ASX 200 rises; jobless rate falls; CSR yes to Saint-Gobain bid; Sigma-Chemist merger hurdle; FOMC sees one 2024 cut

The S&P/ASX200 closes up 0.44 per cent to 7,749.70. RBA's wait and watch continues with May unemployment rate at 4 per cent. Horror day for winemaker Australian Vintage. Sigma-Chemist union hits ACCC hurdle. ASX Ltd tanks on costs blowouts. 

Jobs, inflation and rates data is driving investor sentiment across global equity markets. Picture: Gaye Gerard

Welcome to the Trading Day blog for Thursday, June 13. The ASX 200 index closed 0.4 per cent higher at 7749.70 points, with tech leading the gains. US indexes, Nasdaq and S&P 500, rose to fresh highs on cooling inflation data and despite the Federal Reserve seeing just one rate cut in 2024.

The Aussie dollar is near US66.42c. 

Updates

4:33 pm June 13, 2024

ASX 200 ends up 0.4pc amid US rally

David Rogers

Australian stocks reacted positively to strong US gains following lower than expected CPI data that sparked a fall in bond yields which was subsequently halted by the FOMC's projection of less interest rate cuts this year.

S&P 500 futures rose 0.2 per cent in APAC trading with Nasdaq 100 futures up 0.7 per cent as Broadcom soared 15 per cent on stronger-than-expected earnings guidance on AI demand and plans for a 10 for 1 stock split.

US PPI data could drive markets later Wednesday.

Australia's S&P/ASX 200 closed up 0.4 per cent at 7749.7 after hitting an intraday high of 7777.8 in early trading after the US 10-year bond yield fell 9 basis points to 4.31 per cent. Australia's unemployment rate fell to 4.0 per cent as expected for May as employment rose by almost 40,000 jobs.

The RBA is set to keep rates on hold at 4.35 per cent next week as it continues to target sticky inflation, said IG market analyst Tony Sycamore.

"Technically, the view remains that the ASX200 will trade sideways between 7900 and 7600 this month before an eventual break higher in the New Financial Year towards 8000," he added. "A sustained move above resistance at 7900/10 would confirm that the next leg higher has commenced."

Most sectors rose with gains led by the tech, health care, property, communications and consumer discretionary and utilities sectors.

Xero rose 2.3 per cent, CSL jumped 2 per cent, Goodman gained 2.3 per cent, REA Group rose 2.3 per cent, and Wesfarmers added 1.2 per cent.

Major banks rose 0.2-1.1 per cent led by CBA.

But gains narrowed as the energy and materials sectors turned down.

BHP fell 0.7 per cent and Woodside loset 0.9 per cent.

ASX Limited dived 8 per cent on cost and capex blowouts.

Sigma Pharma fell 4.2 per cent as its Chemist Warehouse deal raised competition concerns at the ACCC.

2:35 pm June 13, 2024

Musk says investors backing his pay vote

Agency writers

Tesla chief executive Elon Musk said late Wednesday on X that preliminary voting results show shareholders currently backing proposals to ratify his pay package and reincorporate the company in Texas by “wide margins”.

In the post, he included line graphs showing the cumulative “for” votes on both resolutions above the line needed for approval.

The post came ahead of the company’s annual shareholders meeting Thursday, at which the final results are expected to be announced.

The results provided by Musk are preliminary, and voters can change their votes until the polls close at the meeting on Thursday.

He added in the post: “Thanks for your support!!”

– Dow Jones

2:02 pm June 13, 2024 Highlight

Bali extra seats may go to Qantas

Robyn Ironside

Hotly contested additional capacity on popular Bali routes has been tentatively awarded to Qantas, after it was found Virgin Australia's application did not meet the criteria.

Both airlines had applied for the additional 2500 seats a week, which were offered on the condition the flights began from a secondary airport such as Cairns, Adelaide or the Gold Coast.

Jetstar's application proposed flights from Cairns to Bali via Melbourne, and Adelaide to Bali via Perth, while Virgin Australia wanted to operate flights from the Gold Coast to Perth and onto Bali, and Adelaide-Perth-Denpasar.

