ASX opens higher despite mixed Wall Street session; Telstra gains
By Stan Choe
The Australian sharemarket has opened higher on Thursday morning after gains on Wall Street, where a stronger-than-expected report on retail sales led to hopes of a resilient US economy.
The S&P/ASX200 gained 25 points, or 0.34 per cent, to 377.20 at 10:32 am AEDT. Strong gains in IT and communication services lifted the bourse. Market heavyweight Telstra rose, having raised its dividend after a strong half-year result.
Telstra’s share price went up 1.86 per cent to $4.20 after the nation’s biggest telco reported an 11.4 per cent increase in operating earnings to $3.8 billion for the December half. Net profit climbed 25 per cent to $900 million, thanks to growth in its mobile business and the acquisition of Digicel Pacific.
The telco giant said it will reward its shareholders with an increase in its half-year dividend to 8.5 cents a share, from 8 cents a year ago.
Strong gains from other IT and communication services also helped lift the local bourse, with both sectors adding 1.7 and 1.4 per cent, respectively. Carsales.com and Xero rose just over 2 per cent each at the open.
Health company Sonic Healthcare’s share price jumped 9 per cent after the company revealed at its half-yearly earnings that its base business revenue outside of COVID tests rose 6 per cent from the same time last year, while net profits were up by 50 per cent on where they were before the pandemic.
The finance sector was still in the red after record results from Commonwealth Bank disappointed investors on Wednesday. CBA extended Wednesday’s losses by 0.3 per cent in early trade. Meanwhile, National Australia Bank’s first-quarter profits jumped by close to a fifth to $2.05 billion, as revenue increased sharply thanks to higher interest rates and growth in its loan portfolio. Its share price went up 1 per cent to $30.62.
Top Australian gold miner Newcrest lost 1.5 per cent after its board rejected a takeover proposal from US mining giant Newmont, arguing it undervalues the company, but has agreed to open its books to extract a higher offer.
Coalminer Whitehaven’s share price went down 2.3 per cent despite the company’s 432 per cent profit jump to $1.8 billion after half-yearly revenue peaked at $3.8 billion. Big miners Rio Tinto and BHP were slightly up on Thursday morning’s trade.
The S&P 500 rose 0.3 per cent overnight after swinging from early losses to gains through the session. The Dow Jones Industrial Average edged up 0.1 per cent, while the Nasdaq composite rose a more forceful 0.9 per cent.
Sales at US retailers jumped by more last month than expected, even as shoppers contended with higher interest rates on credit cards and other loans. The surprising strength offers hope that the most important part of the US economy, consumer spending, can stay afloat despite worries about a possible recession looming. It’s the latest piece of data to show the economy remains more resilient than feared.
At the same time, though, the strong spending potentially adds more fuel to inflation, which a report earlier this week showed is taking longer to cool than expected. Upward pressure on inflation could force the Federal Reserve to stay more aggressive in keeping interest rates high.
High rates can drive down inflation, but they also drag on investment prices and raise the risk of a painful recession.
“Will it lead to that traditional recession or a shallow recession, or will we power through it and have more strong growth with still-high rates?” asked Tom Hainlin, national investment strategist at US Bank Wealth Management. “That’s still the unknown, which is how resilient can the consumer be in this higher for longer” rate environment.
“It seems like both consumers and corporate America came into this in pretty good shape and so far are holding out OK,” he said.
The worries about higher rates and a firmer Fed have been most evident in the bond market, where yields on Treasurys have jumped since a report two Fridays ago showed the US job market remains stronger than expected.
The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.79 per cent from 3.75 per cent late on Tuesday.
Following Tuesday’s data on inflation that was slightly hotter than expected, economists at Deutsche Bank raised their forecast for how high the Fed will take its key overnight interest rate. They now see it ultimately rising to 5.6 per cent, up from their prior forecast of 5.1 per cent.
Even still, stocks are hanging onto healthy gains for the year despite recent rockiness. The S&P 500 is up 8 per cent as strong data build hope that the economy may be able to avoid a recession. Or, if one hits, perhaps it may be only a short and shallow one.
The next big milestone for the market will likely be the Fed’s meeting in late March, when policy makers will give their latest forecasts for where interest rates will be at the end of the year, Hainlin said. That could lead to choppy trading in markets until then, as investors try to guess which way it will go.
On Wall Street, shares of Airbnb jumped 13.4 per cent Wednesday after reporting stronger profit and revenue for its latest quarter than analysts expected. It also said trends remain encouraging into the new year, and it gave a forecast for revenue that topped Wall Street’s.
On the losing end were stocks of energy producers, which fell 1.8 per cent for the worst performance by far of the 11 sectors that make up the S&P 500.
One of the sharpest drops came from Devon Energy, which fell 10.5 per cent after reporting weaker profit for the latest quarter than expected.
This earnings reporting season has been muted, with many companies reporting pressure on their profits from higher costs and interest rates.
AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
Most Viewed in Business
Source: Thanks smh.com