CPI surprise buoys ASX; Healius rallies, EML Payments plunges

Charlie Munger stumbled on a good deal this year. He secured a mortgage over an investment property at an incredibly low rate, locking it in for 30 years. It was no issue that he’d be 129 when the loan expired, he explained, saying “if it’s a good deal, it’s a good deal”.

That was one of many things Mark Nelson, the hedge fund manager who founded Sydney’s Caledonia Investments, remembered on Wednesday when news of Munger’s death, at 99, reached him. Nelson had been in remote Queensland – without mobile coverage – and found his phone flooded with messages informing him on his return that his friend had died.

“It’s the end of the area. It won’t be the same,” he said. Nelson had known Munger since 1995, when he was introduced to the Berkshire Hathaway co-chairman by billionaire businessman Otis Booth.

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ASX-listed toll roads giant Transurban was missing in action at the auction for a 55.45 per cent stake in Melbourne’s EastLink toll road.

Street Talk understands EastLink’s suitors submitted their first-round bids to sell-side adviser RBC Capital Markets on Monday evening. Sources said Transurban, which was stung by a speeding ticket by the ACCC in late September, did not lob a proposal.

However, it’s too soon to discount Transurban from the bidder field for the $300 million-a-year toll road. It still has a big advisory lineup on the tools, and is understood to be still weighing whether the auction is worth picking a fight with the competition regulator.

Bidder sources said EastLink’s second round was not expected to kick off until next year, and the vendors would use the Christmas break to think through the proposals tabled on Monday. Suitors had the option of bidding for the entire 55.45 per cent stake or for a smaller slice of the toll road.

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Gold extended gains after surging 1.3 per cent to the highest level since May on Tuesday, as comments from US Federal Reserve officials bolstered bets it will start cutting interest rates next year.

Spot gold rose 0.4 per cent to $US2048.29 an ounce at 9.19am in Singapore, after jumping the most in about six weeks on Tuesday. The Bloomberg Dollar Spot Index dipped following its 0.4 per cent decline in the previous session. Silver, platinum and palladium all gained.

The dollar weakened and Treasuries added to their November rally after governor Christopher Waller, one of the most hawkish Fed officials, said policy was well positioned to return inflation to the central bank’s 2 per cent goal, suggesting rates may not need to rise again. Lower borrowing costs are typically negative for non-yielding bullion.

Bullion has rallied more than 12 per cent since early October, initially fuelled by haven buying in the wake of the Israel-Hamas conflict. This week, investors will be closely watching US economic data, including the Fed’s preferred measure of underlying inflation, for further clues on the direction of interest rates.

Meanwhile, traders are increasingly positioning for a hard economic landing and aggressive policy easing next year, with speculators in the US Treasury market now the most bullish on record, according to a weekly survey conducted by JPMorgan.

Harvey Norman says trade has picked up in recent weeks – probably boosted by Black Friday discounting – even as the electronics and homewares giant recorded a 7.8 per cent fall in sales over the past five months.

The update on Wednesday morning marks a slight improvement from four weeks ago when the retailer warned that pre-tax profits halved in the September quarter and sales tumbled by 9.1 per cent

Harvey Norman, led by executive chairman Gerry Harvey and his wife, chief executive Katie Page, will hold its annual meeting on Wednesday.

Harvey Norman reported sales at company-owned stores in Australia and overseas, and franchised Harvey Norman, Domayne and Joyce Mayne sites, fell 8.7 per cent on a same-store basis so far this financial year to November 25. This compares with a 10 per cent fall in the first quarter. The sales were boosted by exchange rate movements since July 1, the company said.

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Oil advanced for a second day as traders counted down to a high-stakes OPEC+ meeting on supply, and weighed signs that the US Federal Reserve is done raising interest rates.

Global benchmark Brent rose to near $US82 a barrel after rallying by more than 2 per cent on Tuesday, with West Texas Intermediate below $US77. The producer group is due to meet online on Thursday to set policy for 2024, but has yet to resolve a dispute over output quotas for some African members, according to delegates.

Crude’s gain on Tuesday was supported by a declining dollar, with a Bloomberg gauge of the US currency sinking to the lowest level since August. Comments from Federal Reserve policymakers including governor Christopher Waller suggested the central bank is set to halt its run of rate increases. A weaker greenback makes commodities more attractive for overseas buyers.

“The US dollar was dragged lower on a build-up in dovish expectations, which was very much cheered on by oil prices,” said Yeap Jun Rong, market strategist for IG Asia in Singapore. Meanwhile, “all eyes will be on whether the bloc will be able to do more to support prices”.

Oil remains on track for a back-to-back monthly decline on increased supply from countries outside the Organisation of Petroleum Exporting Countries, boosting pressure on the cartel and its allies to impose deeper output cuts. The International Energy Agency said earlier this month that the global crude market was on course to flip back into a surplus next year.

