Good Evening,

Welcome to Equity Espresso

We’re here to catch you up on the day’s stock market news in Australia and abroad.

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

1. 🛒 Retail's Unexpected Dip

2. 🏗️ Brickworks & Soul Patts Stumble

3. 🏢 Evergrande Chairman Under Watch

4. 🛢️ Aussie Energy Soars as Oil Nears $100

5. 🍫 Cocoa's Bitter Rise: Unwrapping the Price Hike

The Recap

Oil's Climb, Retail's Plunge:
Today’s Market Wrap

Energy stocks were the only spark that lit up markets during the morning session, but it wasn’t enough to drag the index higher as the ASX200 finished Thursday 5.5 points lower to 7,024.80.

Oil prices are creeping closer to the $US100-a-barrel mark as U.S. stockpiles dropped to critical levels. Crude prices reached a 12-month high of over $US94 a barrel overnight after a 3% jump. Woodside Energy (+2.9%), Santos (+3.8%), and Ampol (+1.3%) were all beneficiaries, ending the day higher. Whitehaven Coal (+6.1%) was another big mover on the ASX200 index.

The Materials (+0.3%) sector also etched out a gain as Iron Ore futures rose by over 1% to US$119.0.

Discretionary stocks were the biggest losers today, as retail sales data for August came in softer than expected. Wesfarmers (-0.8%), Aristocrat (-1.9%) and The Lottery Corp. (-1.3%) all ended the day in the red.

Keep an eye on your trading account - BHP, Commonwealth Bank, Fortescue Metals, Santos, Woodside Energy and Telstra will pay dividends to investors today.

Brickworks and Washington H Sol Patts both fell after reporting full-year earnings. More on why later. ResMed continues its mini-resurgence, climbing 4.8% to $24.10 - is the bottom in?

Over in China, shares in Chinese property developer Evergrande have been suspended on the Hong Kong stock exchange amid reports by Bloomberg that its chairman has been placed under police surveillance.

Outlook

The S&P 500 (+0.1%) and NASDAQ (+0.1%) futures are currenlty trading higher. All eyes will be on the U.S. quarterly GDP, which gets reported tonight and is forecasted to be 2.2%. Pending home sales and jobless claims are also on the economic agenda.

Economic News

• Monthly Retail sales for August fell slightly more than expected, coming in at a 0.2% increase from July - marginally down on expectations of 0.3% and below July’s 0.5% gain. The data supports the likelihood that the RBA will keep rates on hold when it meets next Tuesday. A breakdown of key sectors in this tweet ⬇️ 

• In August, there was a rise in orders for durable goods manufactured in the United States. Although orders for civilian aircraft decreased, there was an increase in machinery and other products. After a slow start to the third quarter, business spending on equipment also seemed to pick up again.

Wall Street

The S&P 500 (+0.02%) etched out a tiny gain on Wednesday after an up-and-down session. The NASDAQ fared slightly better, rising 0.22%. Elevated Treasury yields and uncertainty about the path ahead for interest rates continue to weigh on equity markets. A possible shutdown has added to worries for investors, as divisions among U.S. lawmakers put the federal government at risk of a partial shutdown by the weekend.

Rate-sensitive utility groups fell the most, dropping 1.9%. Energy rose 2.5% as Brent crude crossed $97 a barrel, with the jump in oil prices posing a renewed threat to inflation that has been moderating.

In company news, Costco stock rose 1.9% after the retailer topped market estimates for quarterly revenue and profit.

Peloton jumped 13% in after-hours trade on news of a five-year partnership to develop content for Lululemon.

Micron Technology slid 4% in extended trading after providing weaker-than-expected earnings guidance for the current quarter. Micron said to expect a loss of $1.07 per share, higher than the expected 95 cents.

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Quick Singles

🪃 Local News

• The Australian Financial Review reported today that Transport Minister Catherine King met former Qantas boss Alan Joyce in November last year, just weeks after the airline formally opposed Qatar Airways’ application to double weekly flights into Australia.

• Treasurer Jim Chalmers says the Albanese government has no plans to roll out further cost-of-living relief after fuel price increases drove inflation higher.

• Newly sworn-in Victorian Premier Jacinta Allan hopes to have her cabinet in place before parliament sits next week.

🌏 Around The Globe

• A Fight On The Picket Line - Joe Biden became the first sitting U.S. president to join workers on a picket line when he stood with striking members of the United Auto Workers (UAW) union in Michigan yesterday.

• Target said it will close nine stores in New York City, Seattle, San Francisco, and Portland because of organised retail crime.

• Microsoft plans to use next-generation nuclear reactors to power its data centres and A.I. ambitions. It has posted a job listing for a principal program manager to lead its nuclear energy strategy.

• Getty Images has partnered with Nvidia to launch a new tool allowing users to create AI-generated images from its licensed photo library.

• Toyota reported a 9% increase in global sales in August compared to last year, reaching a new record of 923,180 vehicles sold. The growth was attributed to improved supply availability and higher demand. Global production also hit a new record of 924,509 vehicles, including subsidiaries Daihatsu Motor Co. and Hino Motors Ltd.

