The ASX has lifted on the back of positive jobs data.
The S&P/ASX200 finished 13.50 points or 0.19% to 7,135.70. Over the last five days, the index has gained 2.47% but is down 4.15% for the last year to date.
Top-performing stocks in this index are Pendal Group Ltd and Webjet Ltd (ASX:WEB) up 10.99% and 9.52% respectively.
Given the current cost of interstate travel, it would be no surprise if most travel stocks saw a bit more blue sky.
Webjet expects to "exceed pre-pandemic profitability" this financial year after a strong first-half performance.
First-half underlying earnings before interest, taxes, depreciation and amortisation came in at $72.5 million.
Statutory net profit was $4 million and group bookings were 3.4 million up 101% on pre-pandemic levels and 137% on the prior corresponding period.
Managing director John Guscic said the result demonstrated "a spectacular turnaround" for its loss of $15.9 million in the first half of FY22.
"It underpins the efforts we took as soon as the pandemic hit to ensure each business was optimally positioned to recapture demand once travel returned. Recovery is substantially accelerating and WebBeds is leading the charge," Guscic said.
"Prior to the pandemic, Webjet was one of the most profitable online travel agents in the world and EBITDA margins are already back over 41%, despite inflationary wage pressures and after absorbing the loss of overrides and commission usually earned on international travel."
UBS noted strong top line and well-contained costs generating a 557% rise in 1H EBITDA to $72.5 million which was 25% above consensus and very strong cash generation of $168 million.
Looking at the sectors, only Energy and Materials were in the red down 2.06% and 1.17% respectively. Consumer Staples was the best performed up 1.91%, followed by Health Care at 1.31% higher.
Making news today
Employment rate grows
The Australian Bureau of Statistics released its labour data today.
Employment grew by 32,200 in October; unemployment was 3.4%, the equal lowest rate in almost 50 years.
“With employment increasing by around 32,000 people, and the number of unemployed decreasing by 21,000 people, the unemployment rate fell by 0.1 percentage point to 3.4%,” ABS head of labour stats Bjorn Jarvis said.
The result was well ahead of consensus for 15,000 new employed people, which along with yesterday's wage data adds fuel to the Reserve Bank of Australia’s fire to lift interest rates in December and beyond.
The stats:
- Full-time employment increased by 16,800 to slightly above 9.5 million.
- Part-time employment was steady at 4.1 million.
- The participation rate was also steady at 66.5%, slightly below a high of 66.7%.
- Seasonally adjusted underemployment fell 0.1 percentage point to 5.9%, 2.8 percentage points below the pre-pandemic rate.
- The underutilisation rate fell 0.2 percentage points to 9.3% in seasonally adjusted terms. The underutilisation rate is now 4.6 percentage points below March 2020, and the lowest rate since March 1982.
- The RBA expects the jobless rate to remain around 3.5% until mid-2023 before growing to 4.3% by the end of 2024.
CreditorWatch’s chief economist Anneke Thompson said, “Today’s labour force data showed 32,200 people in Australia gained employment in October 2022, dropping the seasonally adjusted unemployment rate to 3.4%, down from 3.5% in September 2022. The labour market remains extremely tight, reflecting the very high levels of capacity utilisation that businesses continue to report.
“Monthly hours worked in all jobs increased by 2.3% over the month, or 43 million hours, and is up 9.7% compared to October 2021. This is good news for businesses as there are now less people taking sick leave (about 1/3 less than this time last year) and less annual leave being taken.
“The continued strength of the labour market presents a conundrum for the RBA, who are looking for heat coming out of labour market as one of the most tell-tale indicators that their monetary policy tightening will start to work against inflation.
"In all likelihood, the unemployment rate will probably remain around current rate until around January 2022, so that businesses – particularly retail, hospitality etc – can capitalise on the busy Christmas period.
"Assuming monetary policy tightening really begins to bite post-Christmas, and looking at the loss of momentum in B2B Trade levels in CreditorWatch’s October BRI, we expect that the labour force will show signs of weakening in February or March 2023.”
Losing the game of CHESS
The ASX has dumped its transition to a blockchain-based settlement and clearing system.
The system would have replaced the ageing CHESS system but the ASX has dumped the project and will write off $245 million to $255 million pre-tax in costs.
It has taken seven years to come to this decision but was fuelled by a damning report by Accenture (NYSE:ACN) which identified several issues, including uncertain timelines, communication issues with technology vendor Digital Asset and excessive complexity.
This is a major blow to ASX credibility, with RBA governor Philip Lowe describing the ASX announcement as “very disappointing”.
The ASX will now consider rebates to customers who invested in building the replacement CHESS project.
“One of the approaches you’ve seen us use when there are issues for our customers is we absolutely have gone through rebate processes from time to time to address customer issues, ASX managing director Helen Lofthouse said.
“That’s certainly an approach that we’ve used in the past in this kind of situation.”
The ASX will now consider all options in updating the system.
“Nothing is off the table but we will be considering adjustments for the current solution.”
The ASX will have to continue to invest in its current CHESS system to make sure it continues to work as required.
it is operational and can meet market needs.
“The path we were on will not meet ASX’s and the market’s high standards. There are significant technology, governance and delivery challenges that must be addressed,” ASX chairman Damian Roche said.
The next update on the CHESS replacement project will be provided in February 2023.
“ASX has failed to demonstrate appropriate control of the program to date and this has undermined legitimate expectations that the ASX can deliver a world-class, contemporary financial market infrastructure,” ASIC chairman Joe Longo said.
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