Weekly Wrap: Lower interest rates fuel new market record
Once again, the Australian share market has soared to a new record high, thanks largely to the Reserve Bank’s decision to belatedly cut official interest rates to 3.6%.
Indeed, the promise of possibly another interest rate cut to come after steady July jobs data helped to usher in five straight record intraday sessions – a rare feat indeed.
It was only a share stumble by the heavyweight Commonwealth Bank that stopped Wednesday’s close from also being a record.
By the close of trade on Friday the ASX 200 had added 64.80 points, or 0.7%, to 8938.60 points, up an impressive 1.5% for the week.
9000 points on the way?
That brings the next upside target of 9000 points well into the realms of possibility over the next few weeks, making the current rash of company profit results particularly important in providing a bit more fuel to keep this market rally firing.
After a pause due to scepticism about the lofty share price of Commonwealth Bank after its results, financials also came charging home on Friday.
Financials charge back
Westpac (ASX: WBC) rallied 2.1% to $36.81 and a new decade high, ANZ (ASX: ANZ) jumped 1.8% to $33.08 after the bank grew deposits by $19 billion in the third quarter and National Australia Bank (ASX: NAB) was up 0.8%.
Even Commonwealth Bank (ASX: CBA) emerged from a two-day funk to rise 0.6% to $168.17.
Friday was a strong day for the miners as well as the iron ore price continued its recovery and analysts continued to back the gold sector.
The three Pilbara iron ore miners, Rio Tinto (ASX: RIO), Fortescue (ASX: FMG) and BHP (ASX: BHP) all saw their share prices add more than 1% while gold miners Newmont (ASX: NEM) saw its shares rise 0.6% while Northern Star (ASX: NST) added a substantial 1.8%.
Baby Bunting really delivers
Some impressive results led to incredible gains in the market as well, with Baby Bunting (ASX: BBN) shareholders undoubtedly overjoyed, as a stronger annual profit guidance saw shares soar 40.5% to $2.60.
Investors were also impressed with Ampol’s decision to expand its petrol station footprint by spending $1.1 billion to purchase the struggling EG Australia.
Ampol (ASX: ALD) jumped 7.7% to $29.15 after its two-pronged plan to add Foodary stores to some of the former EG petrol stations and automate others and open them around the clock found plenty of fans.
Some of the existing Ampol U-GO automated stores have managed to increase fuel volumes by 50% or more without needing full-time staffing.
Amcor cardboard sags
Not so lucky were Amcor (ASX: AMC) shareholders who saw their packaging investment sag by 9.7% to $13.60 due to full year earnings that were below forecasts and weaker volumes in North America.
One of the bigger turnaround stories was real estate group Mirvac (ASX: MGR) which produced a $68 million profit compared to the previous loss of $805 million.
That didn’t convince everybody with shares down 0.9% to $2.29 as investors noted that the improved result was struck on a 10% fall in full-year revenue to $2.74 billion.
Friday was also a strong day for lithium miners, with Liontown (ASX: LTR) up 5.6%, Pilbara Metals (ASX: PLS) up 1.9%, and Mineral Resources (ASX: MIN) up 1.7%.
The week ahead
Productivity will be on everyone’s lips this week as the Australian government hosts a three-day summit involving many leading business, union and economic groups.
As well as addressing Australia’s poor recent performance on productivity, the summit will also be looking at solving some highly contentious issues including taxation and barriers in the way of providing more housing.
There are a few other data points to watch out for including the monthly consumer sentiment index and the purchasing managers index.
Could the Fed still cut?
Offshore, one of the most interesting points will be the release of the minutes from the Federal Reserve’s recent decision to keep interest rates steady.
Traders are still hopeful they could get an interest rate cut in September after the Fed downgraded US economic growth, so any information that pointed to a greater chance of an easing would be positive for the share market.
The Fed is also hosting a major meeting for central bankers at Jackson Hole, with a focus on productivity, demographics, and changing labour markets.
The coming week also signals the release of a lot of market sensitive information as more than 140 companies release their results including a big list of heavyweights such as BHP, National Australia Bank, CSL, Brambles, and Woodside Energy.
Profit results will also be continuing in the US market and have been generally helpful in continuing the share market’s bullish turn.