ASX lifts higher led by Qantas as JB Hi-Fi plunges
The Australian market has recorded its fourth consecutive session of growth helped on by positive quarterly results.
The S&P/ASX 200 index finished the day at 6050.2 points, a gain of 35 points, or 0.6 per cent, with Qantas leading the market higher.
The national airline is on track to record a record pre-tax profit this year after its third quarter revenue lifted 7.5 per cent.
It has flagged full-year profits between $1.55 billion and $1.60 billion, sending its shares up 8.1 per cent to $6.27. The company also ordered six more Boeing 787 Dreamliners, worth more than $2 billion as it works to replace the last of its 747 fleet.
Aristocrat Leisure shares rose 3.4 per cent to $27.79 on the back of positive broker notes from its investor day on Tuesday. Deutsche Bank predicted earnings forecasts 15 to20 per cent above market for the company.
Fairfax Media advanced with the company's 44.6 per cent stake in Domain giving investors optimism. While Fairfax's overall revenue has dipped 1 per cent so far this year, Domain's revenue grew 13 per cent. Fairfax shares were up 5.9 per cent at $75c.
ARB Corp shares rose on positive quarterly results, recording a profit after tax of $23.4 million, up 0.4 per cent. It also outlined its strategy to establish 7 new stores before mid-2019, helping shares up 6.2 per cent to $22.06.
Wisetech Global recorded its second solid day of growth after it upgradedrevenue growth guidance for the year. The company is predicting revenue growth of up to 43 per cent for the financial year. Its shares were up 4.3 per cent at $11.02.
Nine Entertainment shares rose on the back of a target price raise from Macquarie. The broker said that Australia's free-to-air advertising market "is currently in good shape." Nine shares rose 6.1 per cent to $2.43.
JB Hi-Fi shares fell following poor growth results. Growth at JB Hi-Fi stores slowed for the quarter while The Good Guys' growth fell for the quarter. JB Hi-Fi shares closed at $23.28, down 9 per cent.
Gateway Lifestyle shares fell 9.4 per cent to $1.79. The old-age home operator downgraded its number of predicted settlements for the financial year, while also downgrading its distributable earnings growth from 7 per cent to 2-4 per cent.
InvoCare shares fell after the company cut profit forecasts as funeral sales fell. First quarter gross sales were down 6 per cent year on year, causing the share price to fall 7.2 per cent to $12.14.
Stock watch
Xero
Xero in a position to finally transition from a loss-making start-up to a self-funding business with significant growth opportunities, say UBS who has upgraded the stock to a neutral recommendation and upgraded its price target to $42.50. A potential key to the company's growth is the UK's 'Making Tax Digital' initiative which will require all VAT-registered businesses with turnover above £85k to maintain digital records with the broker predicting up to 800,000 UK SMEs could adopt cloud accounting software before April 2019. UBS said that within five years, the company's shares could be work more than $100, if not more, if new international markets or revenue streams are included. The broker said it was remaining cautious however, with numerous key risks that could result in a downside scenario valuation of $16.
What moved the market
Bank returns
Shareholders have felt the impact of a poor year-to-date for the banks with shareholder returns data showing the majors underperformed against the ASX 200. Westpac's total shareholder returns fell by 8.6 per cent while Commonwealth shareholder returns were down 8.2 per cent. ANZ returns were slightly better, down 6.6 per cent while NAB share returns were down just 2.1 per cent. The Bank of Queensland performed worse than any of the four majors however, as returns fell by 17.9 per cent. In the same time period, the ASX 200 index shareholder returns fell just 0.1 per cent. The major banks have been underperforming against the market for the past 12 months showing that the drop in shareholder returns started well before the royal commission.
Copper
Copper prices have rebounded from four week lows after China's manufacturing sector unexpectedly picked up in April according to the Caixin/Markit Manufacturing Purchasing Managers' index. Copper had hit a four-week low on the back of concerns about consumer demand from China. Benchmark copper on the London Metal Exchange fell 0.9 per cent to $US6,745 on Tuesday, its lowest price since April 4. Analysts were predicting a more subdued second quarter as the Chinese government curbs lending in order to regulate the property market. However this most recent survey appears to show demand remaining high through the next quarter, helping copper prices climb.
Aussie Dollar
The Australian dollar fell to its lowest point since June 2017 as the US dollar continues to strengthen against major currencies. Investors remain confident of further interest rate hikes in the United States with the Federal Reserve expected to raise rates at least two mores times this year. The Aussie slipped below US75¢, hitting a low of US74.77¢ on Wednesday as an interest rate rise locally looks continually less favourable. While the Reserve Bank's decision to keep rates on hold were widely expected, RBA Governor Lowe remained cautious in his statement, signalling that while the next rate change would be up, it still may be some time away.
Strong April
The Australian market came within 3 points of beating its February high on Wednesday as the market looks to have finally recovered losses it experienced through March. While the market is still down for the year, the gap is closing with the ASX 200 index up close to 100 points this week alone. The ASX 200 index fell 4.3 per cent during March as the US threatened sanctions against China, sending the market diving. The index staged a recovery through April however as trade tensions eased. NAB analysts are remaining bullish, predicting that the ASX 200 breaks past this year's high of 6,135 soon, setting a target of 6,150 for the next month and a 6,280 target for the next three months.