Temple & Webster shares have jumped more than 15 per cent, after the homewares retailer spruiked strong sales figures at its annual meeting, held on Wednesday.

CEO Mark Coulter told investors that sales from July 1 to November 27 were up 23 per cent year-on-year. He also said there had been an acceleration of growth in the second quarter, with revenue up 42 per cent year-on-year.

“As we return to our growth strategy as a category disrupter, FY24 and FY25 will be focused on accelerating our growth and market share gains,” he added.

The company has reaffirmed its FY24 earnings guidance.

Shares are 15.02 per cent higher at $7.43 at 1pm.

Falling clothes prices and an easing in supermarket cost pressures delivered an unexpectedly sharp fall in inflation last month.

Annual inflation fell to 4.9 per cent in October from 5.6 per cent in September, as price pressures for consumer goods moderate because of falling demand, the Australian Bureau of Statistics said on Wednesday.

The monthly consumer price indicator was lower than economists’ expectations of a 5.2 per cent outcome and cements the market’s view that the RBA board will almost certainly keep the cash rate on hold at 4.35 per cent at its final meeting of the year on December 5.

With markets pricing just an 11 per cent chance of a rate rise next week, Reserve Bank governor Michele Bullock said on Tuesday the RBA was in a period where it had to be “a little bit careful” with further tightening.

“We want to make sure that we keep inflation under control, and we bring it back down to our band, but we also need to make sure we do that in the context of not imposing on the economy too much and raising the unemployment rate so much,” she told a high-powered gathering of central bankers in Hong Kong.

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In a widely expected move, the Reserve Bank of New Zealand has kept the official cash rate at 5.5 per cent at its November meeting.

The central bank said it was confident that the current level was restricting demand.

“However, ongoing excess demand and inflationary pressures are of concern, given the elevated level of core inflation. If inflationary pressures were to be stronger than anticipated, the OCR would likely need to increase further,” the bank added after the decision.

Ahead of the decision, analysts at Westpac said the recent data would have left the RBNZ more comfortable with an “on hold” stance.

“Notably, price data indicates that imported inflation is easing faster than previously anticipated.”

Australian shares are pushing as interest rate sensitive stocks jump following positive signs the Reserve Bank of Australia’s battle to tame inflation is making ground.

Near 2pm, the S&P/ASX 200 is 28.7 points, or 0.4 per cent, higher at 7043.9. The All Ordinaries is also 0.5 per cent higher.

Australia’s Consumer Price Index growth cooled to 4.9 per cent in annual terms in October from 5.6 per cent in September, according to data released by the Australian Bureau of Statistics earlier today.

The consensus among analysts was for a 5.2 per cent rise. Following the result, real estate, tech and consumer discretionary stocks have all rallied more than 1 per cent.

Interest rate-sensitive stocks have rallied following the figures. Real estate and tech stocks are both up more than 1 per cent.

Meanwhile, the Australian dollar has held its 0.6 per cent overnight gain near US66.5¢. The local currency rose overnight on bets the gap between US and Australian interest rates will continue to widen.

Shortly after the CPI data was released, the Reserve Bank of New Zealand kept the official cash rate at 5.5 per cent at its November meeting. A hold had been widely expected.

‘A sigh of relief’

Following the headline CPI figures, IG Australia market analyst Tony Sycamore said the RBA could breathe a sigh of relief.

“Yesterdays cooler than expected retail sales and CPI print today should give the ASX200 the shot higher it’s been looking for,” he added.

EY chief economist Cherelle Murphy said the drop in CPI growth was welcome news.

“Markets duly reacted, pricing a slightly reduced chance of another rate hike,” she said.

“It’s clear the 13 rate hikes that have taken the cash rate from 0.1 per cent to 4.35 per cent, are working. What is less clear, is whether inflation is falling fast enough.”

Stocks in focus

Healius is up 8.8 per cent to $1.54. Australian superannuation funds Australian Retirement Trust and Host Super have upped their stakes in the embattled pathology company.

Fisher & Paykel Healthcare reported increasing revenue and profit in its first half of 2024 as the respirator manufacturer re-adjusts to a pre-COVID-19 trading environment. Shares are up 7.5 per cent to $22.12.

Fintech EML Payments has crashed 30.6 per cent to 76¢ after outlining its profit and revenue expectations, amid an activist campaign by Texas-based Alta Fox Capital to refocus the prepaid cards business.

Electronics manufacturer Codan is 0.4 per cent lower at $8.45. It is set to buy US tech company Wave Central in a deal valued at $21.3 million.

Home goods retailer Harvey Norman is 3.1 per cent higher at $3.72. It reported declining sales across its global store network.