Morning Bell 14 August

Between the Bells

Wall Street’s rally has extended into another session on Tuesday as equities move closer to July’s record following the release of PPI inflation data and ahead of the inflation reading out tonight. The Dow Jones rose 1.04%, the S&P500 added 1.68% higher and the tech-heavy Nasdaq ended the day up 2.43%. The US producer price index increased 0.1% in July which fell short of economists’ expectations and further indicates inflation in the US is easing.

The US inflation reading out tonight is expected to rise just slightly on last month but remain steady at 3% YoY. If the reading comes in below economists’ expectations’, we will likely see equities rally on Wall Street on Wednesday as the two inflation related readings easing will boost investor sentiment of a soft landing over a recession.

Across the European markets overnight, markets closed higher in the region as investors assessed the latest batch of economic data out in the region. The STOXX 600 rose 0.5% led by gains among healthcare stocks, while Germany’s DAX added 0.48%, the French CAC rose 0.35% and, in the UK, the FTSE100 ended Tuesday’s session up 0.3%. UK wage data out overnight showed pay excluding bonuses grew by 5.4% YoY between April and June which is the lowest rate in two years.

The UK unemployment rate also fell to 4.2% from 4.4% which fell short of economists’ expectations indicating strength in the UK economy as inflation continues to ease.
Across the Asia markets on Tuesday, it was a mostly green finish led by Japan’s Nikkei rising 3.45% after Japan’s Producer Price Index rose 3% in July from the prior year. South Korea’s Kospi Index rose just 0.12% on Tuesday, Hong Kong’s Hang Seng gained 0.32% and China’s CSI index ticked 0.26% higher.

The local market rallied 0.17% yesterday despite a near 3% decline in healthcare stocks weighing on market gains as healthcare heavyweight CSL declined on disappointing outlook for FY25.

Economic data out yesterday also added to market gains yesterday as wage growth steadied in Q2 which has been a key driver of inflation remaining high, while Westpac consumer confidence data also rose 2.8% to 85 points in August from 82.7 points in July indicating consumer sentiment is slightly improving but remains weaker than historical levels.

NAB Business confidence data also out yesterday continued its downward trajectory though in July with a reading of 1 index point, down from 3 index points in June, indicating Australian businesses remain pessimistic about the current state of the market, however, the ease in wages growth and slowing inflation drivers pave the way for a recovery in business confidence over the second half of CY24.

Temple & Webster shares shot the lights out yesterday with a 26% rise on the back of stellar FY24 results being released including record revenue of $498m and a strong start to FY25.

James Hardie Industries came under pressure yesterday following release of a Q1 FY25 trading update. Despite posting net sales up 4% to $992m, investors sold out on the outlook of weakening demand and easing volumes in the company’s key North American operations.

What to watch today:

• Ahead of the midweek session on the ASX the SPI futures are anticipating the local market to open the day up a sharp 0.73% on the global rally overnight.
• On the commodities front this morning, oil is trading 2.1% lower at US$78.38/barrel, gold is down 0.4% at US$2466/ounce and iron ore is down 0.6% at US$100.67/tonne.
  AU$1.00 is buying US$0.66, 97.35 Japanese Yen, 51.28 British Pence and NZ$1.09 cents.

Trading Ideas:

• Bell Potter has maintained a hold rating on Temple & Webster but have raised the 12-month price target on the leading online furniture retailer from $11.40 to $12.20 following the release of the company’s FY24 results yesterday. Bell Potter’s analyst says the price target increase was driven by