The ASX 200 closed up 12 points at 7243 (+0.16%), bouncing off 7200.The market rallied from opening losses on reports that Biden and Putin would meet for a summit. Banks and iron ore miners bounced hard on the news from Ukraine; the Big Bank Basket rose to $180.86 (+0.5%). WBC up 1.4% and NAB up 0.6%. QBE rallied 4.8% on broker comments, ASX had a good day up 1.9%, and NWL recovered from recent losses up 3.3%. MFG dropped 1.2%, giving back some gains from Friday as shorts relaxed slightly. Healthcare under pressure, CSL down 0.8%, SHL off 3.6% on disappointing numbers, industrials firmed on geopolitical news, TLS rose 1.5% after a deal with TPG up 3.1%. Consumer stocks were buoyed by EDV rising 10.3% on results, COL up 1.1% and WES up 0.3%. Travel stocks were modestly firm as Australia opened its border today. WEB up 0.7% and FLT up 0.3% with CTD better by 0.3%. Tech remained on the nose with SQ2 down heavily 6.8% and fintechs generally under pressure. TYR tapped out on results, falling 25.9%, XRO falling 1.3% and WTC off 1.9%. All Tech Index down again by 1.7%. Miners were better, BHP up 0.6%, RIO up 0.8% though FMG missed out, falling 1.2%. IGO fell 6.4% as it responded to media speculation that it was looking to buy CSA Copper mine from Glencore. Lithium stocks flat, uninspiring today, energy stocks under a little pressure as oil drifted lower on Iran and Ukraine developments. In corporate news, AGL rose 10.6% on a bid from Cannon-Brookes and Brookfield, A2M up 11.1% on better numbers and outlook, EDV rose 10.3% as profits beat estimates. TYR was the biggest loser as results disappointed again. Z1P off 7.8%, remains in talks to take over SZL, both suffering. Nothing on the economic front.10-year yields steady at 2.20%.

End of Day Podcast – Monday, February 2

Major Movers

  • Winners: A2M, AGL, HSN, EDV, CNU, ABB, HT1, ABR
  • Losers: TYR, CTT, PBH, SUL, BRN, Z1P, SYA, PNV, SQ2
  • Positive sectors: Banks. Iron ore. Consumer staples. Telcos
  • Negative sectors: Healthcare. Tech
  • High 7248 Low 7156
  • Biden and Putin agree to summit in Europe
  • Big Bank Basket: Rises to $180.86 (+0.5%)
  • All-Tech index: Down 1.7%
  • Gold: Rises to $2628
  • Bitcoin: Falls to US$39029
  • Aussie Dollar:  Steady at 72.15c
  • 10-Year Yield: Steady at 2.20%
  • Asian markets weaker Japan down 0.7%, China down 0.4% and HK down 0.7%
  • US Futures: Dow up 168 Nasdaq up 70. Euro Stoxx futures up 14 (+0.36%)

Stocks on the Move

  • A2M +11.13% cream rising on better outlook.
  • AGL +10.61% MCB and Brookfield bid 750c.
  • EDV +10.29% beats forecasts.
  • DDR +4.17% acquisition of Hills Security and IT division.
  • ABB +7.56% results.
  • RDT +8.26% capital raising.
  • TYR -25.92% tapped out on disappointing results.
  • CTT -11.79% volatility continues.
  • PBH -11.11% tech fall out continues.
  • Z1P -7.78% issues a pre result update. SZL talks continue.
  • PNV -7.17% falls continue.
  • HAS -5.08% increases Yangibana project NOV by 84% to $1bn.
  • SPL -5.29% revenue climbs 200% to $1.9m but still loss of $8.4m.
  • ALU -5.92% results underwhelm.
  • SDV -10.91% half yearly results.
  • PPS -6.40% continues to drop.
  • Speculative stock of the Day: Auking Mining (AKN) +34.43% drill results with intersections of 105m at 1.94% Cu and 55g/t Ag. Results include 16.6m at 10.2% and 316g/t Ag at Koongie. Interesting how long that assay results are taking. These from Oct/Nov last year.

