Latest / ausbiz a.m / 12.08.26 with James Gerrish, Market Matters
Transcript
- Andrew: Good morning and welcome to your morning wrap from OSB setting up for the day on the Australian share market. It is Wednesday, august the twelfth, and we're expecting a negative start to the session with ASEX futures down around four tenths of per cent. In a moment we'll preview the day with James Gerrish. First though, a quick look at where we finished on global markets overnight. Oil edged higher after a Iranian official said the Strait of Humus excuse me would remain closed for now. Well, investors ⁓ on Wall Street also are waiting tonight's key inflation read out of the States. So the SP ⁓ that was down around a third of a cent, the Nasdaq down six tenths, the ⁓ the Dow also declining about a third. among those stocks on the move, Amazon dipped ⁓ two percent, along with ⁓ Alphabet, it also fell. And ⁓ SpaceX declined around four percent. On the commodities front, ⁓ Brent Crude. Up around one and a half percent to eighty nine dollars a barrel, gold as these to four thousand three hundred and seventy dollars, iron ore up to ninety-seven dollars a ton, bitcoin trading below sixty-four thousand dollars in the Aussie dollar. It's at seventy point six in the wake of the RBA, leaving rates on hold as expected. Well, let's ⁓ get across those market moves and what to expect today. We are joined by James Gerrish from Market Matters. James, good morning. James Gerrish: G'day Andrew. Good morning, mate. Andrew: So first ⁓ to Wall Street, ⁓ what did you make of that? I mean, clearly investors I guess most focused on this upcoming inflation read. James Gerrish: Yeah, it is. And inflation's really important, ⁓ particularly given the context of what oil prices are doing. So we've obviously had these ebbs and flows playing out in the Middle East, which is putting you know, at times we're seeing ⁓ you know, when oil prices lower, we see expectations decline and bond yields decline. ⁓ and in the last couple of days we've seen oil prices, you know, the the the rhetoric over there deteriorate a little bit. Oil prices have rallied ⁓ and bond yields have merged higher. So bond yields are really important ⁓ and that's probably the driving force ⁓ Aside from earnings ⁓ that are impacting ⁓ or that that that are helping equity markets at the moment. ⁓ and then of course equ earnings over in the US have been really strong. And we're getting a a a sense of what ⁓ companies are doing here in Australia if reporting season locally ramps up. Andrew: Well let's ⁓ let's go there then. of course we're getting into the thick of it. ⁓ we began the week with Westpac ⁓ today, the key result CBA. ⁓ look, I guess particularly in in light of what we heard from the Reserve Bank yesterday, ⁓ look the property market remains of concern for the banks, ⁓ given ⁓ particularly the ⁓ the number of mortgage applications which are clearly falling quite rapidly. James Gerrish: Well, that's gonna be the key in terms of CBA's ⁓ FY twenty six results today. So we've had ⁓ Westpac out with a trading update, NAB out with a trading update. Westpac is seeing ⁓ loans, ⁓ loan applications deteriorate by you know circa twenty percent. NAB is a little bit less at fifteen percent. So commentary from you know CBA, the country's largest lender, is gonna be really important today when they release results. So just in terms of their results, I mean the market's looking for ⁓ a net profit of 10.85 billion for the year. ⁓ that's up just shy of six percent ⁓ on FY twenty twenty-five. So ⁓ that's a reasonable outcome. Obviously, CBA is trading on a pretty high valuation, ⁓ so it doesn't leave a lot of area for error. But I think the outlook commentary and those ⁓ you know, the focus on ⁓ how ⁓ lending applications are tracking is going to be ⁓ key in the short term. But the banks have been under a little bit of pressure in the last couple of days as a consequence or stemming from. That Westback update. So ⁓ this will be a really interesting and and pivotal update ⁓ for the banking sector more broadly, Andrew. Andrew: ⁓ James, also we've got ⁓ the insurer Suncorp out today. What ⁓ what are you seeing with the insurers at the moment? James Gerrish: Yeah, insurers have had some ⁓ strong tailwinds. So premiums have been going ⁓ up, obviously, higher interest rates feed into better investment earnings on their float. ⁓ so the earnings outlook for ⁓ insurers have been pretty good and their share price is reflective of that. So ⁓ of course you think about Suncorp and it used to be a a bank/slash insurer, they spun out their banking division to ANZ. ⁓ now they're just focused on the insurance side. So really getting down to betting down, you know, really getting down to focusing on. Insurance. The tailwinds within insurance have been ⁓ better than the bank, so I think it was ultimately a good move in terms of Suncorp. If I look at you know Suncorp versus IAG, they're still trading at a at a mild ⁓ P discount to IAG when I probably think they should be trading more in line with IAG from a multiple perspective. So we like Suncorp, but it'll be interesting to see the result today, as always. ⁓ I wouldn't expect too many surprises out of Suncorp. They also did this ⁓ change the way they. re ⁓ that changed their reinsurance program a little while ago so it basically makes their ⁓ business ⁓ a lot less risky so not ⁓ they won't be ⁓ impacted as much by these large catastrophes which have impacted profit in the last ⁓ couple of years for some corps at some corporate