Good Evening,

Welcome to Equity Espresso. We’re here to catch you up on the day’s important stock market news in Australia and abroad. Here’s a sample of today’s top stories:

1. 🥛 Kiwi Milk Spat

2. 🚗 Bapcors Profit Battle

3. 🪨 Rio Tinto’s China Boost

4. 🛍️ Consumer Confidence Falls

5. 📈 Place Your RBA Bets For Cup Day

The Recap

Markets Cautious as RBA Flags
Rate Hike Alert

The ASX200 index rebounded on Tuesday after yesterday’s fall, although it gave back some early gains to finish the day 29.6 points higher to close at 7,056.1.

The afternoon drag came after the RBA released the minutes from its October meeting. The minutes showed that members discussed the possibility of raising the cash rate by 25 basis points, as inflation remains well above target. Services inflation remains sticky, with higher fuel prices also adding to headline inflation. The minutes stated: “Members noted that some further tightening of policy may be required should inflation prove more persistent than expected.” The hawkish sentiment will leave some economists believing there is a strong chance of a rate hike in November’s cup-day meeting. CPI for Q3 is expected to be reported next Wednesday, which could prove pivotal in the RBA's direction.

After Monday's sharp fall, Tech (+1.33%) was the best-performing sector today as WiseTech (+1.0%), NextDC (+0.5%) and Xero (+2.3%) all reversed yesterday’s losses. Materials (+0.7%) also increased as the price of Iron Ore futures flirted closer to US$120.00. WTI crude futures held above $86 per barrel, underpinned by ongoing supply risks as the Israel-Hamas conflict threatens political stability in the Middle East.

The Healthcare (-1.21%) sector was again in the red, as CSL (-1.1%) continues to fall despite six broker rating updates today, all of which had a >$300 price target and a buy rating.

Bapcor sunk 11.7% after the company told investors that pro-forma NPAT was behind expectations at the end of September.

Outlook

New governor Michelle Bullock will speak tomorrow, while Job data will be released on Thursday, with unemployment expected to remain steady at 3.7%.

Companies to report quarterly earnings tonight include Johnson & Johnson, Bank of America, Lockheed Martin Corp and Goldman Sachs.

The S&P 500 (-0.14%) and NASDAQ (-0.15%) futures are currently trading slightly lower this afternoon.

Economic Data

• The ANZ-Roy Morgan Consumer Confidence dropped 3.7 points to 76.4 this week. Consumer Confidence is now 5.8 points below the same week a year ago and is below the 2023 weekly average of 78.1.

• New Zealand’s annual inflation rate eased to 5.6% in the September quarter of 2023 from 6% in Q2, its lowest point since the third quarter of 2021. ⬇️ 

  

Wall Street

A positive start to the week in the U.S. as the S&P 500 (+1.06%) rose sharply, as did the NASDAQ (+1.20%) as quarterly earnings season kick-offs. The Consumer Discretionary sector led gains, as all sectors finished higher.

Brokerage firm Charles Schwab stock rose more than 5% after posting better-than-expected earnings of 77 cents per share - above estimates of 74 cents.

Lululemon Athletica stock rose by over 10% as the Canadian sportswear apparel maker is set to join the S&P 500 on Wednesday, replacing Activision Blizzard following the completion of its takeover by Microsoft.

Albemarle dropped 2.7% after withdrawing its offer to acquire Liontown Resources.

Sponsor

Learn About A.I. in
5 Minutes a Day

Sign up to the AI Tool Report, and you’ll save time and earn more.

Join 350,000+ free daily readers for trending tools, powerful prompts, and the latest news. Read by execs from Microsoft, Tesla, Meta, and more.

Subscribe to get The Ultimate ChatGPT Cheat Sheet instantly ⬇️ 

Sponsorship Opportunities

Do you want to advertise your business here?
Reach out to us at [email protected] 

Quick Singles

🪃 Local News

• The Australian Financial Review reported today that a former Big Four accounting firm partner allegedly promoted a tax exploitation scheme by shifting income to loss-making third parties - who also took payments for their part in the scheme.

• The heads of the U.S. and Australian intelligence agencies have issued a joint warning about the increased risk of violence in their respective countries due to the ongoing conflict in the Middle East. During a press conference with FBI Director Christopher Wray, ASIO’s Director-General of Security Mike Burgess stated that his agency anticipates "spontaneous violence". He urged all Australians, including politicians, to play their part in minimising tensions.

🌏 Around The Globe

• An industry group representing General Motors, Toyota Motors, and Volkswagen has criticised the Biden administration's proposal to increase fuel efficiency requirements. The group argues that the plan would result in an average vehicle price hike of $3,000 because of penalties that automakers would face for failing to comply.

• California is considering blocking Kroger's acquisition of Albertsons due to concerns about the negative impact on consumers and workers.

• The Qatari group led by Sheikh Jassim Bin Hamad J.J. Al Thani has withdrawn a £5 billion bid to buy Manchester United after failing to agree a deal with the Glazer family.

• The U.S. is set to lift oil-related sanctions against Venezuela in exchange for democratic concessions.

• South Korea is reportedly cautioning its companies against involvement in the construction of Taiwanese submarines to avoid Chinese economic retaliation. Taiwan recently unveiled its first domestically produced submarine amid rising military tensions with China.

