Good Evening,

Welcome to the ASX News Daily Recap.

Lost track of what happened on the market today?

Don’t stress. We’re here to catch you up.

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

1. 💰 CBA Posts Record Earnings result

2. 💊 Novo Nordisks cardiovascular breakthrough

3. 💍 Lovisa Drops on downgrade

4. ⬇️ China’s Deflation problem

5. 💲 PayPal Goes Crypto

The Recap

CBA Record Earnings

Pushes ASX Higher

It was all about Banking and REIT earning reports today, with Australia’s largest bank, CBA reporting better-than-expected earnings, however, warned of margin pressures and rising debt arrears due to elevated living costs.

It was another flattish day on the market before an afternoon spike helped the ASX200 finish 0.37% or 26.9 pts. higher to 7,338.0. Eight sectors ended the day higher, led by Financials (+1.21%) thanks to a 2.58% rise from CBA. NAB (+2.18%), Westpac (+1.66%) and ANZ (+0.75%) all followed the leader, also finishing higher. Telco (+0.95%) and Tech (+0.87%) were two of the other sectors to see gains today.

Healthcare (-0.89%) was back in the red after a reprieve yesterday. ResMed fell for the 5th straight session, shedding another 4.6% to $27.42, lows not seen since May-2022.

Companies we’re expecting earnings from tomorrow include AGL Energy, AMP, Boral and QBE. Insurance.

Baby Bunting, Charter Hall Social Infrastructure, Newcrest, Nick Scali and REA Group will report on Friday to round out the week.

Economic News

Deflation pressure is hitting the world’s second-largest economy, with China reporting year-on-year declines for both consumer and producer prices in July:

• CPI -0.3% YoY & +0.2% MoM

• PPI -4.4% YoY & -0.2% MoM

Keep a close on the Chinese government and what they do to revive consumption and stimulate their economy.

ASX200 Stock Snapshot

Wall Street

The U.S. market sunk straight out of the gate before clawing back some ground throughout the day to regain some of the losses. The S&P500 finished -0.42% lower, whilst the NASDAQ dropped by -0.79% lower.

Apple shares snapped a 5-day decline, finishing 0.53% higher to $179.80.

The pharmaceutical sector was the big winner in U.S. markets:

• Eli Lilly shares rose 14% after reporting a Q2 revenue increase of 28%. This significant jump came from sales of its diabetes drug Mounjaro - which were 72% higher to $979.7 million. Doctors are prescribing the drug as an off-label obesity treatment as the company awaits official approval from the F.D.A.

• Danish company Novo Nordisk was another who jumped by double digits, rising by 17% after trials from its obesity drug ‘Wegovy’ showed it reduced cardiovascular health risks for patients by up to 20%.

The Banking sector fell after Moodys Investors Service downgraded its rating of 10 small to medium American lenders.

The price of Oil rose overnight after Ukrainian President Volodymyr Zelenskiy said his country would retaliate if Russia continued to block its ports.

Other Earnings reports:

• Lyft’s share price detoured south in after-hours trade, with the ride-sharing company reporting its slowest revenue growth in two years of 3%. Lyft did say it expects Q3 revenue growth to be between 7% - 9%

• Twilio rose after-hours, with the software company raising its profit outlook for the full-year year to $350m - $400m. Q2 revenue of $1,038m and non-GAAP income of $120m were both over 10% more than the prior year’s quarter and beat analysts’ expectations.

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Markets

Index & Commodity Prices

Bond Prices

ASX By Sector

ETF Watch

Quick Singles

🪃 Local News

• Newmark Property REIT fell after reporting a statutory loss of $8.9 million in FY23, with a 3% asset value write-down. The company provided a weaker-than-expected earnings outlook, guiding distribution of 7.6c per share after paying 9.0c per share in FY23.

• Dexus Industria REIT was still able to report a statutory profit of $0.2m despite having to make a $56.3m devaluation of its logistic portfolio. The devaluation represented a 3.5% drop from the previous book value.

• Sezzle reported a positive Q2 Net Income of US$1.1m from a loss of $15.1m in the same quarter last year.

• Beach Energy has appointed former Santos COO Brett Woods as its’ next MD and CEO after incumbent Mr Morné Engelbrecht ended his tenure today.

• Suncorp started the trading poorly before regaining some ground to only finish 1.6% lower. Suncorp reported a full-year net profit of $1.2 billion, which fell short of analysts’ expectations. The Dividend of $0.60 per share was also at the lower end of the payout ratio range of between 60% to 80%.

🌏 Around The Globe

• Danish Pharmaceutical giant Novo Nordisk said on Tuesday that an extensive study of its obesity drug ‘Wegovy’ had the added benefit of reducing cardiovascular risks. Patients in the trial had 20% lower incidences of heart attack, stroke or death from heart disease.

• Walt Disney-owned ESPN has signed a long-term exclusive partnership for sports betting with Penn Entertainment, a regional casino operator.

• U.S. credit card debt hit $1 trillion for the first time in July, but its share of the U.S. GDP is still lower than in 2010.

• Adobe’s $20B acquisition of Figma will receive an in-depth investigation from the European Union due to global competition concerns about the software designers use.

• Taiwanese chipmaker TSMC unveiled plans to commit US$3.8 billion to a chip-making plant to be made in Germany.

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Deep Dive

CBA's FY23 Earnings: Record Profits Amidst Economic Challenges

CBA had the limelight today, reporting a record-breaking cash profit of $10.2 billion for the fiscal year 2023, marking a 6% increase from FY22. The impressive growth was driven by a 17bpts jump in Net Interest Margins.

