half of Star's revenue comes from its Sydney casino, making it particularly vulnerable to the tax hike.
Star, as with its main rival Crown, has continued to be embroiled in corporate scandals around its lack of anti-money laundering safeguards.
Star shares were off 13.1 per cent to $1.63 by 10:25am AEDT.
JB Hi-Fi shares were down 3 per cent to $45.20, despite a bumper profit, after the company revealed that January sales had started slowing as rate increases start to bite discretionary spending, such as on electronics.
The top five losers on the ASX 200:
- Star Entertainment: -13.1% to $1.63
- Aurizon Holdings: -8.3% to $3.385
- Lynas Rare Earths: -6.2% to $8.24
- Fletcher Building: -5.7% to $4.66
- Lend Lease: -5.5% to $7.84
The top five gains on the ASX 200:
- Endeavour Group: +3.8% to $7.08
- Coronado Global Resources: +3.1% to $2.01
- Johns Lyng Group: +3.1% to $5.75
- Insurance Australia Group: +3% to $4.85
- Whitehaven Coal: +2.6% to $7.94
Carsales posts jump in profit
By Michael Janda
Online automotive advertising portal Carsales.com has reported a 458.1 per cent surge in half-year profit to $416.5 million, although the rise in its "underlying" profit number was a more modest 37.3 per cent to $121.8 million.
The company's headline figures were boosted by the full acquisition of US-based Trader Interactive on October 1, 2022, with the underlying number reflecting the profit growth in its existing operations.
After a period when there was a shortage of new cars due to COVID supply chain disruptions, Carsales says sales inventory is nearly back to pre-COVID levels.
However, it also profited while there was a shortage of new and used cars for sale, driving prices higher.
"Yield increases supported by dynamic pricing initiatives and elevated average car prices," the company noted in its media release.
RBC Capital Markets analyst Wei-Weng Chen said the result was ahead of his expectations.
"The company is continuing to deliver on yield improvements in Australia as well as growth and margin expansion in Trader Interactive," he noted.
"Group guidance is unchanged but segmental commentary was incrementally positive with CAR upgrading Private growth to "strong" and noting that growth in Trader Interactive in Jan/Feb was accelerating on 1H23."
The company has declared an interim dividend of 28.5 cents per share, up 12 per cent on the same period last year.
JB Hi-FI posts profit jump, warns of slowing sales
By Michael Janda
Electronics and white goods retailer JB Hi-Fi, which also owns The Good Guys, has reported a 14.6 per cent jump in profit to $329.9 million for the half-year ended December 31.
The retailer's profit was based on an 8.6 per cent increase in sales revenue, indicating that its profit margins also rose.
However, CEO Terry Smart said there are early signs that retail conditions are starting to deteriorate in the new year as the effect of Reserve Bank interest rate rises starts to bite.
"While we are pleased with the January trading result, with sales continuing to be well above pre COVID January 2020, we have seen sales growth start to moderate from the elevated levels seen in the first half of FY23," he noted in a release to the ASX.
UBS analyst Shaun Cousins expects this trend to continue as rate rises bite harder on the consumer.
"Gross margins slightly ahead of UBS estimates, while cash conversion much stronger than expected," he observed of the result.
"Yet the moderation in current trading indicates the commencement of expected unwind in sales strength enjoyed over recent years."
JB Hi-Fi is paying an interim dividend of 197 cents per share.
Insurer IAG boosts profit as premiums rise
By Michael Janda
Insurance Australia Group (IAG) has reported a 171 per cent jump in first-half profit after tax to $468 million.
The company saw a 24.1 per cent rise in its insurance profit, based on a 7.5 per cent increase in gross written premium.
The firm's reported insurance profit margin rose from 7.1 to 8.5 per cent, but it said that its "underlying" insurance margin fell from 15.1 to 10.7 per cent on rising natural perils claims.
"Our reported insurance margin of 8.5% (1H22: 7.1%) reflected growth across the business but was offset by the ongoing impacts of higher inflation on claims costs in home and motor," said IAG chief executive Nick Hawkins.
"A $70m unfavourable net natural perils experience and a $48m prior year reserve strengthening also impacted the margin."
Mr Hawkins said he was pleased with growth and retention of customer numbers.
"We maintained good cost discipline, our businesses are in good shape, and our focus on growth and profitability delivered the strongest first half Gross Written Premium (GWP) growth in seven years, up 7.5% (1H22: 6.2%).
"GWP growth was driven by rate increases, to offset the high inflation in the supply chain, as well as customer number growth in the home and motor portfolios."
IAG is paying an interim dividend of 6 cents per share, the same as the same period last year.
Welcome to another week
By Michael Janda
Good morning and we start another trading week on the markets.
I'm with you today, along with guest posts from some of my colleagues on the stories they're looking at.
It looks like a quiet start to trade, after Wall Street ended last week with a mixed session on Friday, with the Nasdaq down but the S&P 500 and Dow Jones indices higher.
The ASX SPI 200 futures were dead flat at 7,357 as of 9:00am AEDT.
Rates again continue to be the focus, with two appearances before Parliament by RBA governor Philip Lowe to look forward to later this week (on Wednesday and Friday).