In the News

  • IGO (IGO) confirms discussions with Glencore to acquire the CSA Copper Mine in NSW.
  • oOh!Media (OML) reinstates dividend despite another loss.
  • Hansen (HSN) pays 2c special dividend.
  • Nib (NHF) upgrades dividend to 11c, 1c above last year’s as profit grew.
  • Sonic Healthcare (SHL) – Record performance driven by pandemic testing and base business growth. First-half adjusted EBITDA $1.54bn vs consensus $1.53bn. Revenue up 7% to $4.76bn vs consensus $4.91bn. Interim dividend 40c (fully franked) vs consensus 61.1c. Laboratory division margins increased from 30.8% to 34.3%. Announces on-market share buyback of up to $500m over 12 months.
  • Lendlease Group (LLC) – swings to a first-half loss of $264m vs $196 statutory profit last year. Includes a loss of $262m from non-operating items and a loss of $30m from the non-core segment. Dividend cut to 5c from 15c last year. Sees core earnings improving from the second half and says it’s on track for savings target of >$160m per annum. Not sure it will be enough to keep the market happy. Revenue and earnings from its key construction segment both slipped. Earnings also fell in every geography it operates in.
  • Telstra (TLS) and TPG Telecom (TPG) – sign network sharing agreement for regional Australia. TPG Telecom will recognise a one-off, noncash hit of up to $225m in its 2022 financial results arising from the decommissioning of sites. Telstra will get up to $1.8bn in incremental revenue over the next decade. TLS will gain access to TPG Telecom’s spectrum across 4G and 5G, which it says will allow it to grow its network, increase capacity and continue to provide the country’s largest and fastest network
  • Bluescope Steel (BSL) – first-half underlying EBIT $2.20bn vs consensus $2.23bn and in line with guidance. Announce an additional $700m buyback. Revenue $9.42bn vs consensus $8.88bn. Interim dividend 25c, unfranked vs consensus 28.7c. Underlying EBIT in the second half is expected to be between $1.20-1.35bn. Based off the guidance there is an obvious skew to the first half. Added it expects similar underlying net finance costs, lower underlying tax rate and lower profit attributable to non-controlling interests in the second half.
  • Super Retail Group (SUL) – first half normalised profit $112.8m vs consensus $113m. Revenue $1.71bn vs consensus $1.65bn. Interim dividend 27c (fully franked), in line with consensus. Observed a positive start to the second half with the group delivering 6.0% like-for-like sales growth. Expects to see $125m of capital expenditure in FY22 to fund store development, loyalty and digital capability.
  • Reliance Worldwide Corp. (RWC) – first-half underlying profit widens to US$75.4m vs year-ago $71.6m. Revenue US$521.8m vs year-ago US$464.2m. Interim dividend 4.5c, 20% franked. Supply chain pressures, labour shortages, unavailability of key inputs are likely to remain as headwinds in FY22. Ups prices to offset commodity input cost increases. Operating margins are expected to improve in the second half.
  • Altium reports (ALU) – adjusted EBITDA improves to US$34.8m vs year-ago US$27m. Former CFO, Richard Leon appointed as Interim CFO. Revenue US$102.2m vs year-ago US$80m. Interim dividend US21c. FY22 guidance narrowed, now sees revenue between US$213-217m vs prior US$209-217m. Margin guidance was maintained.
  • a2 Milk Co. (A2M) – first-half profit down 50.3% on last year to NZ$59.6m, said conditions remained challenging. Revenue NZ$658.8m vs consensus NZ$615.1m. Outlook for 2H22 revenue has improved, expected to be significantly higher than 2H21, and with growth now expected on 1H22 and for FY22, ahead of initial expectations due mainly to growth in China label and English label IMF. Better revenue is not expected to result in better earnings due to brand reinvestment. Supply chain pressure remain a key risk in the second half.
  • AGL Energy (AGL) – has received a non-binding offer of 750c from Mike Cannon-Brookes and Brookfield, which values the company at $8bn.AGL has knocked back the bid as being too low and not a reflection of the true value of the company. There could also be FIRB issues involved.

Economic News/Bond Markets

  • Nothing today.

Asian Markets

  • Chinese demand for metals is taking longer than some anticipated due to the Olympics with copper rod producers operating at just 59% of capacity last week. Iron ore stockpiles at Chinese ports haven’t been this large since June 2018. PBoC keeps benchmark lending rates unchanged.
  • China’s home price declines eased for a second month in January. New home prices in 70 cities, excluding state-subsidised housing, fell 0.04% last month from December when they dropped 0.28%. The four largest cities saw prices climb 0.65% on average last month, the biggest increase since June.

US and Europeans

  • Big oil set for around US$38bn in share buybacks.
  • Queen tests positive for CV19.
  • US markets closed for Washington’s Birthday.
  • Carl Icahn nominates two to the Maccas board. Pushing for better treatment of pigs.
  • White House economist says inflation should moderate in coming months.

And finally….

I had a phone call during the week from a very, very angry local baker. He basically accused me of stealing all his yeast and said if I didn’t return it he was going to report me to the police.

“You carry on and do what you must do” I told him, “I haven’t touched your yeast” I said.

I know this would worry some people, but not me. He can’t prove a thing.