US markets (S&P 500 Index +0.2%) rose overnight on the back of better-than-expected results from major US retailers.
Walmart (+5.1%) and Home Depot (+4.1%) both reported results that beat market expectations, as well as remaining upbeat for the third quarter, lifting other retailers higher such as Target, Best Buy, and Bed Bath & Beyond.
Sector performance was mixed, with consumer staples and consumer discretionary leading gains, while tech and energy slipped the former giving back recent gains. The oil price also continues to plunge, trading at US$86 a barrel.
Markets also appeared to put aside weak US housing data, as US housing starts plunged -9.6% from the previous month in July, while permits showed a more modest decline of -1.3%.
European markets (Stoxx 600 Index, +0.2%) were up as momentum slowed, with healthcare stocks offsetting gains from resource stocks.
BHP (BHP:ASX)
BHP shares jumped +4.1% yesterday after delivering a bumper result for the 2022 financial year, beating market expectations.
BHP delivered its second largest profit to date with underlying profit coming in at US$21.3 billion, which does not include the profit generated from the sale of its petroleum assets to Woodside. The full year dividend came in at US$3.25 per share, well ahead of analyst expectations. Iron ore prices continue to remain elevated (on a 10-year view still above $100/tonne) but the standout was coal operations, as its prices have held up much better.
With strong cashflow generation balance is also in a solid position, and BHP commented that their $8.3 billion bid to acquire OZ Minerals was a full and fair value price.
Looking ahead there is some uncertainty on the health of the global economy, particularly in China and given the volatility of commodity prices but we keep our Buy rating with a high-risk caveat at current levels. We believe BHP would still be in a position to pay out healthy dividends, even if commodity prices were to slip slightly amidst a shallow recession.
Australia & New Zealand Market Movers
The Australian market (ASX 200 Index, +0.6%) lifted on Tuesday mainly due to BHP, the ASX’s largest listed company.
Most sectors traded higher with materials leading gains, while energy and real estate the only two sectors in the red.
James Hardie slipped -0.9% as its results missed expectations, as price increases weren’t enough to offset higher costs resulting in weaker than expected margins and earnings going forward.
The New Zealand market (NZX 50 Index, +0.5%) was up again yesterday, as investor sentiment improves.
Mercury Energy shares fell -3.2%, despite growing earnings in the 2022 financial year their dividend and 2023 earnings guidance disappointed the market.
PGW Wrightson shares were flat after delivering a result that was in line with its most recent guidance operating earnings – with (EBITDA) rising +20% from last year to $67.2m, keeping investors happy, while as usual management delayed releasing guidance for 2023.
Things Markets will be Watching this Week
Monday
Global: US NAHB Housing Market Index, China retail sales data
Australia: Earnings from Beach Energy, Bendigo & Adelaide Bank, JB Hi-Fi, Quarterly update from Westpac.
New Zealand: Earnings, Contact Energy
Tuesday
Global: Earnings from Walmart and Home Depot
Australia: RBA Minutes, Earnings from BHP, Challenger, Goodman Group, and James Hardie
New Zealand Earnings from Mercury and PGG Wrightson.
Wednesday
Global: US Retail sales data and Fed Meeting minutes release, Eurozone second quarter GDP and employment data, and earnings from Target.
Australia: Earnings from Brambles, Corporate Travel, CSL, Downer EDI, Magellan, Santos, Super Retail, Vicinity Centres.
New Zealand: RBNZ’s cash rate decision (OCR), and earnings from Fletcher Building
Thursday
Global: US Existing home sales data, US initial jobs claims, and Eurozone inflation (CPI) data
Australia: Employment data, and earnings from Blackmores, Evolution Mining, Transurban and Treasury Wine.
New Zealand: Earnings from Auckland International Airport, Precinct Properties, and Skellerup.
Friday
Australia: Earnings: Accent Group, AGL, Cleanaway, Cochlear, Inghams, and TPG Telecom.
New Zealand: Credit card spending data and earnings from Genesis Energy.
