ANZ met the market’s expectations despite a difficult operating environment, announcing a 2 per cent rise in cash profit for the first half. ANZ’s shares advanced 2.8 per cent to $27.95.
The result was received positively by the other majors too. Westpac shares rose 2.3 per cent to $28.14, NAB closed 1.7 per cent higher at $25.78 and Commonwealth Bank add 1.7 per cent to close at $75.50.
Origin Energy was also among the market leaders on Wednesday, rising 3.9 per cent to $7.66. Despite reporting a mixed quarterly production result on Tuesday, chief executive Frank Calabria said the company’s 2018-19 guidance was unchanged during his presentation at the Macquarie conference on Wednesday.
Afterpay Touch hit a record high of $27.30 on Wednesday after adding 6.7 per cent during the session, a day after it outlined the strategy for its UK business. The company’s shares have closed higher for the past six sessions.
Shares in The a2 Milk Company fell after the company reported moderating revenue growth and said second-half earnings before interest, tax, depreciation and amortisation margins would be lower than the first half due to marketing investment and a slightly weaker Australian dollar. Its shares declined 3.3 per cent to $15.43.
Super Retail Group more than reversed its gains from Tuesday when it reported a strong quarterly sales result. UBS downgraded its earnings expectations for the company, sending the retailer’s shares down 8.8 per cent to $7.90.
SUPER RETAIL GROUP
UBS reduced its price target on Super Retail Group despite the company’s strong third-quarter trading update, saying higher costs and the softer margin outlook would hit earnings. The broker cut its earnings per share guidance for the next three fiscal years by between 2 and 4 per cent, forecasting a 20 basis point annualised decline in second-half earnings before interest and tax margin. Analyst Ben Gilbert said the company was trading well against a challenging backdrop but that its shares were now at fair value. UBS downgraded its rating on Super Retail Group from ‘buy’ to ‘neutral’ and reduced its price target on the company from $8.70 to $8.50, reflecting its weaker earnings outlook.
What moved the market
Capital Economics has outlined one of the more dovish forecasts for Australia and New Zealand’s central banks, saying it doesn’t see a hike in rates anytime before the end of 2021. The firm’s economists are forecasting the Reserve Bank of Australia will cut the official cash rate to 0.75 per cent by the end of 2020 and keep it there for at least another 12 months. The economists are forecasting the RBNZ cuts rates by just 50 basis points before the end of 2020, with the country’s interest rate set to remain firm at 1.25 per cent for the next year after that. Capital Economics is forecasting both central banks will cut as soon as their next meeting.
Aluminium prices fell on Tuesday after several of the world’s major producers warned the metal was facing weaker demand levels. Russia producers Rusal and Norsk Hydro both flagged concerns that demand in 2019 would be the lowest in more than a decade. The price of aluminium on the London Metal Exchange fell 1.7 per cent to $US$1,783 a tonne on Tuesday although its losses were capped by positive new coming from the US-China trade talks. Treasury Secretary Steven Mnuchin said negotiations between the two parties were in there ‘final laps’ with just the trade tariffs that originally started the spat reportedly now standing in the way of a deal.
NEW ZEALAND DOLLAR
The New Zealand dollar fell as much as 0.5 per cent against the US dollar on Wednesday after the country’s jobs data disappointed expectations. Expectations of a rate cut at the Reserve Bank of New Zealand’s meeting next week rose following the result, as the number of jobs fell in the first three months of the year. “New Zealand has seen a softening of economic growth as measured by gross domestic product over the last six months, and we now are seeing that softening come through the employment rate,” Stats NZ said.
House prices fell again in April, marking the 19 months of consecutive price declines since prices peaked in September 2017. While the pace of the declines slowed, the falls have become more broad based, with substantial decreases outside Sydney and Melbourne. “Ongoing home price falls will depress consumer spending as the wealth effect has now become negative and homeowners are less inclined to allow their savings rate to decline further to compensate for weak wages growth,” said AMP Capital chief economist Shane Oliver. “It’s also a negative for banks and is consistent with our view that the RBA will cut the cash rate to 1 per cent by year end.”
William McInnes covers markets from Sydney including editing the Markets Live blog.