ASX 200 rises; profit slump hits Macquarie; McDonald's sales rise; Block rebounds; Wesfarmers at record high

Bourse has best weekly gain in five weeks, up 0.7 per cent. McDonald's Australia annual sales up 7 per cent. Wesfarmers hits record high. Path to low inflation 'not yet' secure: ex-RBA boss. Macquarie falls. Block jumps. 

Australian shareholders are set to be buoyed by tech gains on Wall Street. Picture: Jeremy Piper

Welcome to the Trading Day blog for Friday, May 3. The ASX 200 closed 0.6 per cent higher at 7629.00 points. Tech stocks lifted Wall Street before Apple beat earnings estimates.

The Aussie dollar is trading around US65.74c.

Updates

4:29 pm May 3, 2024

ASX 200 ends up 0.7pc for the week

David Rogers

Australia's share market had its best week in the past five as global markets continued to rebound after a slightly more dovish than expected Fed meeting.

China and Japan were closed for holidays. US jobs data are due later.

The S&P/ASX 200 closed up 0.6 per cent at 7629 points on Friday after hitting a two-day high of 7640.2 as US stock index futures added to bullish US leads as Apple jumped 6 per cent in afterhours trading after its quarterly report.

Interest rate sensitive sectors including consumer discretionary, property and tech led broad-based gains on Friday. Wesfarmers rose 2.8 per cent, Arisocrate added 2.3 per cent, Goodman rose 2.7 per cent and Xero up 1.3 per cent.

Block jumped 10 per cent on strong results and guidance plus reassuring comments from Jack Dorsey on Block's regulatory compliance.

Westpac rose 1.5 per cent before it reports on Monday after NAB met expectations and announced a $1.5bn share buyback this week.

Pilbara Mines gained 3 per cent and Seven Group jumped 3.8 per cent.

Macquarie fell 2.2 per cent as 1H profit missed Morgan Stanley's estimate by 5 per cent even as it met the consensus albeit on divisionally weak results.

A 0.7 per cent rise this week came as the Fed eased jitters about interest rates. Those interest rates jitters, combined with geopolitical risks, sparked a 5 per cent dip in the ASX 200 last month and its first monthly fall in six.

4:01 pm May 3, 2024 Highlight

McDonald's Aussie revenue lifts 7pc

Eli Greenblat

The Australian arm of fast-food giant McDonald's has upped its revenue for fiscal 2023 despite cost of living pressures draining disposable incomes and spending on eating out, with McDonald's still confident about the trading environment to spend $1bn on new stores and store refurbishments.

According to latest documents lodged with ASIC by McDonald’s Australia, its sales for 2023 rose 7 per cent to $2.144bn, which includes sales from company-owned restaurants and rent income.

Total system wide-sales were around $7bn, which includes company owned and franchisee restaurant sales.

McDonald’s Australia’s net profit for fiscal 2023 was $253m, up 5.1 per cent on 2022.

The company had previously announced plans to invest $600m in Australia to open 100 new restaurants by the end of 2025 and reinvest a further $450m to remodel around half of its existing restaurants. It has plans to open 35 new restaurants across Australia in 2024.

“Our commitment to providing great value for money and our relentless focus on delivering exceptional customer experiences, underpinned our growth in 2023,” said McDonald’s Australia boss Antoni Martinez.

“When it comes to value, the relaunched Macca’s lunch and dinner bundles (which grew 20 per cent year on year) our loose change menu and the continued popularity of the MyMacca’s loyalty program were all key drivers of growth.”

3:34 pm May 3, 2024 Highlight

Wesfarmers shares hit record high

Megan Neil

Wesfarmers shares have hit a record high following its annual strategy day.

At its strategy day on Thursday, Wesfarmers boss Rob Scott said the conglomerate's stable of businesses were well positioned for growth.

Jarden analyst Ben Gilbert said the strategy day featured a greater emphasis on growth. "Whilst there was little new at the strategy day, the message was clear: Wesfarmers sees material growth across its key pillars via expansion into adjacencies and operational efficiencies," Mr Gilbert says.

UBS analysts lifted their valuation on Wesfarmers to $66, from $61, in 12 months' time, following the strategy day.

Wesfarmers shares rise as much as 3.3 per cent to an all-time high of $68.68. The stock is now up 3 per cent to $68.51.

2:35 pm May 3, 2024 Highlight

Economists tip RBA hold; market less dovish

David Rogers

A still-dovish Fed gives the RBA some breathing room at its meeting next week but the Board is likely to acknowledge that disinflation has stalled even though most expect it to keep rates on hold.

A Bloomberg survey of economists finds 23 of 24 now expect the RBA to keep its cash rate target at 4.35 per cent this month.

Capital Economics is the only forecaster predicting a rate hike next week.

Of the 24 economists surveyed by Bloomberg, 12 expect the RBA to cut to 4.1 per cent by November and 7 expect it to cut to 3.85 per cent by mid-2025.

Rabobank expects rate hikes in August and November.

Market pricing is far less dovish than economists, although it cooled this week.

Overnight indexed swaps show peak rate hike pricing of 8.8 basis points by August.

On Monday it had priced 11bps of hikes by September.

Moreover, a 25 basis points rate cut isn't fully priced until September 2025.

