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Wall Street reversed Monday’s rally to trade lower on Tuesday after credit rating agency Moody’s downgraded the credit rating on several banks including M&T Bank and Pinnacle Financial citing deposit risk as the reason for the downgrades. Moody’s also placed Bank of NY Mellon and State Street on review for a downgrade. This caused investor fears of a further banking crisis to resurface thus sparking the sell-off on Tuesday. The Dow Jones fell 0.45% on Tuesday, while the S&P500 lost 0.42% and the tech-heavy Nasdaq declined 0.79%.
And in the European region markets closed lower on Tuesday as investors await the release of significant inflation data out later this week alongside reactions to a shock banking tax announcement out of Italy in the form of a 40% windfall tax on banking profits which dragged down the banking sector on Tuesday. Banks led the losses in the region overnight while healthcare stocks bucked the trend to add 3.2%. The STOXX600 ended down 0.2% on Tuesday, Germany’s DAX fell 1.1%, the French CAC shed 0.69% and, in the UK, the FTSE100 fell 0.36%.
The local market rose just 0.03% on Tuesday as a selloff in consumer staples stocks was offset by strong gains in the healthcare sector, a sector which has been sharply beaten down this year.
We are preparing for the ramp up of earnings season this week which investors have already been particularly responsive to with companies that have reported, both good and bad results, experiencing double digit share price movement on the day of results being released. The US reporting season has proven to be stronger than expected, so we could see a similar outcome of results here in Australia.
James Hardie Industries released first quarter results yesterday that sent the company’s share price soaring 15%. The leading global supplier of fiber cement building products reported record global adjusted EBITDA of US$279.1m, with an adjusted EBITDA margin of 29.2%, net income up 13% and operating cash flow increased 64%.
JHX also provided outlook, which is a big tick for investors, but only for the second quarter of FY24, with the company expecting adjusted net income between US$170-$190m, North American, its biggest market, is expected to produce volumes to be in the range of 740-770 million and CAPEX of US$550m. While the results were a decline on the PCP, they can be attributed to the currently weaker housing market and lowered demand driving lower margins.
Westpac consumer confidence data for August fell 0.4% month-over-month to 81 points in August from a 2.7% gain in July as consumers remain concerned about the high cost of living crisis in Australia. NAB business confidence for July came in vastly different from the consumer reading though, with business confidence rising 2 points for July from a flat reading in June indicating business sentiment is on the rise.
On the reporting season calendar today, we may see some market movements as investors respond to the release of the Commonwealth Bank’s results this afternoon.
What to watch today: