Good Evening,

Welcome to Equity Espresso’s Daily Recap. The OpenAI musical chairs saga continues to dominate the global headlines, while locally, the RBA thinks inflation is still too high. Let’s jump in.

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The Recap

Markets edged out another small gain today, with the ASX 200 index rising by 0.28% to 7,078.2 to continue the recent positive momentum. Materials (+1.36%) were the big mover today, as Iron Ore futures prices rose on Tuesday to trade at US$134.50. BHP (+1.4%), Fortescue Metals (+0.7%) and Rio Tinto (+1.9%) all finished the day higher.

The Utilities (-1.76%) sector fell as Origin Energy (-1.35%) shares sunk ahead of its takeover vote on Thursday. Shareholders will vote on whether to accept the $9.43 takeover offer by the Brookfield-led consortium. For the takeover to go ahead, 75% of the voters must approve the scheme. Australian Super, who owns 17% of Origin, has said it intends to vote against the takeover offer.

The RBA released the minutes from the November meeting, where the central bank raised the cash rate to 4.35%. Here are some of the highlights:

• The case to raise the cash rate by 25 basis points centred on the risk that the inflation outlook looked higher than expected.

• September quarterly inflation had been higher than expected, most apparent in services, which typically take longer to subdue.

• Forecasts show that there will be a slight decrease in output growth, with unemployment also being lower than previously assumed. The RBA expects demand to remain high for extended periods, and it will take more time to balance the supply and demand.

• Members noted that the risk of not achieving the board’s inflation target by the end of 2025 had increased and that it was appropriate that monetary policy should be adjusted to mitigate this.

• Members discussed the implications of this decision on household finances. While some households benefited from rising house prices, substantial savings buffers and higher interest income, others were experiencing a painful squeeze on their finances.

Economic Data

• China’s GDP grew by 0.6% year-on-year during Q3, which beat estimates of a 0.2% expansion and markedly improved from the 0.8% decline in the previous quarter.

• New Zealand's trade deficit shrank to $1.709 billion in October 2023 from $2.315 billion in October 2022.

Wall Street

Wall Street’s main indices finished higher on Monday, with the NASDAQ (+1.13%) leading the way, reaching its highest levels since January 2022, with Microsoft (+2.0%) the biggest mover of the mega-cap tech stocks. The S&P 500 (+0.74%) and Dow Jones (+0.58%) indices also registered positive gains. The Tech sub-index was the biggest gainer among the 11 major sectors as Microsoft touched an all-time high share price on Monday.

Zoom Video Communications (+2.9%) rose after it reported Q4 net income of $141.2 million at $0.45 per share. Adjusted EPS was $1.29, which beat estimates of $1.08.

Outlook

We will get earnings reports from Webjet, Oceania Healthcare and NextGen Energy tomorrow.

Existing Home Sales data for October gets released overnight in the U.S., while in the U.K., Labour Productivity data will be reported.

Futures markets in the U.S. are higher this afternoon, with the NASDAQ (+0.14%) trading marginally above the S&P 500 (+0.03%).

Nvidia will report October quarterly earnings after the market closes on Tuesday - investors will be watching to see if they can match or exceed already high expectations.

Other companies reporting overnight include HP, Lowe’s, Autodesk, Medtronic, Abercrombie & Fitch, Best Buy and Nordstrom.

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Quick Singles

🪃 Local News

• The Australian Federal Health Department is considering subsidising gender-affirming surgeries for transgender individuals through Medicare. The proposal includes surgical procedures for the face, chest, genitals and voice. The Medical Services Advisory Committee, an independent body advising the government on whether to publicly fund a new medical service, has received the application. The aim is to enhance the quality of life for transgender individuals.

• Treasurer Jim Chalmers announced that the government will set a statement of expectations for ASIC that will focus on cyber security, climate change, and financial services. He also expressed openness to further changes at ASIC.

🌏 Around The Globe

It has been a wild ride at OpenAI in the last few days. We’ve recapped the key events in case you’ve missed the news:

1. Sam Altman was unexpectedly ousted on Friday, with the board initially citing “communication issues” as the reason for the sacking.

2. Co-founder Greg Brockman resigned following the announcement.

3. OpenAI staff set an ultimatum on Saturday for the board to resign and for Altman and Brockman to return, or they would quit.

4. Speculation was rampant on Sunday that the move was made in response to Artificial General Intelligence (AGI) being achieved. This remains unconfirmed.

5. Altman confirmed on Sunday that he was in discussions with OpenAI about a return to the company.

6. The OpenAI board instead hired former Twitch CEO Emmett Shear as the new interim CEO of OpenAI.

7. Microsoft announced on Monday that Altman and Brockman will join Microsoft to create a new advanced AI research team.

8. Reuters reported today that some investors of OpenAI are exploring legal recourse against the company’s board.

• Citigroup is eliminating more than 300 senior manager roles as part of chief executive officer Jane Fraser’s efforts to simplify the company.

• India is expected to maintain its export restrictions on rice into 2024, which is likely to keep prices elevated into the new year. The arrival of El Nino may tighten the global rice supply even further.

• A Missouri jury ordered Bayer to pay $1.56 billion to four plaintiffs who claimed the company's Roundup weedkiller caused injuries, including cancer.

• Chinese property developers saw an increase in the value of their bonds and shares after the government compiled a list of 50 real estate firms that would qualify for financing. This move by Beijing is intended to support the struggling property sector. As reported by Bloomberg, a gauge of China's developer stocks rose 7.6% in early trading, the largest gain since September.

Markets

ASX Company Movers

Commodity Prices

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

• Appen (APX) went into a trading halt today as the company plans to $30 million at $0.55 per share, a 42% discount to yesterday’s price close. Appen said it remains focused on returning to underlying EBITDA profitability. YTD Oct-23 Underlying EBITDA was $223.0 million, down 29.3% from the pcp.

• Avita Medical (AVH) downgraded its full-year revenue guidance range to be between $49.5 million to $50.5 million. This is down from the previous guidance range of $51 million to $53 million.

• Brickworks (BKW) expects an increase in the average cap rate across its portfolio to around 5.2% in the first half of FY24 but anticipates conditions to be more challenging throughout the year as order intake softens.

• Fortescue Metals (FMG) will roll out three separate green energy projects, spending approximately US$750 million over the next three years. The projects include the Phoenix Hydrogen Hub in the U.S., the Gladstone PEM50 Project in Queensland and a Green Iron Trial Commercial Plant in Western Australia.

• Origin Energy (ORG) gave its shareholders an updated calculation of the value of the takeover offer being proposed by the Brookfield-led consortium. The total cash offer is $9.43 per share, which is at the top end of the Independent Experts valuation range of $8.45 to $9.48. The Origin Board unanimously recommends that shareholders vote in favour of the offer.

• PEXA Group (PXA) provided investors with a strategy update today, including FY24 guidance. PEXA said its exchange margins will be between 50-55% and negative operating cash flows of between $70 million and $80 million.

• ProMedicus (PME) founders Sam Hupert and Anthony Hall each sold 1 million PME shares at a market price of $88.02, representing less than 4% of their respective holdings.

• Star Entertainment Group (SGR) has put into effect amended duty arrangements agreed to with the NSW Government, which includes maintaining the current poker machines rebate percentage agreements, which are set to rise to 22.91% in FY27.

• Technology One (TNE) reported its full-year results today, beating its guidance as Profit After Tax rose 16% to $102.9 million. Guidance had been set for between 10-15% growth. Revenue rose 19% to $441.4 million, with annual recurring revenue increasing to $392.9 million.

• Volpara Health Technologies (VHT) reported a 17% lift in revenue for the first half of FY24 to NZ$19.8 million as the company’s subscription revenue grew by 19%. Net loss for the period was NZ$4.4 million as the company maintained its revenue guidance of between NZ$ 40.0 million and NZ$42.0 million.

Technical Analysis

Chart Watch

A bullish chart to watch - ASX Ltd. (ASX)

Notes

• A bullish divergence is being played out on the RSI and OBV on a daily time frame.

• The price of $58.60 is acting as a resistance point, but if the share price breaks through this mark, it could become a new support level - presenting a potential long opportunity.

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Daily Quiz

❓️ Test Your Knowledge

Yesterdays Question. Who introduced the concept of "The Invisible Hand" in economics?

Answer: Adam Smith The metaphor was first introduced by Adam Smith, an 18th-century Scottish philosopher and economist. It describes how the self-interested actions of individuals can lead to beneficial social and economic outcomes, even though none of them intend to bring about these outcomes.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of November 15

📊 Broker Ratings

What do the brokers have to say?

1. Altium (ALU) - Upgrade to Outperform from Neutral (Macquarie)

2. Domino's Pizza (DMP) - Upgrade to Outperform from Neutral (Macquarie)

3. Healius (HLS) - Downgrade to Neutral from Outperform (Macquarie)

4. Steadfast Group (SDF) - Upgrade to Outperform from Neutral (Macquarie)

Broker commentary for Universal Store Holdings.

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

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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.