With it being a quiet night with limited announcements being released, markets appeared to focus on the slowing growth rate of the coronavirus…
US markets bounced back from flat movements seen a night earlier and advanced between 0.65 and 0.94 per cent to new record highs as market concern related to the spread of the coronavirus appear to ease.
Markets appear to be interpreting a declining number of new coronavirus cases being reported each day as signs that quarantine efforts are working and perhaps that growth rates have peaked. China’s National Health Commission showed that 2,015 new cases had been report over the last 24 hours, which is a decline from the previous day’s figures.
Additionally, Nike Inc (NKE) closed 2.98% higher and was the biggest boost the Dow Jones, Alphabet Inc (GOOGL) closed 0.57% higher and Amazon.com Inc (AMZN) fell short of recording highs after climbing 0.43% higher to $2,160 per share. A mostly upbeat fourth-quarter earnings season is beginning to wind down, with 337 S&P 500 companies having reported. Of those, 70.9% have surpassed profit expectations, according to IBES data from Refinitiv.
The ASX200 recorded a second day of gains and closed 29 points higher at 7,088 as strong earnings announcements released offset declines by majority of sectors.
Financials were the stellar performer on the day with a gain of 1.79% following the release of better-than-expected results by the Commonwealth Bank of Australia (CBA). CBA closed 4.08% higher after reporting cash earnings of $4,477 million for the six months ending December 31. While this was 4.3% less than that reported in the prior corresponding period, it was higher than previous estimates of $4,405 million. A fully franked interim dividend of 200 cents per share was also declared and the overall gain by the banking giant account for more than two thirds of the overall advance seen across the ASX200. All remaining members of the big-four banks appeared to follow suit and advanced between 0.60 and 0.89 per cent. Similarly, Macquarie Group Limited (MQG) advanced 1.88% and set a new intraday high record of $148.90 as markets appeared to compare CBA’s results to the business bank, which has previously been quoted as holding very conservative estimates and guidance figures.
Health Care advanced 0.40% as CSL limited (CSL) upgraded guidance and climbed to a record high of $335.99 early in the session, before marginally retracing to up 0.77% at $328.25. Half-year results showed that CSL increase revenue and net profit after tax by 11% to $US4,980 and $US1,248 million respectively. Strong demand for immunoglobulins was the biggest contributor to the growth seen and as a result, profit guidance for FY 2020 was increased from a growth rate of 7 – 10 per cent to 10 – 13 percent.
The best performing stock on the day was IDP Education Limited (IEL), which closed 28.42% higher and reached a new all-time high of $22 following the release of better-than-expected first-half results. IEL provided an increase in revenue of 20% to $379 million and a 24% increase in gross profits to $222.2 million. Similarly, earnings before interest, tax, depreciation and amortization (EBITDA) jumped 53% to $106.2 million. Whiles the numbers released significantly outpaced market expectations, the announcement that the impact from the coronavirus would be immaterial was perhaps the most impactful on market expectations.
Another strong performer on the day was Carsales.Com Limited (CAR) which, like IEL, climbed 8.34% following the release of strong earnings results. CAR showed that strong international business offset a soft domestic ‘new car’ market and resulted in revenue growth of 5% to $214 million and 6% growth in earnings before interest, tax, depreciation and amortization (EBITDA) to $107 million.
Because CAR and IEL are two stocks that has been in our porfolio over the last couple of months, the “stock update”, written by Shannon Rivkin, discussing their results can be found here for our premium members. Click here for CAR update and click here for IEL update.
Not all reporting season related announcements were positive with Blackmores Limited (BKL) downgrading its guidance and suspending its dividend. BKL downgraded its underlying Net Profit After Tax (NPAT) to $18 million in the first half, which represents a 47% decline and is $3 million below its $21 million guidance. As a result of the announcement, BKL declined 12.79% to a 6-month low of $78 per share.
Miners were another weight on the market as the rally seen across global metal prices appeared to subside and as supply clots, resulting from the coronavirus, weigh on Rio Tinto Limited (RIO). The major miner experienced a slowdown in demand for its Mongolian mine copper concentrate from Chinese consumers as the quarantine efforts across the country cause logjams. BHP Group Limited (BHP) followed suit and decline 0.41% to $38.40 per share while Fortescue Metals Group Limited (FMG) closed unchanged.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Commodities and Currencies
US oil gave bullish signs and rallied 3.6% to $US55.97 a barrel and iron ore made a marginal gain of 0.8% to close at $US87.68 a tonne. Gold traded mostly flat throughout the domestic and international sessions with a closing price of $US1,565.87 an ounce.
This article was written by Thomas Brunton – Senior Equity Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3633.
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