The sharemarket ended a volatile day of trading modestly higher, as gains in the materials sector outweighed losses in banks and supermarkets.
The S&P/ASX 200 index rose 5.8 points, or 0.1 per cent, to 6345, hitting a fresh 10-year high for the second straight session.
The major mining stocks were able to lift the market to a positive result as commodity prices advanced slightly over the weekend. BHP rose 1.5 per cent to $33.22 on Monday, Rio Tinto closed 0.3 per cent higher at $73.31, while South32 advanced 0.3 per cent to $3.37.
Fortescue Metals shares rose despite the company revealing a 58 per cent fall in annual profits. The result was ahead of some market forecasts.Its shares rose 1.4 per cent to $4.27.
Eclipx shares lifted 16.8 per cent to $2.50 after the company rejected an $806.6 million cash and stock takeover offer from SG Fleet Group. The offer, which represented a 17.9 per cent premium to Eclipx’s Friday closing price was described as “inadequate” by the company.
Woolworths reported a 12.5 per cent jump in annual net profits on Monday but chief executive Brad Banducci said that sales pressure was already mounting in the new financial year on the back of the the removal of single-use plastic bags.
He said that sales in the first seven weeks of 2018-19 had slowed as customers adjusted to the new policy. Woolworths shares fell 0.8 per cent to $29.36, while Wesfarmers shares fell 1.5 per cent to $51.76 with investors betting that Coles would face a similar slowdown.
The major banks also weighed on the index with some mild losses. Commonwealth Bank was the worst performing of the big four banks, falling 1.1 per cent to $73.49.
Ansell shares fell 7.7 per cent to $25.68 after it warned investors that raw material costs and tariffs introduced on US imports could impact the company’s EPS in the 2019 fiscal year by up to US6¢. The company reported on Monday net profit after tax for the 2018 fiscal year rose 228 per cent to $US484.3 million.
Credit Suisse downgraded Origin Energy on the back of its financial results reported on Thursday. Origin’s FY18 EBITDA of $2.95 billion was 6 per cent below consensus forecasts and 3 per cent below Credit Suisse’s forecast. The company’s FY19 energy markets guidance of $1.5-1.6 billion was also well below the broker’s own guidance of $1.87 billion. The broker said that the impact of competition and concessionary measures had been higher than expected and suggested that retail margins were the cause of the weaker-than-expected guidance. Despite Origin’s recent deleveraging and intention to return to paying dividends in FY19, the broker believes that the magnitude of near-term challenges can’t be overlooked. The broker downgraded the energy company from an ‘outperform’ to a ‘neutral’ rating and cut its target price from $10.50 to $9.70.
What moved the market
Italian yields rise
While Italian bonds have remained mostly out of the headlines since May, Italy’s 10-year government bond yield is close to hitting the high of 3.18 per cent it hit in late May. The 10-year yield is currently trading at 3.14 per cent but hit 3.16 per cent on Wednesday following a steady rise since the middle of July. During the past month, the 10-year yield has risen by almost 70 basis points. A succession of developments have made it more likely that Italy’s Government will implement fiscal stimulus measures in next year’s budget and this could put the country’s debt-to-GDP ration on an unsustainable path according to Capital Economics’ economists.
Copper ended a tough week for commodities by falling 0.2 per cent on the London Metal Exchange on Friday, recording its fifth decline in six sessions and one of its worst weekly performances this year. Copper began last week trading at $US6119.5 a tonne but declined to close the week at $US5,842 a tonne, hitting a 13 month low. On Sunday, Ivan Arriagada, chief executive of Antofagasta, one of the world’s leading copper producers, said he expected copper prices would continue to be volatile on the back of global trade tensions. “There is a level of concern in the industry because the fall in the price of copper has been considerable and, also, because inputs are rising,” he told a Chilean newspaper.
The Australian dollar is looking brighter as it lifts away from last week’s 19-month lows. The Aussie dollar is set to focus more on global sentiment this week than local data or events with this week’s focus being the US-China trade talks. The dollar fell last week on the back of fears that the Turkish lira’s steep slide would affect other markets. Senior currency strategist at Westpac, Sean Callow said in a note on Monday that while local construction data could help shape GDP forecasts, further developments on reports that plans were being formed to bring the US and China together on trade policy ahead of APEC and G20 meetings in November would be much more crucial to the Aussie dollar’s movement.
Afterpay Touch continued its strong run on form on Monday, rising 5.2 per cent to a fresh record high of $17.47. The stock has lifted four times in the last five sessions, rising more than 20 per cent during that time. The company is set to report its annual results on Thursday and investors may be buying up ahead of the announcement. In July, the company reported its quarterly figures which showed sales for the fourth quarter were up 39 per cent on the previous quarter. The company’s shares are up 192.8 per cent for the year-to-date with the next best performing stock inside the ASX200, Sirtex Medical, rising 89.4 per cent.