Trump Trade Takes a Break, MinRes Takes a Hit

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Welcome to Equity Espresso’s Market Recap.

The Australian sharemarket retreated on Wednesday, with the S&P/ASX 200 Index falling 62 points (0.8%) to 8,193.4, following a pause in the global "Trump trade" rally and renewed interest rate concerns. The decline mirrored the S&P 500's 0.3% drop overnight, which ended its strongest five-day run in a year.

Financial (-1.07%) stocks led the decline, dropping as markets pushed expectations for the Reserve Bank's first rate cut to September next year amid concerns about prolonged global inflation under Trump's policies. Notable moves included NAB (-1.29%) and ANZ (-3.99%), though the sector recovered somewhat after wage growth data showed a slowdown to 3.5% in the September quarter.

Utilities (+0.59%) was the sole sector to finish in the green, with Origin Energy (+0.90%) and APA Group (+0.60%) leading the sector higher.

Company News

• Aristocrat Leisure (+2.60%) reported a 17% increase in FY24 net profit to $1.45 billion, driven by strong North American performance, and raised its dividend to 78¢. The gaming company plans to sell Plarium Global for $US820 million while focusing on poker machines and casino games, targeting $US1 billion in Interactive revenue by FY29.

• Insignia Financial (-4.81%) maintained its FY25 revenue margin and expense guidance while announcing a $150 million cost-saving initiative targeting double-digit earnings growth by FY30. The wealth manager expects operating expenses to exceed $700 million by FY30, with planned reinvestments decreasing by $200 million.

• James Hardie (+6.19%) reported a 23% decline in half-year profit to $238.7 million due to weak demand in Asia and Europe, expecting lower FY25 volumes. Despite raising North American earnings guidance, CEO Aaron Erter anticipates continued challenges in the exterior products market despite potential improvements in consumer sentiment.

• Life 360 (-7.44%) shares dropped after releasing its Q3 2024 results, with revenue growing 18% to $US92.9 million, driven by successful back-to-school sales and its new "Tiles" safety product. The family monitoring app saw significant user growth, adding 6.3 million monthly active users (total of 76.9 million), while international expansion accelerated with 51% year-over-year growth in global users.

• Mineral Resources (-7.20%) is suspending operations at its Bald Hill lithium site in WA due to weak spodumene prices, affecting 300 workers who will be redeployed or offered redundancy. Despite the pause, the site's output estimates were recently upgraded to 58.1 million tonnes, a 168% increase from previous projections.

Wall Street

Wall Street's major indexes retreated on Tuesday, with the Dow falling 0.86%, S&P 500 down 0.29%, and NASDAQ declining 0.09%, as investors took profits following the recent post-election rally and awaited upcoming U.S. inflation data. The market's previous enthusiasm for President-elect Trump's proposed tax cuts and deregulation policies was tempered by concerns about potential inflationary impacts.

The decline was driven by the Materials (-1.574%) sector, followed by Healthcare (-1.34%), while Communications Services (+0.51%) emerged as the strongest performer. Rising Treasury yields created headwinds for equities, with the small-cap Russell 2000 experiencing a notable 1.8% decline after reaching a three-year high on Monday.

Shopify (+21.04%) shares soared after the company reported exceptional third-quarter results. Operating income reached $283 million, and revenue hit $2.16 billion, surpassing expectations. The company's optimistic holiday forecast and strong merchandise volume growth further boosted investor confidence. Spotify's (+6.88%) shares surged in after-hours trade after the streaming giant reported 640 million monthly active users in Q3, up 11% year-over-year. The streaming giant posted strong subscriber growth of 12% and revenue of €4 billion, marking significant progress toward annual profitability.

S&P500 Sector Performance

Economic Data

• Australia’s Wage Price index rose 3.5% year-on-year in Q3 2024, easing from a 4.1% rise in the previous quarter.

• South Korea’s Unemployment rate rose to 2.7% in October 2024, up from 2.5% in September.

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🌎️ Around The Globe

• 23andMe announced a major restructuring, cutting 200 employees (40% of workforce) and halting therapy development programs. The genetic testing company is now exploring strategic alternatives, including potential licensing deals and asset sales.

• Amazon is reportedly developing "Amelia," smart glasses based on Echo Frames technology, to help delivery drivers with turn-by-turn navigation and hands-free package documentation. The project aims to boost efficiency in the final delivery stages and increase drivers' capacity.

• AWS is offering $110 million in cloud credits for researchers using its Trainium AI chip, highlighting its push into semiconductor development. The initiative, featuring direct chip programming capabilities, aims to reduce Nvidia dependency and attract AI developers.

• Chipotle has appointed interim leader Scott Boatwright as permanent CEO, following Brian Niccol's departure to Starbucks. The appointment comes as the restaurant chain faces industry-wide challenges of reduced consumer spending amid elevated menu prices.

• Nvidia and SoftBank have successfully tested the world's first combined AI and 5G network (AI-RAN), enabling simultaneous AI and 5G operations. The breakthrough technology aims to support autonomous vehicles and robotic control systems.

• Southwest Airlines, facing aircraft shortages from Boeing, is offering voluntary buyouts and extended leaves to airport staff to address overstaffing concerns amid pressure to improve profitability and stock performance.

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*1-year, 3-year and 5-year returns are calculated as of September 30 2024.

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