Job Market Too Hot, Stocks Too Cold: Banks Continue Sell-off

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Welcome to Equity Espresso’s Market Recap.

The Australian share market experienced a significant decline on Thursday, with the S&P/ASX 200 Index falling 1.15% to 8,322.80 points, marking its largest intraday loss in nearly three weeks. The selloff was triggered by stronger-than-expected January employment data, which dampened hopes for a May interest rate cut.

Banking stocks led the downturn after ANZ reported increased impaired loans during the first quarter. The news sparked a sector-wide selloff, with NAB dropping 3.69%, Westpac falling 3.39%, ANZ declining 2.85%, and Commonwealth Bank down 1.93%.

Australian Employment exceeded expectations in January, adding 44,000 jobs after December's revised 60,000 gain, while unemployment increased to 4.1%. The stronger-than-forecast figures, which doubled economists' predictions of 20,000 new jobs, highlight the labour market's resilience and remain a key focus for the Reserve Bank of Australia's inflation outlook.

ASX Company News

• ANZ (-2.85%) reported first-quarter lending growth outpacing deposits, with institutional loans up 13% to $238 billion. While retail lending rose modestly, gross impaired loans increased to $1.9 billion due to mortgage restructures, though provision charges stayed below historical averages.

• Brambles (+1.68%) shares climbed after the logistics company reported a 4% increase in sales revenue to $US3.4 billion, while profits rose 11% to $US445.7 million. The company lifted its interim dividend 27% to 19¢, and forecasts continued growth for FY2025, projecting sales growth of 4-6%.

• Charter Hall (+5.42%) returned to profit with a $61.1 million interim result, rebounding from last year's $190 million loss due to lower property devaluations. The company upgraded its FY2025 earnings guidance to 81¢ per security, projecting 6.9% growth, and announced an interim distribution of 41.5¢.

• Goodman Group (-5.41%) shares fell after the company announced a $4 billion capital raise, its first in 12 years, to expand its data centre development portfolio.

• Healius (-6.21%) reported a $12.8 million net loss in the first half following its Lumus Imaging sale, though revenue rose 10% to $933.9 million and underlying EBIT increased 51% to $23.7 million.

• Megaport (+17.19%) shares surged following improved subscription revenue and customer retention. The cloud connectivity provider reported EBITDA of $27.6 million and annual recurring revenue up 18% to $226.6 million, though statutory profit fell to $886,000 from $4.4 million last year.

• Netwealth (+0.44%) boosted its interim dividend by 25% to 17.5¢ following record net flows of $8.5 billion in the half-year to December, up 80.2%. The strong performance pushed the investment platform provider's earnings margin up to 50.2%.

• Tabcorp (+3.82%) reported its first successful post-demerger results, with profit up 26% and revenue rising 11% to $1.3 billion. This was helped by a new Victorian betting license that reduced fees and levelled the playing field with competitors Sportsbet and Entain's Ladbrokes.

• Telstra (+5.74%) reported a 6.5% increase in interim net profit to $1.03 billion, driven by strong mobile and infrastructure performance. The company announced a $750 million share buyback and $800 million mobile network investment and is considering selling its data centre business, which is valued at $100-200 million.

• Transurban (+0.99%) reported a $15 million interim net loss, down from last year's $230 million profit. This was primarily due to $143 million in legal costs related to its Connect East dispute. Despite a 2.4% rise in daily traffic, the toll road operator's earnings fell 1.4% to $1.3 billion below expectations.

• Wesfarmers (+1.03%) reported a 2.9% rise in net profit to $1.47 billion and a 3.6% rise in sales to $23.5 billion, driven by strong performance from Bunnings and Kmart. The retail conglomerate increased its interim dividend to 95¢ per share, as CEO Rob Scott noted resilient performance despite ongoing cost-of-living pressures affecting households.

• Whitehaven Coal (+9.06%) reported strong half-year results, with net profit reaching $328 million and earnings up 33% to $960 million, driven by performance from its new Daunia and Blackwater mines.

Wall Street

The S&P 500 (+0.24%) hit back-to-back record highs, climbing again, while the Dow Jones (+0.16%) and Nasdaq (+0.07%) also rose. Healthcare (+1.26%) stocks led the gains, while Materials (-1.16%) and Financials (-0.03%) were the two sector laggards. Super Micro Computer (+7.97%) had a volatile day, jumping 19% before losing half those gains in late trading.

The Fed's January meeting minutes showed concerns about stubborn inflation while keeping interest rates unchanged. Markets also reacted to President Trump's new 25% tariffs on cars, semiconductors and drugs.

Microsoft's (+1.25%) announcement of its Majorana 1 quantum chip sparked a rally in quantum computing stocks, with BTQ Technologies jumping 36%, D-Wave Quantum rising 10%, and Rigetti Computing gaining 3.9%. Microsoft claims the development brings practical quantum computing closer to reality. Him & Hers shares (+17.50%) surged after the company acquired Trybe Labs, an at-home testing facility, and expanded its telehealth services to include home lab testing capabilities.

Economic Data

• Australia’s Unemployment rate increased to 4.1% in January 2025, up from December’s 4.0%, inline with market estimates.

• Australian Employment increased by 44K to a new high of 14.63 million in January 2025, beating the market consensus of a 20K gain.

• U.S. Housing starts slumped 9.8% month-over-month to an annualised 1.366 million in January 2025, down from December's 10-month high of 1.515 million and missing market forecasts of 1.4 million.

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🌎️ Around The Globe

• Apple unveiled the iPhone 16e, a $599 budget-friendly model featuring the A18 chip and new C1 cellular modem, marking Apple's first in-house modem. The device includes FaceID, a modern notch design, and a single camera, offering core iPhone features in black and white finishes.

• Coca-Cola is entering the prebiotic soda market with Simply Pop, which will launch in select stores and Amazon Fresh this month. The drink comes in five fruit flavours and contains fibre for gut health and vitamins, targeting the growing functional beverage trend as consumers seek healthier alternatives.

• HP has acquired Humane's assets for $116 million, which will immediately halt AI Pin sales. The $499 wearable device will cease functioning on February 28, 2025, with all services being terminated.

• KFC is relocating its U.S. headquarters from its historic Kentucky home to Plano, Texas. The move, affecting 100 employees, is part of Yum Brands' plan to consolidate operations between two hubs: Plano (KFC and Pizza Hut) and California (Taco Bell and Habit Burger).

• Lime reported strong performance in 2024, achieving positive free cash flow and over 30% growth in gross bookings. The Uber-backed e-mobility company expanded to 20 new cities and grew its fleet to 270,000 vehicles, positioning itself for a potential IPO.

• Nikola, the hydrogen-electric truck startup, has filed for Chapter 11 bankruptcy with $47 million to fund asset auctions. The company's downfall follows founder Trevor Milton's fraud conviction for misleading investors about their technology.

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*1-year, 3-year and 5-year returns are calculated as of January 31, 2025.

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