MARKETS
Volatility in global share markets over the past week has been driven by uncertainty following the US midterm elections, concerns about technology and AI company valuations, and changing interest rate expectations. Concerns were heightened by Nvidia's leadership upheaval, which triggered significant share price movements across the technology sector. European markets performed strongly, supported by positive corporate earnings and investors shifting towards less highly valued sectors.
The ASX 200 recorded gains earlier in the week despite international uncertainty. The Reserve Bank of Australia's interest rate increase, although largely anticipated, influenced investor sentiment and expectations about future borrowing costs. Technology stocks performed relatively well, while mining and energy shares faced pressure from fluctuating commodity prices. Banks, property and consumer-related stocks were impacted by interest rate concerns and subdued household spending.
MAJOR BANKS’ FULL-YEAR RESULTS
Westpac (WBC) announced a broadly unchanged underlying net profit of $6.99 billion for the year ended 30 September 2026, in line with market expectations. The result was supported by growth in deposits and lending, rising 6% and 5% respectively, although mortgage demand slowed following government tax changes and higher interest rates. Credit impairment charges more than doubled to $864 million, reflecting a more challenging economic outlook and increased provisions for potential bad debts. CEO Anthony Miller warned that inflation and elevated interest rates would continue to put pressure on households and businesses into 2027.
NAB reported a -13% decline in full-year cash profit to $6.14 billion, below analysts' expectations. The weaker result was driven by an 86% increase in credit impairment charges to $1.55 billion, alongside higher operating expenses, reflecting slowing economic growth, rising interest rates, declining house prices and inflationary pressures. CEO Andrew Irvine warned that Australia's risk of recession had increased, with economic growth expected to slow to around 1%. Following the announcement, NAB’s share price fell sharply, closing down -5.4%.
ANZ reported a 31% increase in full-year cash profit to $7.59 billion, driven by stronger business growth, disciplined cost management and higher home-loan volumes, with operating expenses falling -14%. However, its net interest margin declined from 1.55% to 1.53% due to competitive pressures and interest rate movements. Despite the stronger headline profit, investors were concerned about weaker-than-expected income measures and rising competition for capital, which contributed to a -3.2% fall in the share price.
In its September quarter trading update, the Commonwealth Bank (CBA) reported an 8% increase in first-quarter cash profit to $2.8 billion compared with the same period last year, supported by growth in lending and deposit volumes, demonstrating resilience in the bank's core banking operations. However, home loan applications declined -16% as higher interest rates and changes to tax policy weakened housing demand. CBA also reported rising mortgage arrears, which reached their highest level in 14 years, highlighting increasing financial pressure on Australian households.
US EARNINGS SEASON
The US September quarter earnings season has delivered a strong overall result, reinforcing the resilience of corporate America and demonstrating that profit growth is becoming more broadly distributed across the S&P 500. While expectations were elevated heading into the reporting period, companies have generally delivered solid earnings and revenue growth, supported by technology investment, AI spending, and improving contributions from cyclical industries.
Of the 451 S&P 500 companies that have reported their results, earnings for these companies were up 24.6% year on year, with around 84% beating analyst expectations (see chart below). The results suggest that corporate profitability remains healthy, although the magnitude of earnings surprises has been more modest than in some previous reporting seasons. All 11 sectors are reporting year-over-year earnings growth, led by the Energy and Information Technology sectors.
The Magnificent Seven delivered a more varied set of results, with strong underlying revenue growth but some notable earnings disappointments relative to market expectations. Six of the seven companies have reported, with Nvidia scheduled to release its results on November 17. Interestingly, the group is no longer leading the broader market in earnings growth. FactSet's latest estimates put Magnificent Seven earnings growth at around 22.6%, compared with 32.6% for the remaining 493 S&P 500 companies. This would represent the first time since the fourth quarter of 2022 that the other 493 companies have outpaced the Magnificent Seven.
Microsoft delivered a solid result, with quarterly revenue increasing 19% to US$92.3 billion and earnings rising 32%. Growth in Microsoft Cloud and continued demand for AI-related services remain important drivers. Alphabet also reported strong revenue growth of 25% to US$127.6 billion, supported by its cloud and digital advertising businesses. However, its earnings were affected by an $8.7 billion loss on equity investments, which it attributed to its stake in SpaceX.
Amazon produced an encouraging operational performance, with revenue increasing 12% to US$201.9 billion. Its standout performer was Amazon Web Services (AWS), where sales grew 39% to US$46 billion, the fastest growth in nearly five years. Meta delivered revenue growth of 26% to US$64.6 billion, reflecting ongoing strength in digital advertising. However, operating income fell -37%, largely due to a substantial litigation-related charge of US$9.9 billion. Meta also continues to invest heavily in AI infrastructure, with capital expenditure reaching US$34.9 billion during the quarter.
Apple reported revenue of US$114.5 billion for the quarter, up 12% year on year, reflecting continued resilience across its hardware and services businesses. Tesla presented a less convincing picture, with revenue broadly flat at US$28 billion and earnings declining -44%. Its results highlight the challenges facing the electric vehicle business, including competitive pressures and margin constraints.
Important Disclaimer
The directors, employees and authorized representatives of PPN Wealth do not guarantee the information in this report to be complete, up to date, accurate nor applicable to your personal circumstances. This is general investment advice only. You should not act on recommendations in this report without discussing proposed actions with your PPN Wealth adviser to ensure recommendations are suitable to your circumstances.
The principals, associates and employees of PPN Wealth may have investments in the securities or companies, referred to in this report.
This report may not be distributed in any way without the prior permission PPN Wealth. The directors, employees and authorized representatives of PPN Wealth do not accept any liability for third parties’ actions relating to this report.
