The Australian sharemarket emerged from August reporting season deflated by a mildly disappointing month of profit results, and undermined by heavy losses in big names like Telstra and Commonwealth Bank.
Thursday's solid gain of 45 points, or 0.8 per cent, in the S&P;/ASX 200 index to 5715 managed to trim the month's losses to only 6 points. Telstra's 10.5 per cent share price plunge over the month, more or less what it lost on the day it announced a hefty cut to its dividend, and CBA's 9.5 per cent fall amid ramping regulatory pressure around its money laundering compliance failures dragged on the bourse. Those losses were offset by strong monthly gains from the major miners BHP, Rio Tinto and Newcrest Mining, while Wesfarmers also buoyed the market.
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ASX winners and losers - a snapshot
The stand out listings traded on the ASX captured at key moments through the day, as indicated by the time stamp in the video.
Morgan Stanley equity strategists branded results season overall "a subdued affair". Aggregate growth in earnings per share for the top 200 "is on track to sink to circa 5 per cent with no meaningful growth pick-up expected in outer years," they said.
It wasn't all gloom, with energy stocks the best performing segment of the sharemarket over the month, adding 5 per cent after a litany of well received earnings results following a tough period for the sector. That outperformance was slightly tarnished on Thursday, as oil and gas stocks were the only corner of the market to slide.
"One of the themes that led into this results season was that was that the retail environment was very shaky and that discounting was a big part of that," Pengana Capital fund manager Ed Prendergast said. "That's been borne out definitely," Mr Prendergast said, although "there were odd retailers like Adairs that did well in that environment anyway".
"Also, there was the sense overall that the housing construction cycle is probably at the peak right now, and that was borne out by quite a few companies in their results commentary. It was a little bit state-specific obviously; West Australian companies are saying the complete opposite because their cycle has gone the other way."
The contrasting fortunes of the sector were on display on Thursday, as accessories and clothing retailer Oroton Group surged 8.2 per cent after providing an upbeat assessment of trading over the past two months and confirmed that underlying earnings would come in at the top end of its guidance for its July 31 financial year.
In contrast, Harvey Norman plunged 7.5 per cent after revealing annual earnings that disappointed investors.
Citi analysts maintained their sell rating on the stock "ahead of a moderating housing cycle and the upcoming entry of Amazon".
The Aussie dollar slipped below US79¢ on Thursday despite data which showed business spending on new equipment plant and machinery rose for a second straight quarter, with a bigger-than-anticipated upgrade in future spending plans. The currency, which had threatened to break above US80¢ this week, might have ignored this "impressive" lift in capex plans, but "the RBA won't," TD Securities currency strategist Annette Beacher said, pointing to the upbeat message the data sent about the trajectory of the local economy.
Stock of the day
Orocobre
Orocobre shares were on a tear on Thursday, finishing the session 14.2 per cent higher at $3.86 after the lithium producer swung to a net profit and guided for higher production this financial year. Orocobre posted a net profit of $19.4m in the year to June 30, from a $22m net loss in the comparable period. It produced 11,862 tons of lithium carbonate at its Olaroz plant in Argentina and is forecasting output of 14,000 tons in FY18.Citi analysts said that, although the result was below their expectations "the key positive was signs of a recovery in pond inventory, which is required to underpin ramping up production towards capacity."
Movers
Housing credit
Private sector credit figures from the Reserve Bank of Australia out today showed that total credit rose 0.5 per cent month on month in July for an annual increase of 5.3 per cent, compared to a month-on-month 0.6 per cent increase and annual increase of 5.4 per cent in June. Housing credit rose 0.5 per cent month on month and 6.6 per cent on an annual basis. Overall credit growth met market expectations, NAB economists said. "The pattern of growth was in keeping with recent trends of still moderate growth in housing credit, while business credit continues to record somewhat better growth," they added.
Gasoline
US gasoline futures prices hit $2 a gallon for the first time since July 2015 on Thursday after flooding from tropical storm Harvey knocked out almost a quarter of US refineries. Harvey has battered the US Gulf coast since last Friday. At least 4.4 million barrels per day of refining capacity is estimated to be offline, or almost a quarter of total US capacity. Goldman Sachs said it could take several months for all production to be brought back online. "The precedent of Rita-Katrina would suggests that 10 per cent of the ... currently offline capacity could remain unavailable for several months," the bank said.
Euro
The common currency stalled at $US1.1879 on Thursday after dropping 0.7 per cent on Wednesday amid speculation the European Central Bank could step in to weaken the euro, which valued over two and-a-half year highs earlier this week. Analysts said traders are starting to speculate that ECB President Mario Draghi could be growing more concerned about the euro's rise. The euro is up more than 13 per cent against the dollar this year and broke past the critical $1.20 level on Tuesday. The ECB Is set to hold a policy meeting next week.
China PMIs
China's official Purchasing Managers' Index stood at 51.7 in August, up from the previous month's 51.4 reading. Growth in China's services sector slowed in August, hitting the lowest level since May 2016,. The official non-manufacturing PMI fell to 53.4, from 54.5 in July. The PMI readings suggest that industrial output defied a slowdown in the broader economy last month," Capital Economics' Julian Evans-Pritchard said. "We suspect that this is because higher prices are encouraging more rapid production of industrial metals."