Virgin Australia argued that Qantas already had the lion's share of capacity on Bali services, with over 20,000 seats a week opposed to their 4924. The carrier also pointed out their rival relied on foreign crew on some of its international services, whereas Virgin Australia's crew was entirely Australian.

Jetstar's submission highlighted their low fare offering on Bali routes, and the fact the airline was the biggest carrier of Australian passengers to the Indonesian holiday isle.

A number of other organisations wrote to the International Air Services Commission in support of Virgin Australia's application including the Australian Competition and Consumer Commission, Gold Coast Airport, the Transport Workers Union and Flight Attendants Association of Australia. Submissions in response to the draft decision were sought by the IASC by June 20.

1:48 pm June 13, 2024 Highlight

Australian Vintage dives after capital raise

David Rogers

It's a horror day in a horror year for embattled winemaker Australian Vintage as its share dive 45 per cent to a record low of $0.19.

It comes after the company resorted to a highly dilutive $19.9m capital raise at almost one third below its recent share price and 75 per cent under its asset backing as it responds to flatlining sales due to tougher trading conditions, ballooning debt and its future prosperity becomes increasingly tenuous.

1:43 pm June 13, 2024

Jobs market remains tight: RBC

David Rogers

Underlying trends in Australia's jobs market show strengthening monthly job creation since late last year, a pretty steady trend in the unemployment rate for the last six months, and rising hours worked since Dec-23, according to RBC.

"The labour market has loosened from its tightest point of 2022/23 when the unemployment rate was testing 50 year lows but it has broadly continued to absorb the increasing supply of labour and remains both healthy and still tight," says RBC Australia chief economist, Su-Lin Ong.

The various leading indicators point to some moderation in employment generation and the labour market ahead, consistent with the sub-trend pace of economic activity "but the starting point is still strong and the labour market looks pretty resilient", she adds.

"Some further loosening of the labour market remains key for the RBA with labour costs a main contributor to the elevated and more persistent services and domestically generated inflation," Ms Ong says

"The continued easing in unit labour costs and compensation of employees evident in last week’s Q1 national accounts would have been welcome but they remain high at 6.9 and 7.1 per cent on-year respectively.

With core and services inflation running at 4 per cent plus and the lagging nature of labour costs in inflation, she says the RBA will need to see sustained signs of further labour market loosening and lower unit labour costs before cutting interest rates.

Overall, labour market data including the various measures of wages and compensation suggest the RBA shouldn't need to hike any further.

But most of these indicators are "a long way from signalling a shift to a less restrictive policy stance." RBC sees two RBA rate cuts in 1H 2025.

1:39 pm June 13, 2024

Higher risk of rate hike than cut: HSBC

Valerina Changarathil

There is a higher risk or a rate hike in the second half of this year than a cut following recent economic data, including Thursday's May labour force numbers, according to HSBC chief economist Paul Bloxham.

The unemployment rate fell to 4 per cent in May, from 4.1 per cent in April, with 39,654 new jobs.

"We see the RBA on hold next week, but still hawkish as it remains more concerned about still too-high inflation than it does about weak economic growth." His central case is for the RBA to keep the cash rate on hold at 4.35 per cent through 2024, with cuts beginning from the second quarter of 2025.

The central bank has a very shallow forecast rise in the unemployment rate as part of its own forecasts. "Strong job creation while the labour market is gradually loosening due to boosted labour supply has been what the RBA was hoping for as part of its 'narrow pathway' to a soft landing."

1:17 pm June 13, 2024 Highlight

National Storage, GIC form new JV

Valerina Changarathil

Real estate investor National Storage REIT is teaming up with Singapore-based group GIC to establish a new joint venture that will pursue the development and operation of self-storage centres across Australia.

The National Storage Ventures Fund, to be managed by NSR with a 25 per cent stake, will acquire and develop an initial portfolio of 10 foundation assets sourced from NSR's existing development portfolio GIC will hold a 75 per cent equity interest in the fund with both partners deploying $270m of total capital over the initial 12 – 18 month period.

The Ventures JV is intended to have a term of not less than five years, with the option to extend by mutual agreement. Acquisition of the assets is subject to the finalisation and execution of business and property sale agreements and regulatory approvals, including from the Foreign Investment Review Board.