time so to me it's a more stable business it's a more focused business and ⁓ yeah really excited to get their update today andrew Andrew: ⁓ James, any other particular results you you're looking forward to which you think could potentially surprise the market? James Gerrish: Yeah, we get a ⁓ we get a couple of updates from so Charter Hall Long While REIT, CLW is one that we own. This is a more of a boring ⁓ long duration property stock. They've obviously been you know heavily influenced by what ⁓ bond yields are doing. ⁓ so they're reporting their results today. I'll be interested on that one. AGL is another one that's been under a lot of pressure ⁓ of late that's reporting earnings today. So I'll be interested in terms of AGL. And then next week we get some big boppers. We've got ⁓ JB Hi Fi on Monday. We've got the HP on Tuesday. Then some interesting ones. So Hub 24 Pro Medicus, ⁓ these are companies that are going to be really pivotal for, you know, that they've been under a lot of pressure as this valuations in the ⁓ higher growth area have come under a lot of pressure, the software area. So I'll be really interested in those ones, Andrew. Andrew: You mentioned JB Hi Fi. how are you feeling about the retail stocks at the moment? I guess particularly what you heard from the RBA yesterday. James Gerrish: Yeah, the RBA was pretty ⁓ hawkish, I thought, yesterday when they when they held the market just in terms of interest rate expectations in the last twenty-four hours. So ⁓ before the RBA's decision yesterday, the market was sort of fifty-fifty split. ⁓ this is in terms of futures pricing on whether they would hike again in twenty twenty six. ⁓ the market's moved to about twenty basis points of tightening by early of twenty seven. So the market's, you know, pricing in ⁓ circa seventy percent probability that the RBA. It's going to hike again. So that's very different to what we, you know, or you know, that's different to what it was leading into this ⁓ yesterday's update. So ⁓ that has implications, no doubt, for the retail sector. So we've had a few names out with numbers so far. So ⁓ Maya came out and had a a pretty soggy update, ⁓ but I'll probably put that one to one side. ⁓ Nick Scarly came out with a an okay update. The U UK business is going particularly strong, but they highly Highlighted sogginess in their Australian operations. And then JB Hi-Fi, this is really a premier, ⁓ premier ⁓ retail stock that generally does pretty well when it comes down to earnings. They've got a really good history of defending margins whilst maintaining sales even when times are a little bit tough. ⁓ so a lot of their products are more non-discretionary than discretionary these days. We all need our technology, etc. So ⁓ I think the the result probably won't be as bad as fit. The stock has been. Under a lot of pressure in the last 12 months. So the the expectations from a stock price perspective are not super elevated. So ⁓ they're probably the area they're they're the companies that I probably think will do better this reporting season. We've seen a few already where expectations have been low and they've managed to deliver to expectations, and that's led to a reasonable rally in share prices. So ⁓ yeah, focusing on those stocks that are that where optimism expectations are potentially lower, ⁓ is my view. Andrew: James, Life three sixty yesterday, d did you take a look at that? ⁓ obviously that stock having been under pressure, but I mean interesting result and it's sort of making a profit, but I mean the market ⁓ punished it severely. James Gerrish: Yeah, I guess I mean this is a stock that we own. So yesterday wasn't a good day for that position ⁓ for life three sixty. But you've got to in in the context of where it's been trading, so ⁓ it it it's had a a a pretty good rally in terms of the last month of ⁓ share price gain. So it's up materially in that time frame. So yeah, whilst a ⁓ you know sixteen, seventeen percent drop yesterday, it only takes it back to levels it was trading about two weeks ago. So the market had been, you know, the the the result was actually in line with. Consensus. So you look at the on the revenue side, the earnings side, ⁓ their monthly active users ⁓ were strong. ⁓ It was just a I think the market was more positioned for a potential upgrade. The momentum at their last update was was quite optimistic. ⁓ So I think the market was more positioned for an upgrade at these quarterly results that they delivered. And they didn't get that, so the stock was sold off. Whereas something like a C79 yesterday crisis. ⁓ yeah, they delivered in line with expectations, but but ⁓ you know the stock price had been weak leading into their results and the the the price bumped 17% higher. So that's another one we've got in portfolios, but it's it's gonna be that's that's why I was focusing previously just on where you know it's all relative earnings are relative to where the stock price has been over the recent duration. So ⁓ yeah, where the stock price has been weak and they can meet expectations, and that's probably a a catalyst for the share price to go high. Higher, ⁓ but if it's been strong and they only meet expectations, then the share price is susceptible to some weakness, and that's what we saw in live 360 yesterday. Andrew: James, great to get across what you are seeing this reporting season. Enjoy your day. Thanks for joining us. James Gerrish: Have a good one, Mike. Andrew: And that is your Osbys morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.