Evening Wrap: ASX 200 rallies as inflation cools to 14-month low, retail stocks bounce

A cooler-than-expected inflation print sent the Index higher for a second consecutive session, headline inflation eased to levels not seen since April 2022 but rents and food prices remain sticky, retail stocks receive a much needed bounce after getting sold to oblivion in the past few weeks and a few Macquarie notes of interest.

Let's dive in.

ASX 200 Session Chart

ASX 200 rallies and closes near best levels (Source: Market Index)

Markets

The ASX 200 rallies and closed near session highs thanks to a much cooler-than-expected inflation print. Participation was relatively broad-based, with only Utilities finishing the sector in negative territory. The CPI print builds on the positive economic data we saw overnight including better-than-expected US durable goods and consumer confidence data. The Index is trying to pick up the pieces after rollercoaster-like price action in the past three weeks.

A data insight from earlier this week noted how the last four days of June have historically been positive. As well as how the month of July is the third best performing month on average. Let's see how the market holds up as we put 'Sell in May' and June 'tax loss selling' behind us.

Economy

Australia’s monthly CPI indicator rose 5.6% year-on-year in May from 6.8% in April.

• Below consensus expectations of 6.1%

• “This month’s annual increase of 5.6 per cent is the smallest increase since April last year. While prices have kept rising for most goods and services, many increases were smaller than we have seen in recent months.” – Michelle Marquardt, ABS Head of Price Statistics 

• The most significant price rises were Housing (+8.4%), Food and non-alcoholic beverages (+7.9%) and Furnishings, household equipment and services group (+6.0%)

• Offsetting the rise was Automotive fuel (-8.0%)

• Rent prices increased 6.3%, up from 6.1% in April, reflecting strong demand for rental properties and tight rental markets 

• Annual trimmed mean inflation was 6.1% in May, down from 6.7% in April 

Latest news

Interesting news and movers

Trading higher

• +18.4% Latin Resources (LRS)

• +13.0% Betmakers (BET)

• +11.5% Star Entertainment (SGR) – Sells Sheraton Grand Mirage in QLD (Tue)

• +7.5% Collins Food (CKF) – Continuation rally, up 12% in last three

• +7.4% Brainchip (BRN)

• +7.0% Race Oncology (RCE)

• +6.0% Judo Capital (JDO)

• +5.2% Elders (ELD) – Upgraded by Bell Potter

• +4.8% Ramsay Healthcare (RHC) – Potential sale of RSD JV in Asia

• +3.8% Lendlease (LLC) – Selected as partner for Melbourne QVM revitalisation

• +0.6% PointsBet (PBH) – Improved offer for US business

• Retail stocks move: Redbubble (+9.7%), Cettire (+6.9%), Baby Bunting (+8.4%), Dusk (+8.2%), Adairs (+8.1%), City Chic Collective (+8.0%)

• BNPL sector move: Block (+4.1%), Zip (+2.4%), Spiltit (+2.2%)

Trading lower

• -8.5% Bega Cheese (BGA) – Downgraded by several brokers

• -7.1% Capitol Health (CAJ) – Guidance

• -5.7% Theta Gold Mines (TGM)

• -5.5% Centaurus Metals (CTM) 

• -4.4% Stavely Minerals (SVY) – $3.55m placement

Broker notes

A few Macquarie notes of interest:

Collins Food (CKF) – Neutral with $9.70 target price

• “First seven weeks trading has KFC Aust +8.8% SSSg, KFC Netherlands +9.0%, KFC Germany +12.4% as consumers absorb price increases.”

• “CKF's FY23 underlying results were stronger than anticipated, particularly European margins.”

• "Consumers appear to be willing to absorb price increases, giving medium-term upside to this value- focused restaurant. Valuation appears fair at current levels.”

CSR (CSR) – Underperform with $4.50 target price

• “CSR held its FY23 AGM today and left its FY24 outlook unchanged.”

• “We think the pipeline is thinning and remain cautious on detached building activity in FY24 and FY25.”

• “We remain cautious on the medium-term outlook of the Building Products business. The stock trades at long-term average multiples, when the BP earnings are at their peak.”

DDH1 (DDH) – Neutral with $1.01 target price

• “PRN to acquire DDH for $0.1238 cash plus 0.7111 PRN shares for each DHH share, implies a value of $1.01 per DDH share, a 17% premium to 5-day VWAP.”

• “... as the current share price is approaching the bid; some discount is justified by PRN share price movement today, DDH's softer FY23 outlook & time to complete.”

Scans