ASX closes higher; Block soars; Coles slumps

The Australian sharemarket closed higher on Friday, setting it up for its third monthly gain, following a volatile earnings reporting season in which investors marked down supermarket giant Coles’ after it undershot expectations.

Softer than expected sales growth in the face of a resurgence from arch-rival Woolworths left Coles’ shares 7.4 per cent lower. The retailer’s slide was offset by a sharp jump in Jack Dorsey’s payments giant Block, which gained 28 per cent after it said it will slash more than 4000 jobs, or nearly half its workforce.

The S&P/ASX 200 ended trade up 23.3 points or 0.3 per cent at 9198.6, marking the bourse’s third consecutive monthly gain. Seven of its 11 industry sectors traded higher, led by utilities rallying 1.4 per cent.

The cuts from Block will reduce its global workforce from more than 10,000 employees to just under 6000, making it one of the largest AI-driven job culls to date. Block, which acquired Melbourne-founded buy now, pay later platform Afterpay for about $39 billion in 2022, has a significant presence in Australia, though the precise number of local employees affected remains unclear.

Coles’ group sales rose 2.5 per cent to $23.6 billion for the half-year period. Net profits declined 11.3 per cent to $511 million after the retailer set aside $165 million to cover penalties incurred for an underpayment scandal that had embroiled both Coles and Woolworths. Its supermarket sales grew 6 per cent, but liquor sales were weaker.

Furniture and electronics retailer Harvey Norman plunged 9 per cent after weaker sales in Australia overshadowed a better oversees performance. It also narrowly missed expectations on its 14.5¢ per share interim dividend. Sales revenues were up 6.9 per cent to $5.16 billion and profits after tax lifted 15.2 per cent for the first half. Franchise-operated store margins also grew, it said.

Airline Virgin Australia posted a jump in half-year earnings on the back of strong revenue growth and demand in the leisure sector. Pre-tax earnings climbed 11.7 per cent to $490 million, but the news failed to lift its shares, which closed flat.

The banking sector held relatively steady apart from market behemoth Commonwealth Bank, which closed 1.5 per cent lower after a report in The Australian Financial Review that it has alerted police and the corporate regulator about suspected fraudulent loans. Both Westpac and NAB closed down marginally, while ANZ gained slightly.

The majority of mining stocks made gains. Fortescue rose 1.4 per cent and BHP climbed 1.1 per cent. Gold miner Northern Star jumped 2.2 per cent and Evolution Mining rose 1.1 per cent, while rare earths miner Iluka Resources shot up 9 per cent. Rio Tinto was the outlier, down 0.8 per cent.

Energy stocks stayed steady as oil prices see-sawed following US and Iranian talks about its nuclear program. Woodside rose 1.3 per cent, Yancoal added 3.9 per cent, Ampol climbed 1.5 per cent, and Santos was stable.

The Australian dollar traded around US71.27¢ over the afternoon.

On Wall Street, the worst day for Nvidia’s stock since last spring, dragged the US market lower on Thursday, even as most stocks rose.

The S&P 500 slipped 0.5 per cent following sharp swings earlier in the week driven by hopes and worries created by the artificial-intelligence revolution. The Dow Jones added 17 points, or less than 0.1 per cent, and the Nasdaq composite sank 1.2 per cent.

Nvidia, whose chips are helping to power the AI boom, reported another stellar quarter of profit growth that breezed past analysts’ expectations. It also gave a forecast for revenue in the current quarter that once again topped Wall Street’s estimates.

But such blowout performances have become so typical for Nvidia that they’re losing their oomph. Its stock sank 5.5 per cent for its worst loss since April.

“Our customers are racing to invest in AI compute – the factories powering the AI industrial revolution and their future growth,” Nvidia CEO Jensen Huang said.

Because Nvidia’s is the largest stock in the US market by value, it has more influence on the S&P 500 than any other. It alone accounted for more than four-fifths of the S&P 500’s loss.

Despite Nvidia’s troubles, seven stocks rose in the S&P 500 for every three that fell. Among them was Salesforce, which climbed 4 per cent after it likewise reported a stronger profit for the latest quarter than analysts expected.

Overnight, World Economic Forum chief executive officer Børge Brende announced he was stepping down from his position after it emerged he had ties with convicted paedophile Jeffrey Epstein.

A recent batch of documents in the Epstein files showed Brende arranging to meet the financier at the latter’s home for dinner in New York in 2018 and 2019. The second of those meetings was planned just weeks before Epstein’s arrest in the US on sex-trafficking charges. He died in jail in August that year.

The WEF said earlier this month that it opened a probe into Brende and his relations with Epstein. The former Norwegian foreign minister said at the time that he was “completely unaware of Epstein’s past and criminal activities,” though he admitted he should have been more thorough.

AP, Bloomberg

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