• Starting in early 2024, Best Buy will no longer carry physical media such as DVDs and Blu-rays, citing the need to make space for new and innovative technology.

• Unionised healthcare workers agreed to a tentative deal with Kaiser Permanente, including a 21% wage increase over four years to retain staff.

Enjoying The Recap?

Forward this email to a friend, family member, or work colleague who would benefit from getting caught up on the day’s news.

They can sign up with the link below. ⬇️ 

Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

A2 Milk (A2M) & Synlait (SM1) are heading to arbitration after A2 Milk cancelled Synlait’s exclusive manufacturing and supply rights to produce its infant formula. Synlait disputes that A2M has the right to cancel the exclusivity arrangements.

Bapcor (BAP) shares fell after it told investors at its AGM today that pro-forma NPAT at the end of September is behind the company’s expectations, to the tune of “mid-single-digit millions of dollars”.

Cochlear (COH) fell after clarifying that its full-year profit guidance didn’t include the planned acquisition of Oticon Medical’s cochlear implant business.

GUD Holdings (GUD) will acquire Swedish company Rindab AB, a distributor of lighting products and other vehicle accessories, in a deal worth approximately $12 million.

Newcrest (NCM) delivered reduced gold production of 454/oz and copper production of 31/kt following routine planned maintenance activities across their operations.

Star Entertainment Group (SGR) finalised its retail capital raising of $184 million at $0.60 per share today, with a takeup rate of approximately 39%.

Telstra (TLS) had their AGM today, providing FY24 Underlying EBITDA guidance of mid-single digits while stating CAPEX guidance of $3.6bn - $3.7bn.

United Malt Group (UMG) confirmed that its takeover by Malteries Soufflet has gone into effect, and trading of UMG shares will be suspended at the close of trading today.

Volpara Health (VHT) reported its fourth consecutive month of positive net operating cash flow at NZ$1.2m. Cash receipts during the period were up 32%

Post of The Day

Economists sentiment is shifting on whether the U.S. will have a recession.

Sign up to Chartr's free newsletter here for more charts like this.

Deep Dive

The China Stimulus Effect

Rio Tinto rose 1.4% today after the iron ore miner reported better-than-expected quarterly shipments on steady demand from China as it ramped up production at its Gudai-Darri mine in Pilbara.

Rio Tinto's key Pilbara operations saw a 1% increase in shipments, reaching 83.9 million tonnes in the three months ending September 30. The growth was due to a steady demand from China and increased production at the Gudai-Darri mine, the company’s most advanced mine in terms of technology, which began operations in early 2022.

The mining company reported higher prices for its iron ore deliveries, thanks to the increased demand for the steel-making material after recent stimulus measures in China. Rio confirmed that it expects to ship iron ore within the 320 million to 335 million range it had previously announced for the full year.

Copper shipments also rose 5% in the third quarter to 169,000 tonnes, aided by the improvement in Chinese demand and increased production in its Oyu Tolgoi mine in Mongolia and Chile’s Escondida mine.

China is the world’s largest importer of iron ore and Rio Tinto’s biggest market. A decline in economic activity in the Asian giant has weighed on Rio’s margins over the past year, with the miner warning that sustained weakness in the country could spur further weakness in its margins over the coming months.

The Chinese government rolled out a string of monetary stimulus measures this year to support its sluggish economic growth. Third-quarter GDP data from the country is due later this week, which will shed more light on the effects of the measures.

Newsletter Reccomendation

One-click subscribe

Analyst Report

Rent.com.au Ltd

Code: RNT | | Market Cap: $10.3m | Current Price: $0.02 | Price Target: $0.17
Sector: Communication Services | Analyst: Research as a Service

Rent.com.au Limited operates a property website focusing on Australia's rental property market. The company generates revenue from advertising and rental products. The latter is derived from RentCheck, which verifies a renter’s identity and checks their record against the National Tenancy Database. The company’s RentPay app platform allows renters flexibility in making rent payments while giving agents and landlords surety of payments on time.

The company has more than 7,250 paying customers who transact almost $3 million a week in rent through the platform. This is up from 6,066 customers as of the end of Q4.

The analyst’s base case DCF valuation is $0.17 a share; this is on the expectation that RentPay will secure 5% of renters on its platform by FY25 and 20% by FY30.

You can access the full report here.

Daily Quiz

Test Your Knowledge

Yesterday’s Daily Quiz Question. The concept of "The Law of Diminishing Marginal Returns" in economics was discovered by whom?

Answer: David Ricardo - an 18th-century English economist renowned for his contributions to economic theory. The law of diminishing marginal returns is a theory in economics that predicts that after some optimal level of capacity is reached, adding an additional factor of production will result in smaller increases in output.

That question was a tricky one, with only 13% of you getting that correct.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 11

📊 Broker Ratings

What do the brokers have to say?'

1. Red 5 (RED) - Downgrade to Hold from Add (Morgans)

2. Zip Co (Zip) - Upgrade to Neutral from Sell (UBS)

You can read the commentary for both stocks here

Read what brokers had to say after CSLs Capital Markets day yesterday

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

💲Dividends

Companies trading ex-dividend today

1. Horizon (HZN)

2. WAM Capital (WAM)

3. Wam Leaders (WLE)

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.