Good Evening,

Welcome to Equity Espresso

We’re here to catch you up on all the day’s news both in Oz and abroad.

Here’s a sample of what you may have missed today:

1. ✈️ Q2 GDP Higher Than Expected

2. ⚽️ Man. Utd. Off-Market Move

3. 🚀 India Rockets to the Sun

4. 🥂 Ororoa's Market Return

5. 🛢️ Oil Prices Rise

The Recap

ASX Takes a Dive
While Oil Fuels Energy Skyward

Markets fell after a weak lead-in from the U.S. as Wall Street resumed trading after the Labour Day holiday on Monday. The ASX200 index dropped straight out of the gate and sank lower as the day wore on, finishing Wednesday 57.2 pts. lower to 7,257.1.

The Australian Bureau of Statistics reported Q2 GDP today, which expanded by 2.1%. This was slightly higher than expected, possibly alleviating some recession concerns.

The only bright spot on the index was the Energy sector (+0.96%), as Woodside (+1.3%), Santos (+0.6%) and Yancoal (+1.9%) all ended the day higher.

Oil prices rose overnight as Saudi Arabia and Russia extended their supply reduction by another three months. Saudi Arabia will continue its production cutback of 1 million barrels a day, while Russia’s export reduction of 300,000 barrels a day will be extended for the same duration. Brent Crude prices briefly crossed the US$90 mark overnight for the first time since November 2022.

The NSW government will raise an estimated $2.7 billion over four years by increasing coal royalties by 2.6% after extending a lifeline to keep the state’s largest coal-fired power station in operation for longer. NSW Treasurer Daniel Mookhey said today that the plan will not cost jobs or put brakes on investment.

Tech (-1.5%), Telco (-1.3%) and Industrials (-1.3%) fell the most out of the other 10 sectors that finished the day lower.

ASX200 Stock Snapshot

Wall Street

U.S. markets fell as treasury yields traded higher, with the S&P500 & NASDAQ both falling. Energy stocks rose more than 1% after Saudi Arabia and Russia extended production and export cuts until the end of the year. Occidental Petroleum Corporation (+2.5%), EOG Resources (1.8%), and Devon Energy Corporation (+1.1%) all rose.

Economic News

The Australian economy recorded its seventh consecutive quarter of GDP growth, with a 2.1% expansion, beating expectations of 1.8%. The read was down on the previous quarter’s increase of 2.3%.

Compensation of employees (COE) rose 1.6%, private sector COE rose 1.8%, and public sector COE rose 1.2%. All states and territories record quarterly rises, with the most significant increases coming from Victoria (2.6%), NSW (+2.0%) and Queensland (+1.7%).

Economists pointed to the GDP per Capita to demonstrate that it’s not all rosy, with this metric falling 0.3% for the second straight quarter.

Looking under the hood further, household spending slowed, rising by 0.1% this qtr. Discretionary spending fell 0.5% as inflation and interest rate increases took hold. The decline was led by recreation and culture (-2.5%), furnishings, and household equipment (-2.5%).

Essential spending rose 0.5%. This was driven by rent and other dwelling services (+0.5%), followed by electricity, gas and other fuel (+2.2%). Insurance and other financial services (+0.6%) were also higher.

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Quick Singles

🪃 Local News

• TPG Telecom and Vocus Groups’ ongoing negotiations for a $6.3 billion deal have been extended until October 4, 2023. The deal involves Vocus purchasing some of TPG’s fibre assets, including Vision Network.

• Magellan’s Funds Under Management fell from $39.2bn to $39.0bn in August. Net outflows were $0.3bn, with net retail outflows falling by $0.4bn.

• Macquarie Group reported a significant decrease in investment-related income from green energy investments. In a pre-released presentation for the Asia Forum in Hong Kong, the group stated that the combined net profit of its annuity-style businesses for the first quarter of 2024 was considerably lower than the previous year’s. Macquarie attributed this decline to lower investment-related income from green energy investments.

🌏 Around The Globe

• Manchester United shares sunk 18% after reports in the Mail over the weekend that the Glazer family, the club's owners, will take the club off the market after failing to receive offers that match their asking price. The English soccer titan was valued at $3.9bn before Tuesday, falling to $3.1bn by the end of the trading day.

• Mercedes-Benz has just unveiled new “close-to-production” concept vehicles, which aim to outdo Tesla cars by going more than 466 miles on a single charge. This would surpass the 380 miles for any Tesla model. However, no specifics have been provided on when the vehicles will enter production.

• According to a report shared by UploadVR, Meta and LG have teamed up to build future versions of the Quest Pro headsets. Industry sources claim the new headset will launch in 2025, with a price tag of around $2,000.

• Huawei and China’s top chipmaker SMIC have built an advanced 7-nanometer processor to power its latest smartphone, suggesting the Chinese government is making headway in attempts to create a domestic chip ecosystem. For reference, Apple uses a 5-nanometer processor in their iPhones.

• The UAE could be looking at legalising gambling. The Persian Gulf nation established a new governmental body for regulating the industry. The move suggests the country is laying the groundwork for a law change.

• UK-based chip designer ARM Holdings is targeting a valuation of more than $52 billion in an initial public offering in the U.S. later this year that is expected to be the biggest IPO in 2023.

₿ Crypto Corner

• Monthly NFT trading volume dropped 81%, and sales dropped 61% between January 2022 and July 2023, per Bloomberg. Some top NFTs, like Bored Ape Yacht Club and CryptoPunks, sit at two-year lows.

• The London Stock Exchange Group is considering using blockchain to build an ‘end-to-end digital market ecosystem to raise and transfer capital across asset classes’. (We suggest they speak to the ASX on what not to do).

• India’s finance minister said that discussions are underway on a global framework to regulate crypto assets.

