The major banks were largely mixed this week as ANZ and National Australia Bank reported their half-year results.
While ANZ managed to maintain its dividend, NAB said it would cut its payment to shareholders.
“Really what we’re seeing in ANZ and NAB, is two examples of quite strong management execution in certain areas,” Clime Asset Management senior analyst David Walker said.
“NAB is doing well in business lending and ANZ is executing well in cost reduction and de-risking. They’re both executing well where they’re paying attention.”
ANZ shares rose 1¢ to $27.41 and NAB closed the week flat at $25.67. Westpac declined 1.1 per cent to $27.44 and Commonwealth Bank declined 0.6 per cent to $74.98.
Macquarie closed the week lower after its shares fell sharply on Friday following the financial giant’s yearly result.
While it reported a strong increase in profits and increased its dividend, it said it was forecasting a weaker outlook for the 2020 financial year. Its shares dropped 5.3 per cent to $128.81.
Pendal Group slid 11.7 per cent to $8.04 this week after it announced a sharp decline in its first-half results, with cash net profits falling 26 per cent compared with the same period a year earlier.
Domain shares closed the week 8.1 per cent lower at $2.83 after reporting a hit to its revenue in the March quarter. The company blamed the slowing housing market for the decline in its new market listings, which saw its revenue drop 6 per cent in the first three months of the year.
Afterpay Touch advanced this week after closing every session this week in the green. The company outlined its strategy for UK expansion and also announced it had signed a $US300 million receivables funding facility with Citi to support the expansion of its US business. It shares rose 16.1 per cent to $27.65.
Nine Entertainment closed the week 7.5 per cent higher at $1.87 after the company agreed a deal to sell its regional newspapers for $125 million to former Domain chief Antony Catalano, with the bid backed by Rich Lister and Thorney Investment Group billionaire Alex Waislitz.
ResMed shares added 11.6 per cent this week to end at $16.26. On Friday, the company reported sales growth of 12 per cent for the third quarter. Chief executive Mick Farrell said product innovation was the “turbo charger” behind the company’s performance.
Morgans retained its “hold” recommendation on Woolworths but lifted its price target by 11.9 per cent following its strong third-quarter sales growth. The broker noted solid growth from the supermarket giant’s liquor business as well as the solid sales from its Big W stores. “Woolworths’ third-quarter sales result overall was comfortably ahead of our expectations, with like-for-like sales for the core Australian food business growing at 4.2 per cent,” analyst Alexander Lu said. “The result was stronger than our 2.8 per cent forecast driven by improved transaction and item growth.” The broker only made minor changes to its 2018-19 forecasts, however, increasing its revenue and earnings before interest and tax expectations by just 1 per cent. Morgans increased its price target from $27.92 to $31.24.
What moved the market
Building approvals continue to show underlying weakness, with the outlook for the dwelling construction looking poor. “Stripping out the high-rise segment, the underlying trend in approvals still looks to be very weak,” Westpac senior economist Matthew Hassan said. “Approvals ex-high-rise look to be down a further 2.1 per cent in the month, following a 4 per cent fall in February and down around 19 per cent for the year. Overall, the update again points to weakening underlying momentum, highlighting downside risks to the near-term outlook for new dwelling construction.”
The price of crude oil fell on Thursday as a number of oversupply concerns converged to push the commodity to its lowest level in a month. US crude inventories rose to their highest level in two years while Russia, a key part of OPEC’s plan to cut oil production, missed an inventory reduction target. There is also a lack of confidence in the market that US sanctions on Iran’s oil exports will completely work and the strong political risk to Venezuela’s oil supply appears to be easing. The price of Brent crude fell 2.3 per cent to $US70.65 a barrel on Thursday while NYMEX crude slid 2.8 per cent to $61.81.
The Aussie dollar fell below US70¢ on Friday morning as the US dollar continued to firm following the Federal Open Market Committee’s meeting. The tone in local markets is far more dovish compared with the US too. A number of the country’s leading economists are expecting the Reserve Bank of Australia will cut rates when it meets on Tuesday on the back of soggy growth and weak inflation. A decline in oil prices also contributed to the weaker Australian dollar, with crude price falling to their lowest levels in a month.
Bank of England
The Bank of England made no monetary policy changes at their latest meeting on Thursday, with the bank maintaining its gradual and limited tightening bias. It also lifted its 2019 GDP growth and inflation projections. “The sterling-dollar pair moved lower because the decision doesn’t show any hawkish member in the committee,” TF Global Markets chief market analyst Naeem Aslam said. “Basically, the message is clear that the BoE also wants to practice patience and wants to assess things more closely before it makes any decision on the interest rate hike.”
William McInnes covers markets from Sydney including editing the Markets Live blog.