Before accounting for provisions for bad and doubtful debts, the bank's profits surged by an even more impressive 19% to reach $15.6 billion.

Financial Highlights (Growth vs. FY22)

• Cash Profit $10,164m, +6%

• Net Interest Margin (NIM) +2.07%, +17bpts

• Total Dividend $4.50 per share, +17%

• Profits Before Dad Debts $15,591m, +19%

• Operating Expenses $11,646m, +5%

• Share buy-back of $1billion in 2024

It wasn't all smooth sailing for the banking giant. The second half of FY23 saw a slight dip of 5bpts in NIM from the year's first half.

Operational costs also rose by 5%, attributed to factors like inflation and investments in technology. Additionally, the bank's employee-related costs increased by 9%, driven by salary increments and a 5% rise in full-time equivalent staff, as CBA strategically moved to bring more IT operations in-house.

Bad Debt concern?

One of the other items to keep an eye out for is the bank’s rise in loan impairment expenses, which account for bad debts. CBA said this increase, amounting to $1.47 billion, reflected “ongoing cost of living pressures and rising interest rates”.

Home and personal loans with payments over 90 days overdue rose, but Chief executive Matt Comyn said the overall quality of lending “has remained sound, with arrears and impairments below long-term averages, supported by a strong labour market as well as savings and repayment buffers.”

Household Spend

One slide that caught our eye was how higher interest rates are impacting different age groups.

Savings are eroding for customers under the age of 34 but are increasing for customers aged 35 and above. Customers aged 65+ have increased savings by 5% from last year, who unsurprisingly have a very low home loan balance compared to the younger age groups.

While the CBA FY23 earnings report showcased impressive profits, it also underscores the ongoing challenges and uncertainties in the financial landscape.

Movers and Shakers

✅ Biggest Gainers

• Syrah Resources (SYR) traded as much as 11% higher today before closing only up 1.5% to $0.65. Syrah announced it had signed a non-binding MOU with South Korean global lithium-ion battery giant Samsung SDI. The partnership between the entities will involve evaluating graphite AAM. supply from its Vidalia AAM facility in Louisana, USA.

• InvoCare (IVC) shares rose by 5.94% after it was announced that TPG Capital would buy out the funeral services provider for $12.70 per share, valuing the deal at $1.8 billion. The deal represents a 42% premium to the InvoCare share price when the deal was initially proposed back in March of this year.

🔻Biggest Fallers

• Lovisa (LOV) dropped by 4.3% after Macquarie downgraded its company rating to Neutral from Outperform, lowering the target price to $22.00 from $35.20. The broker said a challenging macro outlook would drive margin pressure for the fashion retailer. Lovisa will report full-year earnings on the 24th of August.

• Gold miner Pantoro (PNR) fell by 21% after finalising a $30 million institutional capital raise at a placement price of $0.06 per share. The funds will support working capital requirements for the companies’ wholely owned Norseman project. The capital raise will result in the issuance of 500 million new shares. Pantoro reported 1,617m shares in issue at the end of December-22.

A Little Extra

📉 Going Down?

Top 10 shorted stocks on the ASX - as of 3rd August

1. Core Lithium (CXO) - 11.16%

2. Flight Centre (FLT) - 9.87%

3. IDP Education (IEL) - 9.84%

4. Syrah Resources (SYR) - 8.37%

5. JB Hi-Fi (JBH) - 8.22%

6. Select Harvest (SHV) - 7.83%

7. Pilbara Resources (PLS) - 7.69%

8. Brainchip (BRN) - 7.39%

9. Lake Resources (LKE.) - 7.18%

10. LendLease Group (LLC) - 7.17%

📊Broker Ratings

What do the brokers have to say?

• Charter Hall Long WALE REIT (CLW) - Upgraded to Neutral from Underperform (Macquarie)

• Lovisa (LOV) - Downgraded to Neutral from Outperform (Macquarie)

• Pilbara Minerals (PLS) - Upgraded to Add from Hold (Morgans)

• Santos (STO) - Downgraded to Hold from Add (Morgans)

Crypto Corner

Paypal Takes The Crypto Plunge

The global financial platform, PayPal, has moved into the digital currency world by launching its very own stablecoin named PayPal USD (PYUSD).

PayPal aims to bridge the gap between traditional fiat currencies and the evolving blockchain technology, offering a seamless experience for consumers, merchants, and developers alike.

What’s a Stablecoin?

A stablecoin is a type of cryptocurrency pegged to a stable asset, generally to a fiat currency like the U.S. dollar. This pegging mechanism ensures that the stablecoin's value remains relatively constant, shielding it from the extreme volatility often associated with other digital tokens.

Other developed stable coins are Commodity-backed (gold, silver etc.) or Crypto-backed. Some of the more known stablecoins are Tether (USDT), USD Coin (USDC) and Binance USD (BUSD).

While stablecoins have existed for years, their integration into mainstream consumer payments has been slow, primarily due to regulatory concerns.

PayPal’s Stablecoin

The PYUSD stablecoin will be backed by U.S. dollar deposits, short-term U.S. Treasuries, and other cash equivalents to ensure it remains stable and reliable.

Users can transfer PYUSD to compatible external wallets, make payments, and convert it into other supported cryptocurrencies. The currency can be redeemed for dollars, making it a versatile tool for digital transactions.

One of the features of PYUSD is its interoperability with other platforms. Soon, users will be able to transfer their PYUSD tokens between PayPal and its subsidiary, Venmo, streamlining peer-to-peer payments.

📅 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.