₿ Crypto Corner

• Binance has finalised the sale of its Russia regional unit for an undisclosed amount to CommEX, a crypto exchange that officially launched on September 26.

• Bankrupt crypto lending firm BlockFi has received approval from bankruptcy Judge Michael A. Kaplan to begin reimbursing customers under a new plan.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Newsletter Recommendation

ASX News

ASX Company Announcements

Atlas Arteria (ALX) dropped 2.2% after the French government slugged them with a new tax effective from 2024 relating to companies operating long-distance transport infrastructure. The tax represents 4.6% of revenues that exceed €120 million per legal entity.

Brickworks (BKW) was the biggest faller on the ASX200 today, losing 6.4% after reporting a 54% drop in NPAT to $395 million during FY23, despite an 8% rise in revenue to $1.18 billion. Underlying NPAT also fell by 32%. Building products were adversely impacted by significant labour and raw materials cost increases, resulting in lower margins.

De Grey Mining (DEG) went into a trading halt today after announcing it will launch a two-tranche placement to raise A$300 million in capital at an issue price of $1.05 per share. De Grey’s share price closed at $1.115 yesterday.

Gold Road Resources (GOR) fell 3.3% after committing to subscribe to De Grey Minings institutional placement at $1.05 per share. Gold Road holds a 19.9% stake in De Grey’s.

Nufarm (NUF) traded flat after updating its FY23 outlook today, stating it expects to report underlying EBITDA for the year ending September 30 to be between $430 - 440 million. Leverage will be within the range of 2.1x to 2.4x.

Premier Investments (PMV) traded marginally lower after reporting a 9.7% increase in full-year sales to $1.64 billion. The retail giant declared a final fully franked dividend of 60¢ a share, up 11.1% from the prior corresponding period.

Regal Partners (RPL) says it has formally withdrawn its bid for asset management firm Pacific Current Group, citing disappointment with the company's engagement. Pacific Current shares fell by 9.5%.

Washington H Soul Pattinson (SOL) fell 6% after reporting a fall in regular profit of 9% to $759.3 million, which excludes the one-off, non-recurring impairment relating to the Milton merger. The company reported a 20% lift in its dividend and a 22% rise in net cash flow from investments. Another potential contributor to the falling share price is Washington Soul’s 40% ownership stake in Brickworks, which also fell by 6%.

Post(s) of The Day

Deep Dive

Cocoa Crisis: Why Your Favorite Chocolate Bar Is Costing More

The global chocolate industry faces a significant challenge as cocoa prices have surged by almost 50% in the last year due to adverse weather conditions and diseases affecting major cocoa-producing regions.

The world is potentially heading into its third consecutive year of cocoa supply deficit.

The Ivory Coast, responsible for over 40% of the global cocoa production, has experienced severe flooding, leading to rotting and diseases in cocoa trees. While most wholesale food prices have decreased, cocoa prices remain high, causing concern among consumers grappling with rising living costs.

The global chocolate trade, valued at over US$1tn, is also linked to deforestation issues in Ivory Coast and Ghana. Rabobank analysts predict that consumers might reduce their chocolate consumption due to these price hikes, though the desire for indulgence remains.

In Australia, specialty chocolate makers are contemplating how to transfer these rising costs to consumers. Some small businesses report that cocoa prices have doubled compared to pre-pandemic levels. Additionally, global sugar prices have increased due to failed harvests in South America, further impacting chocolate prices. Local producers face increased shipping costs, customs delays, and higher packaging costs. Despite these challenges, specialty chocolate producers emphasise the importance of supporting local businesses and choosing quality over quantity.

Daily Quiz

Test Your Knowledge

Yesterday’s Daily Quiz Question. Which of these soft commodities has risen the most in the past 12 months?

Answer: Cocoa. See above if you want to find out why. Well done to the 43% who got that one correct.

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of September 22

1. Pilbara Minerals (PLS) - 11.75%

2. Genesis Minerals (GMD) - 9.66%

3. Flight Centre (FLT) - 9.55%

4. IDP Education (IEL) - 8.75%

5. Syrah Resources (SYR) - 8.74%

6. Core Lithium (CXO) - 8.52%

7. Sayona Mining (SYA) - 8.25%

8. Elders Limited (ELD) - 8.13%

9. Select Harvests (SHV) - 8.07%

10. Mesoblast (APX) - 7.55%

📊Broker Ratings

What do the brokers have to say?

1. ANZ Bank (ANZ) - Upgraded to Overweight from Equal-weight (Morgan Stanley). Target Price is $27.00.

2. Paladin Energy (PDN) -Downgraded to Speculative Hold from Buy (Bell Potter). The target price was lifted to $1.31

Read what the brokers had to say about both companies

👨‍💼 Director Transactions

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

💲Dividends

Companies trading ex-dividend today

📅 Economic Calendar

Data to keep an eye on this week

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.