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07 May

ASX slips as profit season peaks, eyes turn to Federal Reserve

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The ASX 200 ended the week down just 0.2 per cent. Photo: Brendon ThorneProfit season moved up a gear in its last big week as did the wild swings of the share prices of many reporting companies, however, the sharemarket ended the week stagnant in anticipation of a speech from US Federal Reserve chair Janet Yellen.

The S&P/ASX 200 traded within the range of 5510 to 5570 points all week, but on Friday fell 0.5 per cent, or 26 points, to 5515.5, while the All Ordinaries ended 0.4 per cent, or 24 points, lower at 5607.4. The benchmark index closed just 0.2 per cent lower for the week.

Woolworths was among the blue chips reporting this week that turned heads, posting a $1.2 billion loss, however its shares pushed higher as investors bet that the worst of the pain is over for the retailer’s restructuring. Its shares did however hand back some of its strong gains on Friday. Wesfarmers also lifted despite its profit plunge, and the consumer staples index ended 2.6 per cent higher, the week’s best performing sector.

Qantas shares soared after the airline broke its seven-year dividend drought, declaring a 7¢ fully franked dividend while posting a record pre-tax profit of $1.5 billion and announcing a $500 million buyback, but the stock failed to hang on to its gains to end the week.

Fortescue Metals Group also shined, delivering a much higher than expected 12¢ a share dividend after lifting its net profit by 212 per cent.

Market darling Blackmores, however, suffered a 20 per cent intraday fall after the company more than doubled its profit to $100 million but warned its first quarter results would be lower than the previous year.

On Friday, the reporting companies included Coca-Cola Amatil, Corporate Travel Management, Mayne Pharma, Saracen Mineral, Select Harvests, Star Entertainment and Super Retail Group, which was among the day’s best performing stocks, up 6 per cent. Select Harvests was among the laggers, falling 6.7 per cent on its update.

“Across the market as a whole, company earnings for the financial year 30 June 2016, are down on the previous year by around 8 percent, but this reflects the major impact of resource companies where average earnings fell 48 percent,” Australian Unity Investments chief executive David Bryant said.

“Excluding this, company profits have grown around 5 percent this financial year. Overall it has been a fairly stable reporting season, without too much unexpected bad news.” Market moversJackson Hole

Global markets were fixated on news from the US Federal Reserve’s annual meeting at Jackson Hole in Wyoming this week. While chatter has given little indication that Fed members will provide any clues to the timing around further interest rate rises in the world’s biggest economy, local investors have the weekend to digest a speech from Fed chair Janet Yellen due on Friday night. Currencies

The Australian dollar joined global risk assets in sideways trade as investors patiently awaited news from Jackson Hole. Central bank monetary policy remains the main game and the US dollar has remained stagnant in anticipation. However expectations are low that Yellen’s commentary on timing will be explicit and analysts expect any short term spike in the US dollar to be shortlived. The Australian dollar firmed above US76¢ on Friday, buying US76.40¢ in late local trade. Commodities

While oil prices had a volatile week amid speculation ahead of an OPEC meeting in September, iron ore continued its stability, on track for its fourth weekly gain out of five. The benchmark iron ore price slipped 0.4 per cent overnight to $US61.44, a more than three month high, and analysts from ANZ expect its strength to continue into September with steel producers rebuilding their stockpiles ahead of China’s G20 summit. Japan

Core inflation data from Japan on Friday cast further doubt over the success of prime minister Shinzo Abe’s ‘Abenomics’ policy while raising expectations of further easing. Data revealed consumer prices dropped 0.5 per cent from a year earlier, below the expected 0.4 per cent fall, capping off five straight months of contraction. Despite its expansive stimulus program, the data shows businesses and consumers are stuck in a deflationary mindset. Stock watch: Ardent Leisure

Investors cheered Ardent Leisure’s full-year result on Wednesday after it reported a 32 per cent increase in net profit to $42.4 million. Bell Potter analyst John O’Shea said the results reflected the company’s crystal clear strategy: it is all about entertainment, a comment echoed by chief executive Deborah Thomas. Ardent’s share price has risen 36 per cent this month as it strips off its gym and marinas businesses to focus on its bowling, entertainment centres and theme parks. “In our view this change increases the likelihood the company will be re-rated over time,” Mr O’Shea said, retaining a ‘buy’ rating on the stock and lifting the price target from $2.57 to $3.13.

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