The ASX has logged a stellar day, with the benchmark S&P/ASX 200 finishing up 1.19%, or 86 points, to 7,297 after news that July inflation had cooled more than expected ahead of next week’s RBA rate decision.
Industrials led the way, gaining 2.02%, followed by Healthcare stocks (+1.81%) and Consumer Staples (+1.44%), while telcos ended the day slightly lower (-0.24%).
Chalice Mining finished down 25.3% following the release of a scoping study on its Gonneville Nickel-Copper-PGE Project last night after the market closed. Chalice today copped criticism around the high commodity price assumptions made in the study and lower-than-expected nickel production. Focusing on the perceived negatives, investors looked past the two-year forecast payback on a mine costing between $1.6 billion and $2.3 billion.
Brambles (ASX:BXB) gained 7.35% despite saying it expects profit growth to slow in 2023-24 as cost-of-living pressures result in lower volumes of goods being transported on pallets to the group’s retailer customers. Yet by charging higher prices, the group was able to lift net profit by 19% to $US703.3 million in the year to June 30, offsetting higher timber prices, energy, labour and transport costs.
Flight Centre (ASX:FLT) Travel Group Ltd lost 3.1% after announcing solid full-year results and declaring its first dividend since 2019 - a fully franked $0.18 per share. The airline’s revenue was up 126.4% over the year to $2.28 billion. Earnings were also impressive with EBITDA rising 233.1% from FY22 to $266 million with nearly 70% of underlying EBITDA generated in the second half of FY23.
eToro market analyst Farhan Badami said: “The shift in profit distribution during the latter half of the fiscal year mirrors the positive shift in global market conditions following the lifting of travel restrictions.
"This improvement aligns with positive industry dynamics, notably the expansion of airline capacities, along with the anticipated seasonal patterns.
"With the stock price up over 50% this year, it’ll be interesting to see whether the group can uphold its trajectory of sustainable growth in the face of potentially reduced consumer travel.”
Inflation cools in July
Monthly inflation data continues to show an easing of price rises across most categories. CPI came in at 4.9% for the 12 months through July 31, down from 5.4% in June and lower than the expected 5.2% figure.
Food and beverage prices continue to ease, thanks to better growing conditions, while the overall price of fresh food and vegetables eased. However, meals out and takeaway food inflation remains steady as businesses pass on higher utility and rent costs. Automotive fuel prices also declined (-7.6%).
Rents, however, rose by 7.6% over the year, up from 7.3% in June. Electricity prices also rose by a substantial 15.7% and that takes into account the Energy Bill Relief Fund. Without it, electricity bills would have risen 19.2% during the month, instead of 6%.
State Street (NYSE:STT) Global Markets’ head of APAC Macro Strategy Dwyfor Evans said: “A weaker than expected July CPI report confirms evidence from our PriceStats inflation series that Australian prices continue to moderate, both on an absolute and a relative basis to other G10 markets.
"The one caveat is a reacceleration in Australian online prices in August month-to-date, ostensibly from food and energy prices, and this maintains caution at the RBA for now, particularly given inflation levels relative to target.”
The Australian dollar dropped 0.4% to US64.54¢ after the figures were released.
Given the moderating inflation, we look ahead to the RBA’s meeting next week and its September rate decision. At this stage, the market has priced in a 62% chance the cash rate will remain at 4.1% for the rest of the year, up from 52% on Tuesday.
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