Domino’s stock falls on ASX, while local stock market won’t drink ‘Kool Aid’ on inflation

Australian fast food chain Domino’s is losing ground in the local market as the global brand leaves the country that made pizza famous.

The company that owns the Australian franchise rights to Domino’s fell 6% on the ASX on Friday to $69.31.

ASX-listed Domino’s Pizza Enterprises not only manages the brand in Australia and New Zealand, but also in Belgium, France, the Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan. , with a total of more than 3,100 stores.

The fall came after news broke that the global brand was leaving Italy, seven years after opening its first store there.

While the Italian and Australian arms are not connected, some investors seem to have taken fright from the brand’s struggles internationally.

The rise of delivery services – such as Deliveroo, Just Eat and Glovo – has taken away any advantage the US company thought it had in Italy, according to a 2021 report to investors by its Italian franchisee ePizza SpA.

In Australia, the same pressures are also hitting the takeaway sector.

Domino’s Pizza has more than 18,500 stores worldwide in at least 90 countries. Most are franchised, including in Australia.

Energy wins but ASX falls

The energy sector was the main beacon in the Australian equity market today after oil prices rallied above $100 a barrel overnight, the benchmark oil futures contract Brent crude lying just below this mark at 4:50 p.m. AEST.

Woodside Energy Group led the gains on the ASX 200, up 3.7%.

Beach Energy (+3.1%) and Viva Energy (+2.6%) also had good sessions.

Coal miners New Hope (+3.5%) and Whitehaven (+2.5%) also jumped on the energy bandwagon.

However, while rising energy costs are good for producers, they are bad for much of the rest of the economy and may also put pressure on interest rates to keep rising. at a rapid pace.

This saw the ASX 200 and All Ordinaries indexes fall 0.5% to 7,033 and 7,289 points respectively.

Industrials – many of which are exposed to rising energy costs – were the worst performing sector, down 2%.

Consumer discretionary – usually highly exposed to rising interest rates that reduce household spending – fell 1.2%.

The worst performing companies on the ASX 200 were Lake Resources (-13.5%), Novonix (-8.6%), Telix Pharmaceuticals (-7.7%), Arena REIT No 1 (-6.7%) ) and Nanosonics (-6.4 percent).

IAG returns to profit

Earnings reporting season continued in Australia today.

Key results released today include insurer IAG.

He announced that his net profit was up $347 million. This comes after losing more than $400 million in the previous fiscal year.

Its profitability is up despite its overall revenue down $548 million from the previous year to $18.34 billion.

The insurer said its growth “primarily reflected rate increases to offset inflationary pressures in the supply chain and natural perils”.

It said its insurance margins were 7.4% lower than expected after having to pay a significant amount of premiums for natural disasters.

This year has seen huge amounts of claims related to East Coast flooding and storms. IAG itself was hit by over $1 billion.

IAG gained 1.1% to $4.66.

It pays a dividend of 5 cents a share, down from last year’s payout of 13 cents.

Investors don’t buy ‘Kool Aid’ inflation

The ASX fell after Wall Street had mixed results overnight.

In the US, the Dow Jones closed flat, the S&P500 closed down 0.1% and the tech-heavy Nasdaq lost 0.6%.

Wall Street surged the day before as US markets rose after the world’s largest economy released its latest inflation data.

The data showed that price increases were starting to subside, which could ease concerns about another sharp rate hike of up to 0.75% next month.

However, San Francisco Fed President Mary Daly said it was too early to “declare victory” on inflation, despite the better numbers.

Ms Daly also said that a 0.5% rate hike in September was currently her “baseline”, and that jobs and worker data to be released soon also needed to be taken into consideration.

Oil as people switch to expensive gas

Yields on 10-year US Treasuries rose slightly, indicating that markets are also continuing to bet on rate hikes.

City Index analyst Tony Sycamore said it looked like investors would still be betting on a US rate hike of 0.75%.

“The interest rate market is clearly not drinking the same post-inflation Kool Aid that the equity market has been slowing down,” he said.

“The financial markets initially reacted positively to [US inflation] data that showed that inflation in the United States is moderating, but gaining [were] then reduced fears that the market may have overreacted,” ANZ also noted.

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