Australian healthcare rises, whilst our trusted supermarkets take a hit.

The S&P/ASX 200 finished marginally higher up +0.1%, with 8 of the 11 sectors finishing in the green. The marginal rise was influenced by gains in healthcare stocks, whilst losses were noted in consumer staples, utilities, and technology companies. Consumer Staples (-.8%) was the worst performing sector in the Australian market, influenced by supermarket chains Woolworths -1.3%, Coles -0.9% and IGA owner Metcash down -1.6%. The interest rate-sensitive Information Technology sector also fell, awaiting updates on the much-anticipated RBA cash rate announcement today, along with the IT sector consolidating gains. WiseTech, TechnologyOne, and Megaport all experiencing declines, dropping by -0.4%, -1.2%, and -3.8%. It’s important to note in the last 6 months, Australian technology companies have been on a tear with WiseTech up +44%, TechnologyOne up +9%, and Megaport up an astonishing +83%. Healthcare – our top-performing sector for the day, was driven by CSL up +0.7%, Ramsay +2.2% and Fisher & Paykel +0.9%.

Australian lithium companies continue to struggle.  

IGO, a leading lithium company, faced a sharp decline of 4.6%, despite reporting impressive fourth-quarter earnings of $636 million, representing a 19% increase, and achieving a record underlying free cash flow of $381 million for the three months ending June 30. Analysts believe that IGO’s June-quarter performance could have been even better if not for lower commodity prices and subpar output at its lithium refiner. In the same industry, Allkem, a rival lithium company, experienced a 2.5% drop, while Pilbara Minerals also suffered a 2.2% decline. In other company-related news, Origin Energy shares slid by 0.6% after reporting that revenue at its Australia Pacific LNG venture had declined by 11% in the June quarter. Despite this, Origin’s FY23 electricity sales volumes rose by 1% compared to the previous year, while gas sales volumes decreased by 5%. Gold miner Gold Road Resources climbed by 1.9% after announcing that its 2023 all-in sustaining cost was anticipated to be at the upper end of the existing guidance, ranging from $1540 to $1660 per attributable ounce. On the other hand, Silver Lake Resources shares experienced a significant decline of 20.2%, falling to 89¢. This decline followed the company’s warning that it expects to sell less gold in FY24, with the sales guidance for its Australian operations in FY24 ranging from 210,000 to 230,000 ounces at an all-in sustaining cost of $1850 to $2050 per ounce.

US equities & US oil surge – a sharp contrast to what’s happening in China.

Despite the Federal Reserve’s efforts to curtail growth and suppress inflation, there seems to be no signs of an impending recession, highlighted by the S&P500, Dow Jones, and the NASDAQ all finishing in the green for the day. In US oil news, energy stocks continue to rise, closely following the surge in oil prices. West Texas Intermediate remained above $US80 a barrel, with prices reaching their highest level since April after a five-week streak of gains, whilst Ampol experienced a rally of 1.2%. Goldman Sachs has also placed a buy recommendation on Chevron, as the free cash flow inflection point nears. Overall, there appears to be a broadening of leaders noted during this US earning season (no longer compartmentalised in the AI sector), with Disney also benefitting from improved investor sentiment up 2.4% for the day. America’s GDP, which surpassed expectations, stands in sharp contrast to China’s struggling post-pandemic recovery. China is currently facing deflation, presented by an unusually gloomy assessment of the obstacles impeding its economy, including diminished investment, notably in the property sector, sluggish consumer spending, record high savings rates, record high youth unemployment +20%, and talks of “stimulus” that is yet to occur.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.