Coronavirus impacts earnings: Aus shares close 0.4% lower

Market Reports

by Katrina Bullock

It has been a negative day of trade for the Australian share market. The ASX200 opened lower and has seen a sell off throughout the day which dragged the index 0.4 per cent lower. Most sectors landed in the red today, with only REITs and Consumer Staples managing to advance. The Performance of Services Index figures for January came in lower than expected. On a brighter note, RBA Governor Philip Lowe expects economic growth in Australia to pick up this year. He also says it is too early to tell what effect coronavirus will have on the economy. These comments come as Honda and Toyota extend the closure of their Chinese factories and Flight Centre Travel Group (ASX:FLT) warns that coronavirus has affected travel patterns in Asia for the second half which could result in them missing their 2020 fiscal year guidance.

The S&P/ASX200 index

At the closing bell the S&P/ASX 200 index closed 27 points lower to finish at 7,023.

Over the week, the market has gained 0.1 per cent. Half of the sectors made gains. Healthcare has been the best preforming sector this week rising almost 2 per cent; while Energy has been the biggest drag on the market, shedding almost 5 per cent.

Futures market

Dow futures are suggesting a loss of 51 points.
S&P 500 futures are eyeing a slide of 4 points.
The Nasdaq futures are eyeing a dip of 18 points.
And the ASX200 futures are eyeing a 25 point fall on Monday morning.

Broker Moves

Macquarie has increased its 12-month target price for transport and logistics company Brambles (ASX:BXB), from $11.65 to $12.30. The broker retains its Neutral rating. This comes ahead of the company’s earnings result release. The stock has had a consistent run following its quarterly trading update, and at 22x forward earnings the broker sees it as fully priced. The broker notes that it is "a good place to hide" for investors seeking a defensive position. Brambles is a developed market with little exposure to Asia and the coronavirus. Shares in Brambles (ASX:BXB) closed 0.6 per cent higher at $12.70.

Local Economic News

The Reserve Bank of Australia forecasts that economic growth in Australia will pick up from an average rate of 2 per cent over the past couple of years to 2¾ per cent this year, and 3 per cent over 2021. It says that the coronavirus represents a new source of uncertainty and that household spending has been very soft in response to falling housing prices. The RBA Governor also estimates that over the December and March quarters, the fires will have reduced Australian GDP growth by around 0.2 percentage points. The drought is also continuing to act as a drag on the economy and is expected to reduce GDP growth by a quarter of a percentage point this year. It expects the unemployment rate to hold steady for a while at just over 5 per cent. Inflation has been in line with the RBA’s expectations, with CPI inflation running at 1.8 per cent.

Ai Group has released its Performance of Services Index for January 2020. The index fell by 1.3 points to 47.4 in seasonally adjusted terms. This missed the market’s expectation and marks the second month of decline for Australia’s services industries.

Company news

Venus Metals Corporation (ASX:VMC) has today agreed to settle all claims against Spectrum Metals and Zebra Minerals arising from Zebra Minerals’ acquisition of the Penny West Gold Project. The 3 companies have entered into a confidential agreement, which includes Spectrum paying approximately $850,000 to Venus Metals. The allegations against Spectrum’s Managing Director, Paul Adams, Davide Bosio and DJ Carmichael Pty Limited for breaches of fiduciary duty, breaches of confidence and misuse of Venus Metals’ information in connection with the acquisition are scheduled to be heard by the Supreme Court of Western Australia in early March 2020. Shares in Venus Metals Corporation (ASX:VMC) closed flat at 18 cents.

The REA Group (ASX:REA) today announced its results for the half-year ended 31 December 2019 showing revenue of $440.3 million and EBITDA of $272.1 million.

Sigma Healthcare (ASX:SIG) reports that the transformation of their business has left them unable to pay a fully franked dividend in 2020.

Adventure retailer Kathmandu (ASX:KMD) report group underlying EBIT for the first half of financial year 2020 is expected to be around 40 per cent above the same period last year following the successful acquisition of surf retailer Rip Curl.

News Corporation (ASX:NWS) today reported financial results for the three months ending December 31, 2019 showing a 6 per cent decline in revenues at $2.48 billion compared to $2.63 billion in the previous year.

Best and worst performers of the day

The best performing sector was Real Estate Investment Trusts adding 0.5 per cent while the worst performing sector was Energy, shedding 1.7 per cent.

The best performing stock in the S&P/ASX 200 was Gold Road Resources (ASX:GOR), rising 9.3 per cent to $1.58, followed by shares in Pinnacle Investment Management (ASX:PNI) and Northern Star Resources (ASX:NST).

The worst performing stock in the S&P/ASX 200 today was Orocobre (ASX:ORE), dropping 7 per cent to close at $3.44. Shares in Cimic (ASX:CIM) and Mayne Pharma (ASX:MYX) followed lower.

Asian markets

Lower: Japan’s Nikkei has lost 0.2 per cent, Hong Kong’s Hang Seng has shed 0.9 per cent and the Shanghai Composite has lost 0.7 per cent.

Wall Street

Wrapped up our four trading days this week higher: The Dow Jones added 3.8 per cent, The S&P 500 added 3.6 per cent and the tech heavy Nasdaq gained 4.4 per cent.

Commodities and the dollar

Gold is trading at US$1,567 an ounce.
Iron ore price is 2.3 per cent higher at US$83.17.
Iron ore futures are flat.
Light crude is 14 cents higher at US$51.09 a barrel.
One Australian dollar is buying 67.16 US cents.