Over the week global equities were stronger fuelled by a recovery in US technology stocks and rises in the broader US market on the back of strong earnings reports.
Non-Farm payrolls came in lower than expected rising by 157,000 jobs in July, below market consensus of 159,000, however there were revisions to prior month’s data covering this shortfall.
Unemployment fell further from 4 per cent to 3.9 per cent reflecting overall strength in the US economy. The ongoing trade battle between China and the US continued, however, the market proved resilient, shifting focus to corporate earnings.
Over 81 per cent of companies have reported and as the corporate earnings season comes to an end, blended earnings growth across the market has recorded its second-highest pace since Quarter 3 in FY2010, coming in at 24 per cent.
Trade concerns impacted Asian and emerging market equities, weakening after China retaliated against the US with a proposed list of tariffs on US$60 billion worth of US imports.
Australian equities rallied as a mixed bag of corporate earnings results lead the market to a 10-year high earlier in the week. As expected the RBA left the official cash rate on hold at 1.5 per cent and no suggestion of a near-term change in the official rate was signalled.
The Australian Dollar remained sensitive to news on China/US trade and tariffs however selling pressures were eased as the Peoples Bank of China (PBOC) increased reserve requirements on Chinese Yuan forward contracts, supporting the Yuan and Australian Dollar.
We note the Australian Dollar remains the market’s preferred China and Emerging Market risk proxy.
Commonwealth Bank of Australia (CBA) reported a reasonable result, however, revenue and margin headwinds are set to continue into FY2019. Cash NPAT for the FY2018 came in at $9.23 billion (including discontinued operations, and including a number of one-offs including the AUSTRAC penalty, and regulator costs) down 5 per cent from the year prior and below consensus estimates. CBA announced a dividend of 231 cents fully franked, bringing the total FY2018 dividend to 431 cents.
Trade concerns impacted Asian and emerging market equities, weakening after China retaliated against the US with a proposed list of tariffs on US$60 billion worth of US imports.
- Christopher Hindmarsh
This was a surprise to the market and was higher than consensus estimates, reflecting that management appears to be looking at the 2018 result as the low point in terms of provisions.
Suncorp Group Limited (SUN) reported a strong result as cash NPAT of $1.098 billion came in at 4.5 per cent above consensus estimates. A final dividend of 40 cents fully franked and a special dividend of 8 cents fully franked was announced.
This brings the total FY2018 dividend to 81 cents, representing a payout ratio of 95 per cent.
Further capital is expected to be returned to shareholders in the future as the sale of SUN’s Australian Life business to TAL (for $725 million) was announced, subject to final documentation being executed and regulatory approvals in Australia and Japan.
Further we note SUN’s Business Improvement Program is tracking well ahead of targets and should drive SUN’s growth into the future.
- This article does not take into account the investment objectives, financial situation or particular needs of any particular person. Accordingly, before acting on any advice contained in this article, you should assess whether it is appropriate in light of your own financial circumstances or contact your financial adviser. Christopher Hindmarsh is an adviser at JBWere Limited. JBWere Limited is owned by National Australia Bank Limited.
