The Match Out: Strong employment data stops the advance, Quarterlies galore with BHP, PDN and EVN in focus

A day of "could’ve" and "should’ve" with the ASX200 giving up all of the early gains to finish flat on the session. The index climbed as high as 7383, up +60pts before the first hour was up, hitting the highest level since April but the good times ended there and the index was marginally lower by ~1 pm. Part of the reason for the failed rally was employment which came in stronger than expected pushing the chance of an August rate hike up, while a barrage of company updates had us on our toes throughout. A fascinating session really!

• The ASX 200 finished up +1pt/ +0.02% at 7325
• The Financials sector (+0.40%) was the best on the ground with Tech (+0.35%) and Industrials (+0.23%) the only other gainers.
• Healthcare (-0.49%) was the weakest link. Less than a 1% disparity between the best and worst showing how muted the move was from a sector perspective. Utilities (-0.35%) and Real Estate (-0.33%) also lagged.
• Australian employment data beat expectations for June and the jobless rate held at 3.5%, having hovered in a range of 3.4%-3.7% since June last year.
• 32,000 jobs were added, more than double estimates + employment has now risen in 9 of the past 12 months. Alex Joiner from IFM pointed out that New South Wales’ jobless rate is now the lowest on record since the modern data series started before 1980!
• The ASX sold off from early highs/dropping -40pts quickly as interest rate markets price in a more than 50% chance of an August hike to 4.35%, right when lower inflation globally was suggesting they would pause.
• As you’d expect, the AUD popped higher (+0.8%) to US68.27c.
• Both NAB and CBA expect the RBA to hike in August, with CBA saying the following on employment: We remain of the belief that the unemployment rate will rise this year, although we acknowledge that we had expected more softening by now.
• While the data remained unfortunately strong, Telstra (ASX: TLS) joined the cut campaign today announcing 472 jobs, mostly in its enterprise division, will make way.
• Mineral Resources (ASX: MIN) +5.16% rallied on news of a revised agreement with their partner Albemarle on the Kemerton lithium hydroxide processing facility + they canned investments in China, reducing MINs capex requirements. The bearish thesis on MIN revolved around its balance sheet making today’s update a bullish one.
• BHP Group (ASX: BHP) -0.11% 4Q production was largely in line with expectations. More on that below
• Evolution (ASX: EVN) -0.53% also a touch lower following their production update, coming in marginally below guidance.
• Paladin (ASX: PDN) +1.33% continues to progress towards a restart of their Langer Heinrich uranium mine. All things are on track.
• Nuix (ASX: NXL) +36.56% provided strong guidance for FY23 after a number of contract wins late in the piece. They expect Annualized Contract Value (ACV) of $184-186m, up 14-15% with underlying EBITDA of $44-47m, up around 50% on FY22.
• QBE Insurance (ASX: QBE) +2.36% preliminary 1H numbers looked strong with Gross Written Premiums (GWP) of $12.8b and strong investment returns. The company maintained guidance for FY23 and will report the full 1H numbers on August 10^th.
• Flight Centre (ASX: FLT) +4.04% upgraded guidance again, this time by 7% at the EBITDA line, aiming for $300m at the midpoint. Total Transaction Value (TTV) is expected to climb ~115% in the year.
• Lendlease (ASX: LLC) +2.9% bounced back after a tough 2 days following job cuts which implied lower growth, we think it means better profitability.
• Zip Co (ASX: ZIP) +2.3% rallied as it said revenue + transaction volumes were up in the quarter, hitting 4-week highs before an aggressive pullback
• Iron Ore was up 1.5% in Asia, with Rio Tinto (ASX: RIO) +.36% and Fortescue (ASX: FMG) +1.35% outpacing BHP which released production numbers today.
• Gold was up $US5/oz in Asia today, though most gold miners were softer following a few production misses this week.
• Asian stocks were missed. The Hang Seng is flat while Nikkei (-1.23%) and China (-0.68%) struggled.
• US Futures are down, Netflix (NASDAQ: NFLX) fell -8% aftermarket following their update. Nasdaq Futures are currently -0.55%.
• Blackstone (NASDAQ: BX) & Freeport McMoran (NYSE: FCX) report tonight, both companies are held in the International Equities Portfolio.  

ASX 200 Intraday

ASX 200 Daily

BHP Group (BHP) $44.62

BHP -0.11%: finished slightly lower after reporting solid 4Q and FY production numbers this morning. In the quarter, they produced 72.7 million tons of iron ore while Copper output increased 9% to 476,200 tons, thermal coal production gained 3%, while metallurgical coal was flat. FY Iron Ore production was in line with last year’s 285 million tons while it also achieved full-year production guidance for copper, and both types of coal. 

They also had positive comments on their Potash project while they didn’t make any comments about Chinese growth or its impact on demand. A solid 4Q & FY for the Big Australian and they remain well positioned for what comes next.

Evolution Mining (EVN) $3.72

EVN -0.53%: the gold miner was out with their Q4 production numbers today, bringing a tough year to an end. Their key asset, Ernst Henry, saw production dip as a result of poor weather which weighed on the last quarter of the year, though this has been well understood by the market. The company produced 160koz of gold in the quarter, at a higher cost of $1,915/oz. 

Total production for FY23 was 651koz, just shy of recently updated guidance. FY24 guidance was left unchanged at 770koz at an average cost of $1,370/oz, far lower than what they faced in the June quarter, highlighting the leverage of a fully operation asset base. Evolution also expects to produce ~50kt of copper, a commodity we like over the medium term.

Paladin (PDN) 76c

PDN: +1.33%: Paladin has released its June quarter activities report showing good progress towards the restart of its Langer Heinrich uranium operation in Namibia which is now 60% complete, and importantly, on time and on budget (US$118m). Paladin is well capitalised with a cash balance of US$126m at Jun-23, while they are also beginning to ramp up exploration programs to provide growth options beyond the restart of Langer Heinrich. We think PDN is a stand-out in the sector on a risk-reward basis, with a well-defined pathway to production.

Broker moves

• Northern Star Cut to Sell at UBS; PT A$11.70
• Woodside Energy Raised to Accumulate at CLSA; PT A$40
• Telix Pharma Cut to Reduce at CLSA; PT A$12.25

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