• Visa announced that it is expanding its involvement in the world of cryptocurrency. It plans to use the stablecoin USD Coin and the Solana blockchain. The company is collaborating with merchants to transfer millions of dollars in USDC, the sixth largest digital asset.

Markets

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Movers and Shakers

✅ Biggest Gainers

Uranium stocks are enjoying a mini-resurgence, with Deep Yellow (+6.2%), Boss Energy (+2.8%) and Lotus Resources (+8.3%) finishing near the top of the index today. Flying somewhat under the radar, the price of Uranium has climbed to US$58.50/Lbs, its highest point since November 2022. The use of Nuclear Energy remains a hotly debated topic. Advocates state that it is a low-carbon energy source that can operate 24/7 without weather impacts and would diversify global energy resources. Detractors point to environmental concerns, explicitly disposing of the waste and the risk of nuclear accidents.

🔻Biggest Fallers

Orora (ORA) recommenced trading today after finalising its takeover of high-end French-based glass marker Saverglass in an A$2.2bn deal.

To complete the acquisition, Orora will raise $1.3bn in equity from institutional and retail investors and $875m from debt refinancing. The equity offering was priced at a 21% discount to Orora’s last close.

The purchase of Saverglass at an enterprise value of €1,290 million (A$2,156 million) represents an implied multiple of 7.7x adjusted EBITDA for the last 12 months (LTM) to June 30 2023 (Jun-23) of €168 million. This valuation excludes the synergies Orora expects to gain from the transaction, which it values at A$15 million. Orora finished the day down 18% to $2.88.

Pointsbet's (PBH) share price fell 55% after it traded ‘ex return of capital’, where it will return capital to shareholders from the resulting sale of its U.S.-based business to online sportsbook Fanatics. The payment to shareholders on September 22 of $315.41 million will be the first of two transactions Pointsbet will make.

Post of The Day

How To Beat Inflation

I may have to get that Costco Membership…*

*Not financial or nutritional advice

What The?

From Lunar South Pole to Solar Orbit

India’s space program is in the headlines again. Just weeks after a historic moon landing, the nation decided, ‘Why stop at the moon when you can touch the sun?’ And so, the Aditya-L1 rocket was born, setting off on a sizzling adventure to study the sun’s outermost layers.

Named after the Hindi word for the sun, Aditya-L1 is a mission that seeks to understand the outermost layers of the sun better. Specifically, it aims to study the impact of solar activities such as solar winds and flares. These phenomena can potentially disrupt Earth's communication systems, as evidenced by auroras. Additionally, they play a crucial role in space weather, essential for safeguarding satellites and other spacecraft.

The rocket’s destination is a cosmic parking spot called the Lagrange Points, where it can chill without burning too much fuel. Here, it will enjoy an uninterrupted view of the sun, even during those dramatic solar eclipses.

The mission seeks to gather a unique dataset that could provide insights into the sun’s dynamics and the inner heliosphere. The potential knowledge gained could be pivotal for modern-day technology and understanding space weather aspects. Scientists hope to comprehend the impact of solar flares and other particles on Earth’s climate patterns by studying the sun's temperaments.

India’s solar mission is not just about space exploration; it’s about understanding the profound relationship between the sun and our planet, ensuring technological advancements are safeguarded from solar disturbances, and contributing to the global pool of knowledge about our central star.

Daily Quiz

Test Your Knowledge

A History Lesson

Yesterday’s Daily Quiz Question: Which country reported inflation of almost 60% in August?

Answer: Turkey. The second most popular answer (27%) behind Mexico.

Turkey’s August inflation figure comfortably beats this poll result at an eye-watering 58.94%.

South Africa (4.7%), Mexico (4.8%) and India (7.4%) stand at much more manageable rates.

No, this isn’t your local high school ATAR chart by student; this is Turkey’s whopping monthly inflation numbers.

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of August 30

1. Flight Centre (FLT) - 10.47%

2. Pilbara Resources (PLS) - 9.80%

3. Elders Limited (ELD) - 9.03%

4. Syrah Resources (SYR) - 8.91%

5. Lake Resources (LKE) - 8.30%

6. JB Hi-Fi (JBH) - 8.29%

7. IDP Education (IEL) - 8.19%

8. Brainchip (BRN) - 7.96%

9. Appen (APX) - 7.69%

10. 29Metals (29M) - 7.54%

11. Mesoblast (MSB) - 7.50%

📊Broker Ratings

What do the brokers have to say?

1. Cochlear (COH) - Downgraded to Underweight from Equal-weight (Morgan Stanley). Target price $240

2. Harvey Norman (HVN) - Downgraded to Underweight from Equal-weight (Morgan Stanley). Target price $3.50

3. ResMed (RMD) - Downgraded to Neutral from Buy (UBS). Target price $27.70

👨‍💼 Director Transactions

What are the insiders doing? (On-market and off-market trades only)

💲Dividends

Companies trading ex-dividend today

1. Australian Ethical Investment Ltd (AEF)

2. Amcor Plc (AMC)

3. Clearview Wealth Ltd (CVW)

4. Excelsior Capital Ltd (ECL)

5. Engenco Ltd (EGN)

6. Kip Mcgrath Education Centres Ltd (KME)

7. Kina Securities Ltd (KSL)

8. Meridian Energy Ltd (MEZ)

9. Pacific Current Group Ltd (PAC)

10. Pro Medicus Ltd (PME)

11. Ramsay Health Care Ltd (RHC)

12. Seek Ltd (SEK)

13. Sonic Healthcare Ltd (SHL)

14. SRG Global Ltd (SRG)

15. Shaver Shop Group Ltd (SSG)

📅 Economic Calendar

Data to keep an eye on this week

Reader Review

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.