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Highlights:
- Out of the eleven significant sectors under the S&P/ASX 200 index, nine closed lower on Wednesday. The fall was led by Consumer staples and Consumer discretionary sector.
- Yesterday, RBI announced to raise interest rates by another 50 basis points.
- The cash rate has risen to 1.85 points from 1.35 points now.
- Consumer sector is likely to get impacted due to inflation and rising interest rates.
Consumer stocks are usually considered safer for investing purpose than any other industry’s stocks. It is so because earnings of the companies pertaining to consumer sector are most likely to remain stable.
At present, the major concern in Australia is the rising inflation rate along with the lifting up of interest rates by the Reserve Bank of Australia (RBA). The prices of commodities are also increasing at a rapid pace, while there is no improvement in the wages of Aussies.
Investors usually believe that consumer stocks would deliver strong earnings even in difficult times. In the previous quarter, a series of consumer stocks reported strong earnings despite facing challenges like- COVID-19 lockdowns, employee shortage, floods, supply chain disruption, etc. Even in this quarter, investors are expecting these stocks to deliver strong earnings despite inflation and interest rate hike challenges.
RBA's latest update on interest rate hike:
In RBA's monthly meeting yesterday (2 August), the organisation further increased interest rates by 50 basis points in order to cool down the heat of rising inflation in Australia. Furthermore, the Central Bank is expecting inflation to surge by 7.75% by the end of 2022.
Driven by the hike in interest rate, the cash rate has touched 1.85 points from 1.35 points now, making some expert predictions true.
Today majority of the S&P/ASX 200 index sectors ended in red.
The S&P/ASX 200 Consumer Staples sector (INDEXASX:XSJ) closed at 13,610.8 points, down 126.7 points or 0.922%. The S&P/ASX 200 Consumer Discretionary sector (INDEXASX:XDJ) ended 1.226% lower at 2900.7 points.
Wesfarmers Limited (ASX:WES)
Diversified consumer service provider Wesfarmers Limited (ASX:WES) shares closed 1.093% lower at AU$46.050 per share on the ASX today (3 August).
Over a period of one year, Wesfarmers' share price has declined by almost 25% on the ASX. Meanwhile, Wesfarmers' YTD-based share price also fell over 21% (as of 4:10 PM AEST on the ASX today).
The Australian retailer is expected to release its audited FY22 financial results on 26 August 2022. In a previous announcement, Wesfarmers had shared that its inventory levels in H1FY22 were very high due to COVID-19 lockdowns, high commodity prices, and supply chain disruptions. In H2FY22, too, the inventory levels are expected to remain high, driven by the rising inflation rate in Australia. The level of inventory is expected to have a significant impact on the company's business.
Image source: © gopixa | Megapixl.com
Coles Group Limited (ASX:COL)
Australian supermarket Coles Group Limited (ASX:COL) shares ended at AU$18.970 per share, down 1.2%.
In last 12 months, Coles' share price has gained by 5.45% on the ASX. On the other hand, Coles' YTD-based share price gained almost by 6% (as of 4:10 PM AEST on the ASX today).
Coles is likely to announce its audited FY22 financial results on 24 August 2022. Earlier, the company reported that its business was highly impacted by the floods in Queensland and New South Wales. Furthermore, the company also had to go through employee shortages during the March 2022 quarter due to the rising cases of COVID-19.
Woolworths Group Limited (ASX:WOW)
Food staples retailer Woolworths Group Limited (ASX:WOW) shares closed 1.23% lower at AU$38.100 per share on the ASX today.
In the last 12 months, Woolworths' share price fell more than 3% on the ASX. Furthermore, Woolworths' YTD-based share price declined by 0.96%.
In an announcement made yesterday, MyDeal.com.AU Limited shared some updates regarding the proposed acquisition of 80.2% shares of the company by Woolworths. Followed by the court hearing regarding the acquisition, the court advised MyDeal to host a shareholder meeting to seek their approval in favour of the acquisition. Along with that, the supreme court also approved the distribution of an explanatory statement that contains every detail of the proposed acquisition.
Image source: © Flynt | Megapixl.com
Tabcorp Holdings Limited (ASX:TAH)
Australian consumer service provider Tabcorp Holdings Limited (ASX:TAH) shares ended at AU$0.990 per share after marking a loss of 1.980% on the ASX today.
Over a period of one year, Tabcorp's share price has marked a gain of 5.32% on the ASX. On year-to-date basis, the stock has lost 1%.
Holding a market capitalisation of AU$2.24 billion, Tabcorp is a leading operator of gambling and other entertainment services in Australia. Tabcorp's business is mainly divided into two major segments- wagering and media business and gaming services.