The deal will result in net sale proceeds of approximately $120m for NSR which will be used to repay debt. It will earn fees for services provided to the joint venture. NSR managing director Andrew Catsoulis said the joint venture "will assist NSR to maintain a stable earnings trajectory as it accelerates the development pipeline and the new assets are being stabilised."

12:57 pm June 13, 2024

Jobs data puts RBA on wait and watch

Valerina Changarathil

A continuing healthy labour market and upcoming tax cuts will make the RBA very cautious about cutting interest rates too soon, according to CreditorWatch chief economist Anneke Thompson.

"It is likely that the RBA will wait until the full impacts of tax cuts flow through to retail trade, labour force and savings data, which won’t happen until late 2024 and into early 2025," she says. The unemployment rate fell to 4 per cent in May, from 4.1 per cent in April, with 39,654 new jobs.

But internal data at CreditorWatch is signalling weak business conditions, which will impact jobs over the remainder of 2024.

CreditorWatch Business Risk Index (BRI) data for April shows particularly small businesses struggling. "Business liquidation rates are now well above pre-Covid levels, at 0.72 per cent on a rolling annual basis, and the ATO is now in full tax debt recovery mode, with notices of disclosure sent to 26,574 Australian businesses with outstanding tax debts greater than $100,000, as at April 2024," CreditorWatch states.

Business-to-business trade payment defaults were also at record levels in April. "Clearly, there are many businesses experiencing cash flow problems – particularly in the construction and food and beverage sectors – and this is likely to lead to further weakening in the labour force over the remainder of 2024."

12:33 pm June 13, 2024

ASX 200 up 0.4pc amid US gains

David Rogers

Australia's share market is having a better day after decisive US gains fuelled by lower than expected inflation data and the ongoing AI frenzy.

However, it has trimmed half of an early rise as gains narrow.

The ASX 200 is up 0.4 per cent at 7748 after rising to 7777.8 in early trading.

S&P 500 futures are up 0.2 per cent with Nasdaq 100 futures up 0.6 per cent as Broadcom leaps 15 per cent afterhours on a 10 for 1 stock split and stronger-than-expected earnings guidance related to AI demand.

Most sectors are up with tech, communications, property, discretionary and health care leading, though materials and energy have turned down.

WiseTech and Xero add 2.5 per cent, Seek and REA group rise 3.1-3.4 per cent, Wesfarmers jumps 1.8 per cent, Goodman is up 2.4 per cent and James Hardie rises 3.1 per cent. NAB leads major banks with a 1.2 per cent rise.

ASX Limited is down 8.7 per cent on bigger than expected cost growth.

Sigma Pharma falls 6.2 per cent as its Chemist Warehouse deal is in doubt.

BHP falls 0.7 per cent as iron ore mains shaky.

Woodside falls 1.1 per cent after a strong rise on Wednesday.

11:54 am June 13, 2024 Highlight

Fortescue camp loses another senior

Nick Evans

Andrew Forrest’s Fortescue has lost another senior member of its management team, with former green energy boss Julie Shuttleworth leaving the company this week.

A Fortescue spokesman confirmed Ms Shuttleworth’s amicable departure on Thursday, saying the former senior executive had called time on her 11 years with the iron ore giant and planned to spend time travelling abroad with her family.

"Julie has been an integral part of Fortescue’s success. We thank Julie for all she has contributed over 11 years and wish her the best as she enjoys some travel and time with her family," he said. Ms Shuttleworth had most recently been in charge of developing Fortescue’s Belinga iron ore project in Gabon.

She was previously a key member of the team seeking to deliver on Dr Forrest’s plans to reshape Fortescue as a global green energy and hydrogen giant, as the first boss of Fortescue Future Energy.

She is the latest in a long line of senior executives to leave Fortescue over the last two years. Former NT chief minister Michal Gunner also left the company this year, along with Deborah Caudle – chief financial officer of Fortescue’s energy division for only four months. A tumultuous 2023 saw the departure of chief executive Fiona Hick in August after only six months in the role, with newly-appointed CFO Christina Morris departing within a few days.