Evening Wrap: ASX 200 higher as energy stocks surge, AMP reverses early selloff

The Index climbs to a 1-week high, European gas prices jump the most since March 2020 amid Australian supply worries, the S&P/ASX 200 Energy Index rallies to a three-and-a-half year high, AMP reverses a 6.4% selloff to close 4.6% higher and Boral's upbeat earnings lifts building and construction peers including CSR and Adbri.

Let's dive in.

ASX 200 Session Chart

ASX 200 rallies intraday to finish at best levels (Source: Market Index)

Markets

The ASX 200 finished higher and at best levels. The move was supported by solid earnings from names like Boral, AMP and QBE Insurance. As well as a broad-based rally for all things Energy (such as coal, uranium, oil and gas) amid potential strikes from Chevron and Woodside workers in Australia. The S&P/ASX 200 Energy Index rallied to levels not seen since January 2020. We have US inflation data due tonight at 10:30 pm, where consensus expects headline inflation to reaccelerate from 3.0% in June to 3.3% in July. While core inflation is expected to remain unchanged at 4.8%. The Index is beginning to poke its head up to a 1-week high but let's see what CPI will bring for tomorrow.

Economy

No major economic announcements.

Latest news

Market Insights

Reporting season is starting to ramp up. We'll recap a few interesting takeaways from today's results.

AMP (ASX: AMP) sold off as much as 6.4% in the first ten minutes of trade but closed 4.6% higher.

• Why the selloff: AMP CEO Alexis George said "Given the current uncertainty around the Court’s judgment and other litigation matters, we are taking a prudent approach with our capital and liquidity and will pause tranche three of the capital return."

• How big was the beat: Underlying 1H23 net profit was $112m compared to Citi expectations of $97m. Revenue of $668m was comfortably above consensus expectations of $657m

The capital return delay might've hit a soft spot. But then the market realises, 'hey the results weren't that bad', resulting in a V-shaped move to breakeven between 10:10 am and 10:35 am.

AMP intraday chart (Source: Market Index)

Boral (ASX: BLD) posted an all-round beat with an upbeat guidance. Key figures (vs. expectations) include:

• Revenue of $3.46bn, up 17% (vs. $3.3bn)

• EBIT of $231.5m, up 106% (vs. $209m)

• Net profit of $142.7m, up 304% (vs. $125m)

• FY24 EBIT guidance of $270-300m (vs. $279m)

The stock opened 4.8% higher and rallied to an 8.5% close on volumes (4.99m) not seen since 8 February 2023, which was the day of its half-year result where the stock rallied 12.8%.

The upbeat result inspired peers including:

• Brickworks (ASX: BKW) +2.0%

• CSR (ASX: CSR) +3.0%

• Adbri (ASX: ABC) +4.8%

• Acrow Formwork and Construction (ASX: ACW) +8.9%

Interesting news and movers

Trading higher

• +27.3% Lake Resources (LKE) – Bounce after -23% in last three

• +12.1% Cettire (CTT) – Earnings

• +8.5% Boral (BLD) – Earnings

• +7.9% Galileo Mining (GAL) – Drilling results

• +6.3% AUB Group (AUB) – Guidance

• +4.6% AMP (AMP) – Earnings

• +3.3% Alliance Aviation Services (AQZ) – Earnings

• +2.7% MMA Offshore (MRM) – New finance facility 

• Energy sector move: Strike Energy (+6.0%), Beach Energy (+3.6%), Santos (+2.6%), Woodside (+1.9%)

• Coal sector move: New Hope (+5.8%), Stanmore (+5.1%), Yancoal (+4.8%), Whitehaven (+4.3%)

• Uranium sector move: Elevate (+14.1%), Alligator Energy (+11.8%), Bannerman Energy (+10.4%), Deep Yellow (+9.1%), Boss Energy (+8.0%), 92Energy (+7.1%), Paladin Energy (+5.9%)

Trading lower

• -6.4% Downer (DOW) – Earnings

• -3.1% AGL (AGL) – Earnings

• -2.7% IDP Education (IEL) – Downgraded by Macquarie

• -2.5% A2 Milk (A2M) – Downgraded by CSLA 

• -1.2% QBE Insurance (QBE) – Earnings

Broker notes

A few Macquarie notes of interest:

Commbank (CBA) – Underperform with $88.00 target ($104.85 at 9 Aug close)

• “CBA delivered a solid FY23 result underpinned by strong balance sheet trends and slightly higher revenue, offset by higher costs.”

• “However, with limited scope to grow earnings, its ~19x FY24E PE mutliple is difficult to justify (~45-60% premium to peers).”

IDP Education (IDP) – Underperform with $21.00 target ($24.28 at 9 Aug close)

• “We expect a soft FY23 result from IDP. We think consensus is overestimating multi-destination student placement volumes (i.e. EBITDA margins).”

• “With an expensive multiple (44x FY23 P/E), in addition to expected consensus downgrades to margins and IELTS volumes, we downgrade IDP to Underperform.”

Suncorp (SUN) – Outperform with $17.20 target ($13.54 at 9 Aug close) 

• “SUN reduced its FY23 ordinary dividend to account for the delay in the bank sale process. Questions now surround quantum of 1H24.”

• “Bank NIMs and CTIs are forecast to deteriorate in FY24; however, with the bank sale still pending we suspect this won't be a focus.”

• “Stronger FY24 GWP growth expectations were a bright spot albeit offsetting weakness in the underlying margin guidance of 10-12% mid- point.”

Wesfarmers (WES) – Neutral with $52.00 target ($49.87 at 9 Aug close)

• “Metcash Hardware indicates that DIY hardware demand is softening relative to trade. This may be a headwind for Bunnings in the half.”

• “The outlook for discretionary consumer spending over the next six months looks challenging. However, the cash generation of Mt Holland significantly changes the cashflow of the group. WES is a defensive consumer stock with significant earnings & dividend upside over the medium term.”

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