EU CONSUMER STAPLES: Woolworths | 3Q Trading Update (to March)
(WOWAU; Baa2/BBB; Stable)
Earnings fine and broadly in line with Coles, its main competitor. The bigger credit swing comes from politics: centre-left Labor government is now firmly ahead ahead in polls for this weekend’s election. Reminder: while the Australian Regulator (ACCC) found no wrongdoing at either of the two majors, policy responses diverge — Labor’s stance is more lenient, which is credit positive. Also helping sentiment: prices are now flat to deflating and should ease consumer (and political) pressure. Woolworths retains ample ratings headroom and can absorb the guided mid-single digit 2H EBIT decline without issue.
New 32s are flat since pricing (vs. index -5) - 6.4x covered books but went -3 through our FV and may have driven that weakness. We see some uncertainty out of the way, and see ~20bps of value on the 28s and ~8bps on 32s.
- Q3 sales at AUD17.3b (€10b), +3.2% y/y.
- Core Australian Food (only segment relevant for credit) +3.6%
- 14% of Aussie food sales online which is growing +16%
- Comparable Aussie Food sales +3%
- The comparable growth is in-line with Coles 1Q (main competitor)
- Volumes up: transactions +1.3%, items per basket +0.3%
- while average prices ex. Tobacco fell -0.5% (vs. CPI Food running +1.2%)
- AUD 400m/year cost-efficiency target will be hit by year-end, as planned
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CROSS ASSET: Equities Slip Further on Washington Post Headline, Near Support
Stocks holds the entirety of the move lower triggered by the Washington Post story - the "around 20 per cent on at least most imports to the United States" is at the sharper end of expectations. We wrote earlier that while there is no real consensus on the tariff %, the average levy is expected between 10 - 20%, hence the market move (EUR, stocks lower) on that headline.
- E-mini S&P is falling further at typing: 5619.25 marks the first support and overnight low, ahead of the more major 5533.75 pullback low and bear trigger.
- EUR/USD, however, has bounced off headline-triggered lows, potentially stemming from the article's mention that "several options", potentially less extreme than a blanket tariff, remain on the table.
ESM ISSUANCE: 3-Month ESM-Bill
| Type | 3-month bills |
| Maturity | Jul 3, 2025 |
| Amount | E1.092bln |
| Target | E1.1bln |
| Previous | E1.083bln |
| Avg yield | 2.262% |
| Previous | 2.355% |
| Bid-to-cover | 2.39x |
| Previous | 2.81x |
| Previous date | Mar 04, 2025 |
OUTLOOK: Price Signal Summary - Trend Needle IN GBPUSD Points North
- In FX, the trend condition in EURUSD is bullish and recent weakness appears to have been a correction. MA studies are in a bull-mode position highlighting a dominant uptrend. 1.0733, the Mar 27 low, marks a key near-term support. A move through it would confirm a clear breach of the 20-day EMA and signal scope for a deeper correction towards the 50-day EMA at 1.0656. Key resistance and the bull trigger is 1.0955, the Mar 18 high.
- GBPUSD is in consolidation mode and importantly for bulls, the pair continues to trade closer to its recent highs and above last week’s lows. MA studies are in a bull-mode position highlighting a dominant uptrend. Support at the 20-day EMA, at 1.2887, is intact. A breach of 1.3015, the Mar 20 high and bull trigger, would open 1.3048, the Nov 6 2024 high. A clear break of the 20-day EMA is required to instead signal scope for a deeper correction.
- USDJPY is trading below last week’s high. The primary trend direction is unchanged, it remains down and the latest recovery is considered corrective. A key short-term resistance around the 50-day EMA - at 150.86 - is intact. A clear break of this EMA would undermine the bearish theme and signal scope for a stronger rally towards 152.70, a 50.0% retracement of the Jan 10 - Mar 11 bear leg. The first key support to watch is 148.18, the Mar 20 low. A breach would be bearish.
