What's Affecting Markets Today
China’s Reserve Requirement Ratio Cut: Economic Stimulus
China is set to lower the reserve requirement ratio (RRR) for banks by 0.5 percentage points on February 5, releasing 1 trillion yuan into the market. This action by the People’s Bank of China (PBOC) is part of broader measures to support the economy and address a significant stock market decline. Alongside this, regulators are implementing strategies to bolster the property and stock markets, including easing commercial property loans and enhancing financial integration with Hong Kong. This transparency in policy announcement by PBOC Governor Pan Gongsheng marks a shift from usual practices, reflecting the urgency to stabilize economic conditions and market sentiments.
Domino’s Revokes Guidance Amid Asian Sales Decline
Domino’s Pizza Enterprises has withdrawn its financial year 2024 earnings guidance following a notable decrease in sales across its Asian outlets. The first half of the year saw an 8.9% drop in same store sales in Asia, impacting the overall performance of the business. Contrastingly, the Australia and New Zealand market experienced an 8.2% increase in same store sales during the same period. The company acknowledges the need for further improvements in the second half of the year to boost order volumes and has stated that any previous performance projections for FY24 are no longer applicable.
Mineral Resources: Mines Profitable Despite Lithium Price Drop
Mineral Resources, a lithium and iron ore producer, asserts that its Wodgina, Mt Marion, and Bald Hill mines remain profitable despite the dramatic decrease in spodumene prices, which have fallen about 90% over the past year. The company’s second-quarter report highlights a 30% increase in spodumene production at Mt Marion and a 34% rise in shipments. They maintain their volume and cost guidance for FY24 unchanged, indicating confidence in their operational profitability amidst the current market scenario. Further details are expected to be released soon.
ASX Stocks
ASX 200 - 7519.2 (+0.10%)
Key Highlights:
The Australian sharemarket ended the week on a high, marking its fifth consecutive session of gains on Thursday. The S&P/ASX 200 rose by 0.5% to 7549.4, with similar increases in the All Ordinaries, ahead of the Australia Day long weekend. The market has risen 1.8% since the previous Friday, despite a decline in technology stocks.
Leading the surge were iron ore miners like BHP, Rio Tinto, and Fortescue, each climbing over 1.5%, buoyed by iron ore prices surpassing $US136 per tonne. This rise followed the People’s Bank of China Governor’s announcement of a cut in banks’ reserve requirement ratios, signaling China’s efforts to boost its economy and stock market.
Fortescue reported near-record iron ore shipments in its half-yearly financials, maintaining its FY24 production guidance. Conversely, tech stocks dropped 0.7% after Tesla’s below-expectation results and a predicted slowdown in growth, affecting shares like Afterpay-owner Block and WiseTech Global.
Significant movements were seen in individual stocks. Domino’s Pizza plunged 31.1% after withdrawing its earnings guidance due to declining Asian sales. Sayona Mining fell 9.1% amid a lithium price slump. In contrast, ResMed rose 6.4% after surpassing earnings expectations and maintaining its dividend, while Mineral Resources climbed 7.1%, confirming its FY24 guidance despite falling spodumene prices. Incitec Pivot grew 4.7% after announcing a $500 million shareholder return. Santos gained on rising oil prices, despite increasing its budget for the Barossa gas project. HomeCo Daily Needs REIT fell 4.8% after a downgrade from Barrenjoey analysts.
Leaders
ERA-Energy Resources (+18.18%)
PMT-Patriot Battery Metals Inc (+17.57%)
DVP-Develop Global Ltd (+10.33%)
GRR-Grange Resources Ltd (+8.99%)
WBT-Weebit Nano Ltd (+8.26%)
Laggards
DMP-Domino’s Pizza Enterprises Ltd (-30.51%)
HTA-Hutchison Telec. (Australia) Ltd (-22.58%)
4DX-4DMEDICAL Ltd (-7.69%)
3PL-3P Learning Ltd (-7.56%)
SYA-Sayona Mining Ltd (-6.82%)