☕️ NextDC Soars, Woodside Wobbles: RBA's Bullock Sounds Inflation Alarm

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Welcome to Equity Espresso’s Market Recap.

The Australian share market recovered some ground on Thursday, with the S&P/ASX 200 index closing 0.4% higher at 7,982.40 points. This modest gain came after Wednesday's significant 1.9% drop, triggered by disappointing U.S. factory activity data.

The day's trading was challenging, as shares briefly retreated following comments from Reserve Bank of Australia governor Michele Bullock. In her annual address to the Anika Foundation, Bullock emphasised the potential need for tighter economic restrictions if inflation doesn't continue to subside, underscoring the central bank's commitment to bringing inflation back to target levels.

Technology (+2.31%) was the best-performing sector on the day, thanks mainly to life from Next DC (+8.40%), whose steep share price rise caught the attention of the ASX and required a please explain. The company said that the inclusion of the company in the NAREIT Real Estate Index may have triggered the rise in its share price.

Despite the overall market gain, the Energy (-3.86%) sector faced considerable headwinds, declining by almost 4.0%. The broader sector felt the pressure from falling oil prices, with Brent crude dipping below $US73 a barrel - its lowest point in 14 months - after declining nearly 8% since the start of the week. Woodside was particularly hard hit, plummeting 6.2% to $25.35. This sharp drop was attributed to a combination of factors, including Citi analysts' downgrade to ‘sell’ and the stock entering ex-dividend trading.

Iron ore futures hit their lowest point since 2022, dropping to $US90.75 per tonne due to China's property crisis impacting steel production. The commodity has fallen by over a third this year, with Chinese steel output in July and August reaching its lowest levels since 2018.

Company News

• Challenger (-11.00%) and Apollo Global Management reaffirmed their strategic partnership despite Apollo reducing its stake from 20.1% to 9.9%. Apollo's decision to sell part of its stake aims to redeploy capital to other growth opportunities while maintaining their collaborative relationship in retirement financial security.

• Coronado Global Resources (-15.98%) reduced its FY24 coal production forecast due to heavy rainfall at its Bowen Basin mine. The company now expects 15.4-16 million tonnes of saleable production, down from previous guidance.

• Star Entertainment's shares remain suspended from trading as the casino operator extends negotiations with its lenders. The suspension, implemented earlier this week by the market operator, followed the company's failure to release its FY24 financial report on time.

• TPG Telecom (+1.84%) and Optus have received approval from the Australian Competition and Consumer Commission for their regional network-sharing deal. The watchdog concluded that the agreement won't significantly reduce competition in mobile services. This collaboration is expected to enhance TPG's regional coverage and support Optus's 5G expansion in rural areas, potentially improving competition in the telecom market.

Wall Street

U.S. stocks experienced a volatile session on Wednesday, ultimately closing slightly lower following the release of labour market data and comments from a Federal Reserve official. The new information strengthened the case for an interest rate cut at the Fed's upcoming meeting. The Labor Department reported that U.S. job openings fell to a 3-1/2-year low in July, indicating a continued easing of labour market tightness.

The S&P 500 (-0.16%) and Nasdaq (-0.30%) both edged lower at the close, while the Dow Jones (+0.09%) managed to finish slightly higher. Utilities (+0.85%) and Consumer Staples (+0.52%) stocks led the gainers, while Energy (-1.42%) and Technology (-0.41%) equities were the main drags on performance.

S&P500 Sector Performance

Economic Data

• Australia's Trade Surplus on goods increased to $6.01 billion in July 2024 from a downwardly revised $5.43 billion in June, surpassing market expectations of $5 billion.

• U.S. job openings fell by 237,000 to 7.673 million in July 2024 from a downwardly revised 7.910 million in June, reaching the lowest level since January 2021 and below market forecasts of 8.10 million.

• Japan’s average cash earnings increased by 3.6% year-on-year in July 2024, slowing from a 4.5% growth in June, which was the highest since January 1997 but exceeded market expectations of 3.1%.

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🌎️ Around The Globe

• California’s Senate passed a law requiring consent for AI-generated digital replicas of deceased performers. Championed by SAG-AFTRA, the legislation aims to give estates control over AI-created likenesses of famous figures.

• Clearview AI faces a record €30.5 million fine from the Dutch Data Protection Authority for GDPR violations. The facial recognition company, known for scraping social media images, has previously been penalised by UK, Australia, France, and Italy regulators for privacy breaches.

• Costco implemented its first membership price increase since 2017 on Sunday. Gold Star memberships in the U.S. and Canada rose from $60 to $65 annually, while executive memberships increased from $120 to $130. The maximum annual 2% reward for executive members also increased from $1,000 to $1,250.

• Rite Aid has successfully emerged from Chapter 11 bankruptcy as a private company after completing its financial restructuring. The drugstore chain has closed hundreds of stores, sold its pharmacy benefit company Elixir, and negotiated settlements with creditors.

• New Zealand is significantly increasing its International Visitor Conservation and Tourism Levy (IVL) from NZ$35 to NZ$100, effective October 1. Tourism Minister Matt Doocey explained that the increase offsets international tourism's environmental and infrastructural costs.

• Tesla reported its best monthly sales in China for the year, selling over 63,000 cars in August. This represents a 37% increase from July, driven by solid demand in smaller cities.

• Tiffany & Co. plans to significantly reduce the size of its flagship store in Shanghai's Hong Kong Plaza. The jewellery maker intends to relinquish about half of its 12,000-square-foot space, which opened in late 2019. This downsizing decision comes amid plummeting luxury brand sales in China.

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*1-year, 3-year and 5-year returns are calculated as of July 31 2024.

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