The Match Out: Market flat ahead of key US Inflation Data, Qantas (QAN) soars

James Gerrish

Market Matters

A choppy session for the ASX today with weakness bought early pushing the index up ~30pts at its best before we gave up those gains and some by the close – not surprising really given the significance of the data due out in the US tonight with consensus expectations outlined below.

  • The ASX 200 finished down -4pts/ -0.07% at 6442
  • The Financial sector was best on ground (+1.39%) while Consumer Discretionary (+0.07%) also outperformed.
  • Property (-1.87%) and Healthcare (-1.04%) the weakest links.
  • The local monthly inflation print was out at 11am today and came in flat MoM at 5.4%.
  • Qantas (ASX: QAN) +8.70% rallied following a trading update that blew consensus expectations out of the sky – a huge beat.
  • CSLA upgraded both WBC & NAB this morning, JP Morgan upgraded CBA as the analyst community turned more positive on the banks.
  • Commentary included…JP Morgan lifting near-term estimates for major lenders on rate leverage and positive NIM outlook, as Bank of Queensland(ASX: BOQ) “has given us more confidence in these dynamics”.
  • Jarden said…“We see this as strong confirmation of margin expansion for the majors, particularly as BOQ is seen as having less positive leverage to rising cash rates than peers and has more proactive term deposit pricing recently”.
  • Morgan Stanley said… While BOQ’s period end, business mix and growth are all slightly different from larger peers’, the result “supports our positive view on near-term margin trends, particularly in relation to deposit pricing benefits”
  • Banks were higher today, ANZ +2.10%, CBA +1.91%, NAB +2.38% & WBC +2.95%.
  • Nib Holdings (ASX: NHF) -11.98% was sharply lower following a $150m equity raise at $6.90, shares closed ~4% below the placement price at $6.61 – funds are being used for an acquisition.
  • Morgan Stanley put a more bearish note out on Lithium today, saying customs data show a decline in lithium prices in China to $55,000 from $70,000 per ton. Pilbara (ASX: PLS) -4.45%, Allkem (ASX: AKE) -5.56% while IGO fell -1.91%
  • The Treasurer has explicitly ruled out touching the stage three tax cuts in the October budget, but leaves the door open to rolling back or amending the package in future – seems like some changes will almost certainly happen here.
  • Inflation data tonight in the US – with expectations covered below.
  • Iron Ore was down 1% in Asia, Newcastle Coal Futures for November up 5%
  • Gold was flat at ~US$1670 – inflation + the $US will be key tonight.
  • Asian stocks were down, Hong Kong off -1.1%, Japan -0.50% while China was flat
  • US Futures are all marginally higher, around +0.10%

ASX 200 Chart

Expectations for tonights inflation data

US inflation data due out tonight is going to be important, below looks at the market consensus for the key numbers, headline rate below 8.1% is important and gets the airtime, however, the Fed’s preferred measure is Core Inflation which strips out more volatile Food & Energy – Consensus sits at +6.5% YoY. Tonight’s data will have a big bearing on the Fed Funds rate come the next meeting in early November.

Qantas (ASX: QAN) $5.62

QAN +8.70%: The flying Kangaroo said 1H23 profit before tax would be in the range of $1.2-$1.3bn, ‘slightly’ ahead of the consensus of ~$500m and compares to FY consensus of $1.16bn i.e. it was simply a stunning update with Qantas cashing in on exorbitant airfares with 1H earnings likely to be more than what analysts were expecting for the full year. They said domestic capacity is back to 94% of pre-covid levels while international was at 61% with both edging higher in the 2H. All is going well for QAN with shares rallying as a consequence, although they did taper off from early highs with the stock up more than 11% at its peak.

Broker Moves

  • NAB Raised to Accumulate at CLSA; PT A$31.30
  • Westpac Raised to Buy at CLSA; PT A$25.90
  • CBA Raised to Neutral at JPMorgan; PT A$94

Major Movers Today

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James Gerrish
Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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