☕️ Nvidia Jitters Hit Home

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The Australian share market had its sharpest decline in three weeks on Thursday, mirroring Wall Street's weak performance and responding to Nvidia's disappointing after-hours trading. The benchmark S&P/ASX 200 Index fell 0.3% or 26.3 points to 8,045.1, moving further from its recent record high.

Despite the overall market decline, the Financial (+0.32%) sector showed some resilience, leading the three sectors that finished positively. Notably, the big four banks made gains, with Westpac (+0.81%) leading the pack, followed by Macquarie Bank (+0.69%) and National Australia Bank (+0.64%)

The Energy (-2.15%) and Discretionary (-1.95%) sectors saw the steepest falls. Uranium stocks gave back gains made earlier in the week, with Boss Energy (-8.25%) and Deep Yellow (-5.31%) losing the most ground. Wesfarmers (-4.07%) fell after providing a cautious outlook as part of a trading update for the first eight weeks of the new financial year.

Corporate Earnings

• Atlas Arteria (-0.59%) reported a 16% decrease in interim net profit to $114.2 million despite higher group toll revenues. The decline was attributed to increased costs and ongoing losses from its Chicago Skyway toll road.

• Bega Group (+9.39%) reported a return to profitability with a net profit after tax of $30.5 million for FY2023-24, compared to a $230 million loss the previous year. The company increased its final dividend to 4¢ per share. Revenues rose 4% to $3.52 billion, with branded sales up 6%, now comprising 86% of total sales. Bega forecasts EBITDA of $190-200 million for FY2024-25.

• Cettire (-20.30%) reported a 34% decline in full-year net profit to $10.5 million, despite a 78% increase in sales to $742.3 million. Adjusted EBITDA was $32.5 million, falling short of earlier estimates. The company cited heavy discounts from competitors and soft trading conditions for the underperformance.

• IDP Education (+3.09%) reported record revenue of $1 billion for FY2024, a 6% increase from the previous year, primarily driven by a 27% growth in student placement revenue. Adjusted EBIT rose 4% to $239 million, while adjusted net profit slightly decreased by 1% to $154 million.

• IGO (+1.33%) reported a significant decline in full-year profits due to falling lithium and nickel prices. Net profit plummeted 99% to $2.8 million, including substantial write-downs on nickel assets and exploration portfolio. Revenue fell to $841 million from $1 billion the previous year. The company halved its full-year dividend to 37¢.

• Mineral Resources (-8.08%) announced it would not pay a final dividend for the first time in over a decade, aiming to preserve cash amid falling lithium prices and concerns about high-cost iron ore operations. The company's net debt increased to $4.43 billion from $1.89 billion last year.

• Qantas (+0.79%) reported full-year underlying earnings of $2.08 billion, down $387 million from last year. Statutory profit fell 28% to $1.25 billion. Despite lower-than-targeted domestic and international margins, the airline maintains a positive outlook for travel demand.

• Southern Cross Austereo (+0.94%) cancelled its final 2024 dividend and listed its 96 TV stations for sale amid declining earnings. The media company reported a 1% drop in revenue to $499.4 million and a 49% decrease in underlying profit to $11.2 million.

• Wesfarmers (-4.07%) reported a strong FY2023-24, with overall sales up 1.5% to $44.2 billion and net profit rising 3.7% to $2.6 billion. The Kmart Group stood out, with sales increasing 4.4% to $11.1 billion and earnings jumping 25% to $958 million. Bunnings also saw growth, while the chemicals, energy, and fertiliser divisions experienced significant declines. Wesfarmers increased its final dividend to $1.98 per share.

Wall Street

U.S. stocks fell during Wednesday's session as investors eagerly awaited Nvidia’s earnings, which dropped after the bell despite beating earnings expectations. More on that below. The Nasdaq (-1.12%) lost the most ground of the major indices, followed by the S&P 500 (-0.60%) and Dow Jones (-0.39%).

Nvidia (-2.10%) reported strong fiscal second-quarter results, beating expectations with adjusted earnings of 68 cents per share and revenue of $30.04 billion. The company's data centre business, which includes AI processors, saw a 154% year-over-year increase to $26.3 billion, accounting for 88% of total sales.

Despite the impressive performance and optimistic guidance for the current quarter, Nvidia's shares dropped by almost 7% in after-hours trading. The company expects revenue of $32.5 billion for the upcoming quarter, surpassing analyst estimates and representing an 80% year-over-year increase.

Super Micro Computer's (-19.02%) shares plummeted after the company delayed filing its annual 10-K form, citing the need for more time to assess internal financial controls. This announcement coincided with Hindenburg Research revealing a short position in the stock and alleging "accounting manipulation" at the AI server maker.

S&P500 Sector Performance

Economic Data

• Australia’s Private Capital Expenditure fell by 2.2% quarter-on-quarter in the second quarter of 2024, reversing from a 1.9% expansion in the previous period, missing market forecasts of a 1% rise.

• The Japanese Consumer Confidence index stood at 36.7 in August 2024, unchanged from the previous month, below market forecasts of 36.9.

• E.U. Passenger car registrations rose by 0.2% YoY to 852,051 units in July 2024, much weaker than a 4.3% growth in the prior month.

• Spain's annual Consumer Price Inflation rate dropped to 2.2% in August 2024, the softest since June 2023, easing from 2.8% in the prior month and below market expectations of 2.4%

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🌎️ Around The Globe

• Cannabis stocks declined on Tuesday following the Drug Enforcement Administration's (DEA) announcement of a December 2 hearing to consider reclassifying marijuana as a less harmful drug. The DEA categorises marijuana alongside substances like heroin and LSD, which are considered to have high abuse potential.

• Eli Lilly has introduced a new, lower-priced form of its weight loss drug, Zepbound, offering 2.5mg and 5mg single-dose vials at $399 and $549 per month, respectively. This move aims to reach uninsured patients, expand supply, and combat counterfeit versions.

• HMD Global, the maker of Nokia-branded phones, partnered with Mattel to launch the HMD Barbie Phone, a compact pink flip phone with a retro design priced at £99. The device offers basic call and text functionality without social media access, catering to those seeking a simpler mobile experience.

• Lowe's informed employees that it will cease participation in LGBTQ advocacy surveys and pride parades, marking a notable shift in its approach to corporate social responsibility and employee engagement initiatives.

• Lyft has launched a rider verification pilot program in nine major U.S. cities to enhance driver safety by confirming riders' identities. The initiative, which includes markets like Atlanta, Chicago, and Miami, will display a verification badge on riders' profiles using their legal names, helping drivers ensure passenger authenticity.

• Nasdaq is seeking regulatory approval to launch and trade options on a bitcoin index. The proposed index options would offer a cost-effective way to amplify Bitcoin exposure, potentially attracting more institutional participation in the cryptocurrency market.

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