2:30 pm May 3, 2024 Highlight

RBA rate hike is unlikely: Westpac's Ellis

Megan Neil

Westpac chief economist Luci Ellis says a RBA rate hike is unlikely.

Dr Ellis, a former RBA assistant governor, notes that the outlook for rate cuts has been pushed out following the March quarter inflation surprise and given some further upside is possible in the June quarter.

She notes that one body of opinion holds that rate hikes are necessary and likely, although Westpac believes a hike is unlikely. "While the RBA is, quite properly, not ruling anything in or out, the case for raising rates in response to every upside surprise is weak," she says.

"The RBA is on hold until inflation falls further. A scenario necessitating a rate hike is not impossible, but it is unlikely, and it would only take shape later in the year," Dr Ellis says.

"Could they hike? Not yet, and probably not given the current run of data. The language following next week’s meeting could be more hawkish. In the end, though, the Board will and should remain forward looking. We continue to expect the next move to be a cut, down the track."

2:13 pm May 3, 2024

Macquarie guidance 'conservative': Morgan Stanley

David Rogers

Morgan Stanley's Andrew Stadnik keeps his Overweight rating and market-leading $225 price target on Macquarie even as its FY24 NPAT fell 32 per cent to $3.52bn, missing his estimate by 5 per cent.

"Macquarie's FY25 outlook points to a clear earnings recovery with MAM's other operating income to be significantly up on investment income and MacCap's transaction activity to be significantly up with investment income also up," Stadnik says.

"Partly offsetting this, MQG expects broadly in-line outcomes for commodities income, MAM base fees and ongoing OPEX on green portfolio companies.

"Consensus is looking for $4.25bn FY25 profit or 20 per cent growth.

"So we expect a debate to emerge on whether MQG's outlook is enough to support this figure.

"Our view is that MQG is being conservative and the stock is at the start of a multi-year upgrade cycle with global M&A recovering from a 30 year record low in 2023."

MQG last down 2.4 per cent at $183.54.

2:02 pm May 3, 2024

Rates could be higher for longer: HSBC

Megan Neil

HSBC still expects the RBA to keep interest rates on hold this year, flagging a risk of a rate hike or that rates remain higher for even longer.

HSBC chief economist Paul Bloxham says the upside surprise to first quarter inflation means the RBA board will consider, but not deliver, a rate hike at its meeting next week.

"Our central case is that the RBA will be on hold through 2024, with a shallow cutting phase starting in Q1 2025 (60 basis points of cuts in 2025). That said, we see a 40 per cent chance that the RBA could raise its cash rate again in H2 2024 and a risk that the cash rate is on hold for longer than our central case, partly depending on actions by the US Fed."

Mr Bloxham says that since the RBA board last met six weeks ago, the data flow has shown that inflation is falling more slowly and the jobs market is loosening more gradually than the central bank had been forecasting. "In short, the economy is still moving in the right direction for the RBA to achieve its inflation target, but taking longer than expected."

Mr Bloxham says the RBA is likely to revise up its near-term core inflation forecast. He also notes that after the higher-than-expected CPI print, the OIS market is now pricing only 8 basis points of cuts by mid-2025, compared to pricing of 75 basis points of cuts when the RBA last did its forecasts in early February.

"The assumed cash rate track underpinning the RBA's forecasts will therefore be higher, which we think will allow them to still be forecasting that inflation returns to around the mid-point of the target band by mid-2026."

1:35 pm May 3, 2024 Highlight

Low inflation path ‘not secure’: ex-RBA boss

Eric Johnston

Former Reserve Bank governor Glenn Stevens says the path to low inflation is “not yet” secure, although it has been moving in the right direction.

The former central banker, who now chairs investment bank Macquarie, says there are several risks for markets, and the global inflation challenge remains one of them.

“What we really need to see is low inflation is secure. We're on the path back there, it’s been going the right direction, but I'd say low inflation is probably not yet quite secure. And when it is secure I think that will give a lot more certainty to the interest rate outlook and markets”.

Geopolitical tensions remain a risk the investment bank grapples with, as well as sizable government deficits around the world — particularly in the US — which need to be funded, he said.

Stevens retired from the Reserve Bank in 2016 after a decade in the role of governor.

1:30 pm May 3, 2024

NAB internet banking playing up

David Ross

National Australia Bank warns it is experiencing issues with its internet banking services.

This includes NAB mobile app, NAB Trade, NAB Connect, and the bank's internet banking platform.

NAB told customers it was working to resolve the issue.

12:55 pm May 3, 2024

Qantas provides update on app incident

Robyn Ironside

Qantas finalises its investigation into a privacy breach involving its mobile phone app, which gave frequent flyers access to other members' flight details and points balance information.

In a message to the airline's 15 million frequent flyers, Qantas apologised to customers, and offered an assurance the app was now "stable and operating normally".

"We have now identified the root cause and can confirm that this was a technology issue and there is no evidence of a cyber incident," said the message.

A spokeswoman clarified the problem related to a "caching issue which meant incorrect information was updating onto users' apps".

Qantas went on to say the company took the security and privacy of customers' data seriously. "We want you to know that we have done everything we can to fully understand what went wrong so we can prevent it happening again," the airline said.