Evening Wrap: ASX 200 slumps from session highs, CSL beats earnings estimates, US futures higher

The S&P/ASX 200 closed 13 points higher, up 0.18%.

The local sharemarket falls from session highs of 0.8% ahead of key US inflation data, Australian consumer sentiment backflips to near-record lows, big day for corporate earnings with names such as James Hardie, Breville, Challenger and CSL posting half-year results and JP Morgan's CPI scenario analysis.

Let's dive in.

ASX 200 Session Chart

ASX 200 fades from session high of 0.79% to just 0.18% higher (Source: TradingView)

Markets

The nerves are kicking in ahead of the US CPI report. The ASX 200 faded from session highs of 0.79% to close just above breakeven, even as 8 out of the 11 major sectors finished higher.

• Technology led to the upside, in-line with how the Nasdaq outperformed overnight

• Healthcare was another top performer after CSL (+0.90%) posted better-than-expected results

• Materials weighed on the market, with all three iron ore heavyweights BHP, Fortescue and Rio Tinto lower

• Energy was heavy after a whipsaw session for Woodside (-1.1% from session low of -2.8%)

Economy

Westpac's Consumer Sentiment Index fell -6.9% in February to 78.5 points, which brings it back to historic lows seen last November. Here are some key takeaways from the report:

• At 78.5, the reading is a touch above the 78 read in November but below the low point of the GFC (79.0) and marginally higher than Covid lows of 75.6

• Sentiment before the RBA's ninth rate hike was steady at 83.5 but fell to 74.8 after the hike

• "Most disturbing is the size of the hit to current finances. The ‘family finances vs a year ago’ sub-index dropped 8% in February, to just 62.1 – marking the weakest reading since the depths of the early-1990s recession."

• "The ‘time to buy a major household item’ sub-index plunged 10.1% to 78, miles below the long run average of 126."

NAB's monthly business confidence survey 6 points to 6 in January, around its long-run average. Some key takeaways from the report include:

• “Business conditions picked back up in January after three months of softening in late 2022,” said NAB Chief Economist Alan Oster.

• “There were strong increases in conditions for ‘upstream’ sectors such as wholesale, construction and manufacturing, and importantly, conditions in the more consumer-facing industries remained very strong.”

• “The improvement in confidence suggest firms have a more optimistic outlook as concerns about global growth prospects ease, while strong conditions are also providing evidence that the economy is more resilient than previously expected.”

Japan's GDP rose 0.2% quarter-on-quarter in the December quarter, below consensus expectations of 0.5%.

Latest news

Market Insights

Changing the header here to reflect little snippets relating to macro, technicals, stocks and more.

Markets: JPMorgan's CPI Game Plan

JPMorgan's trading desk offers its scenario analysis for the S&P 500.

Note that consensus expects inflation to come in a 6.2% year-on-year in January from 6.5% in December 2022.

Markets: S&P 500 Seasonality

S&P 500 seasonality highlights strength through to August. August and September are the worst performing months with an average return of -0.34% and -1.0% respectively.

Source: SentimenTrader

Interesting news and movers

Trading higher

• +9.1% SG Fleet (SGF) – Reports 1H earnings

• +7.1% Sims (SGM) – Reports 1H earnings

• +5.5% Domain Group (DHG) – Bounce, down more than 10% in last three

• +5.2% KMD Brands (KMD) – Issues trading update

• +4.4% Challenger (CGF) – Reports 1H earnings

• +4.2% Universal Store (UNI) – Upgraded to Buy from Neutral at Citi

• +3.9% Boss Energy (BOE)

• +2.7% Aeris Resources (AIS) 

• +0% Lynas (LYC) – Malaysian operating licence approved for three years

Trading lower 

• -26.9% Temple & Webster (TPW) – Reports 1H earnings

• -13.5% Star Entertainment Group (SGR) – 1H earnings (Monday); Downgraded to Underperform at CSL; AFR speculates capital raise of asset sales

• -8.7% Ansell (ANN) – Reports 1H earnings

• -7.8% Vulcan (VUL) – DFS for Zero Carbon Lithium Project (Monday)

• -7.1% Appen (APX) – Guides FY EBITDA to lower end; announces non-cash impairment (Monday)

• -4.7% Breville Group (BRG) – Reports 1H earnings

• -4.4% Seven West Media (SWM) – Reports 1H earnings

• -4.3% James Hardie (JHX) – Reports Q3 earnings

Broker updates 

UBS’ ratings and one liners for company earnings on Tuesday.

Seven West Media (SWM)

• $0.80 target price; Retains Buy

• “Result ahead of UBSe but in line with consensus operationally. Early indications suggest mid-high SD % decline in total TV market, limited visibility.”

James Hardie (JHX)

• $47.50 target price; Retains Buy

• “Miss on a combination of volumes (USA -10% vs UBSe -4%) and price (+10% vs UBSe +15%) … JHX continues to prefer share gains over EBIT margin in the medium term.” 

Dexus (DXS)

• $8.50 target price; Retains Neutral

• “Low quality beat and guidance tightened to upper end of range but focus on capex.”

Breville Group (BRG)

• $24.60 target price; Retains Buy

• “EBIT beat, sales touch softer via EMEA & Distribn. Guidance in line.”

Temple & Webster (TPW)

• $5.40 target price; Retains Neutral

• “Reduction in costs drive margin beat, B2C revenue and customer trends slightly below.” 

Challenger (CGF)

• $7.30 target price; Retains Neutral

• “Core earnings and dividend in line. Key earnings drivers likely to be questioned in both Life and Funds. Guidance reaffirmed.”

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