Beijing's Boost Propels ASX - WEB Travel's 35% Plunge

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Welcome to Equity Espresso’s Market Recap.

The Australian share market approached its record closing high on Monday, driven by a late surge in mining stocks. This uptick was attributed mainly to new stimulus measures announced by China over the weekend. The S&P/ASX 200 index closed 0.5% higher at 8,252.2 points, just shy of its all-time high.

The rally in mining stocks was fueled by China's Ministry of Finance detailing additional government support to stimulate its economy. These measures include increased borrowing to support the property market, subsidies for low-income individuals, and boosting state banks' capital. As a result, the Chinese market also saw gains.

Gold miners were among the top performers on the ASX, with several companies seeing significant increases. The price of gold added around 1% in the previous session and maintained much of that gain during Monday's trading. Regis Resources (+6.02%), Bellevue Gold (+4.41%), Sandfire Resources (+2.86%) and Evolution Mining (+2.85%) were some of the biggest movers.

Company News

• Seek (+1.08%) has lobbed a $45 million takeover bid for Xref, an ASX-listed technology company focusing on the human resource sector. Xref (+51.85%) shares saw a spike on the back of the news.

• TPG Telecom (-4.13%) is selling its fibre network assets and Enterprise, Government and Wholesale fixed business to Vocus Group for $5.25 billion. TPG will retain its mobile and consumer businesses. The deal will be completed in late 2025, subject to approvals.

• WEB Travel Group (-35.56%) shares sunk after its WebBeds division reported lower margins for 1H25, despite strong TTV and bookings growth. Factors impacting margins included the collapse of the FTI Group, while European margins remain subdued. The company maintained its long-term growth targets but expects TTV/Revenue margins to stabilise at 6.5%.

Wall Street

The U.S. stock market ended the week on a high note, with the S&P 500 (+0.61%) and Dow Jones (+0.97%) reaching record closing highs on Friday. This positive momentum was largely driven by strong performances in the financial sector, as major banks, including JPMorgan Chase (+4.44%), reported better-than-expected quarterly results.

The market's upward trend was further supported by the latest inflation data, which showed the Producer Price Index (PPI) remained unchanged in September, fueling expectations for a potential Federal Reserve rate cut in November. Traders have maintained their bets on a high probability (~88%) of a 25 basis point rate cut by the Fed in November, as indicated by CME's FedWatch tool.

Tesla's (-8.78%) robotaxi event failed to impress investors, with shares declining after unveiling its Cybercab concept. The futuristic, silver two-seater vehicle, designed without steering wheels or pedals, showcased Tesla's vision for an autonomous vehicle fleet.

JPMorgan Chase (+4.44%) shares rose after the banking giant surpassed third-quarter expectations for both profit and revenue. Despite a 2% year-over-year profit decline, revenue increased by 6%, with interest income exceeding forecasts, showcasing the bank's strong performance. Wells Fargo (+5.61%) shares surged after reporting strong third-quarter results. The bank's adjusted earnings of $1.52 per share significantly exceeded analysts' expectations of $1.28. However, revenue slightly missed estimates, coming in at $20.37 billion versus the projected $20.42 billion.

S&P500 Sector Performance

Economic Data

• China’s Annual Inflation rate eased to 0.4% in September 2024, missing market forecasts of 0.6% and marking the lowest figure since June.

• China's Producer Prices declined by 2.8% yoy in September 2024, steeper than a 1.8% fall in the previous month and market forecasts of a 2.5% fall.

• U.S. Consumer Sentiment fell to 68.9 in October 2024 from a five-month high of 70.1 in September and below forecasts of 70.8.

• U.S. Producer Price Inflation was unchanged in September from August 2024, below the previous month’s 0.2% rise and lower than forecasts of a 0.1% increase.

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Quick Singles

🌎️ Around The Globe

• AMD unveiled its Instinct MI325X AI chip to challenge Nvidia's dominance in data centre GPUs. Set for production in late 2024, this new chip could potentially impact Nvidia's high-profit margins if it gains traction among developers and cloud providers as a viable alternative.

• ByteDance launched AI-enabled earbuds in China, allowing users to interact with its GenAI chatbot hands-free. The $170 Ola Friend wearables, available in four colours, serve as an audio assistant for various tasks and will ship from October 17.

• GM Energy launched PowerBank, a home battery unit for energy storage and backup power, competing with Tesla's Powerwall in the growing home energy market, offering an alternative to EV-based solutions.

• Ikea’s revenue fell 4% YoY to €45.1 billion as it cut prices on 2,000 products to aid inflation-stricken customers, resulting in increased orders. Despite the financial impact, Ikea's $2 billion global discount initiative prioritises customer affordability over short-term profits.

• TD Bank pleaded guilty to violating anti-money laundering laws, agreeing to pay over $3 billion in fines. The bank failed to monitor $18.3 trillion in customer activity over six years, enabling drug trafficking and money laundering through its accounts.

• Internal TikTok documents reveal users can become addicted after just 260 videos, leading to negative mental health effects. A lawsuit by 14 attorneys general alleges the platform's algorithm endangers children with harmful content. TikTok allegedly promoted ineffective safety measures while ignoring moderation concerns.

• Tesla unveiled its Robotaxi, a steering wheel-less vehicle with gull-wing doors, priced under $30,000 and set for 2026 production. Musk also introduced a larger Robovan and updated the Optimus robot. Tesla's autonomous approach relies on AI and cameras, potentially revolutionising transportation with low-cost, self-driving vehicles.

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*1-year, 3-year and 5-year returns are calculated as of September 30 2024.

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DISCLAIMER: Please note that the information provided in this newsletter is for educational purposes only and should not be considered financial advice. It is not intended to encourage you to buy/sell assets or make economic decisions. We strongly recommend conducting your research before making any investment.