ASX down 0.6%, Big fall in jobs, Shaver Shop's rating gets upgraded, Energy falls as Materials rise

Market Reports

by Melissa Darmawan

The Australian sharemarket bounced back in the first 20 minutes of trade after tapping a 5-day low, on track to fall for its fourth straight day. Investors booked their profits on Wall St as investors turned cautious on inflation figures which soared to a 3-decade high. At noon, the S&P/ASX 200 is 0.6 per cent or 47.7 points lower at 7,376. The SPI futures are pointing to a fall of 16 points.

Investors appeared to have liked the jobs data as the XJO started to gain momentum on the news as market participants focused on the RBA’s support, despite the inflationary pressures seen around the globe. The 3-year bond yield jumped 12 basis points at 1.1 per cent after dipping to as low as 0.9 per cent with the Aussie dollar softening.

The losses are almost across the board amid a big day of AGMs and earnings updates.

Energy leads declines while materials overtake

Energy stocks are leading the decline, down 2.3 per cent as crude oil tumbled over 3.0 per cent after the Energy Information Administration showed supply rose by one million barrels last week. According to sources at Reuters, "President Biden said he had asked the National Economic Council to work to reduce energy costs and the Federal Trade Commission to push back on market manipulation in the energy sector in a larger push to reverse inflation."

Informational technology stocks are the 2nd biggest loser, down 2.0 per cent by no surprise given that the Nasdaq underperformed out the major indexes on Wall St amid a rising bond yield, followed by healthcare and property.

On the brighter side, material stocks are a bright spot trading over 1.5 per cent erasing some of its losses from yesterday despite the iron ore price falling below US$90. The materials sector has been switching seats from the best and worst performer this week. Let’s see how they close by today.

Ramsay Health Care feels pain from Covid-19 disruption

Shares in Ramsay Health Care (ASX:RHC) are pressuring the healthcare sector, tumbling 6.2 per cent at $67.73 fall after its first quarter results. Revenue rose by 1.3 per cent by the September quarter compared to the prior corresponding period to $3.2 billion, however their earnings before tax fell 67.8 per cent at $197.4 million attributed to elective surgery restrictions due to the disruption from Covid-19. Meanwhile, after tax profit sank 39.5 per cent at $58.1 million.

Half-year performances from AusNet, Xero, Graincorp

AusNet Services (ASX:AST) posted their half year profit results with revenue down 0.7 per cent at $1.03 billion, after tax profit declined by 21.4 per cent at $177.5 million, while earnings before interest dipped 3.8 per cent at $636.4 million. The Victorian electricity operator attributed its lower results due to severe weather events and rounds of Covid-19 lockdowns. They also said that the fall in profit was expected which resulted from a combination of lower regulatory revenues, more costs associated with their employee underpayment remediation, and a $18.8 million hit in non-cash hedge accounting outcomes. An interim dividend of 4.75 cents was declared. Shares are trading 0.2 per cent lower at $2.85.

Xero (ASX:XRO) posted a mixed performance for its half year as revenue rose while earnings before tax fell. For the half-year ending 30 September, the cloud-based software provider posted a 23 per cent jump in revenue to $505.7 million while EBITDA fell 19 per cent at $120.8 million. Net profit and cash flow also fell from the same time a year ago due to an increased level of investment spend across both sales and marketing and product development. No dividend was declared. Shares are trading 5.2 per cent lower at $139.57.

Graincorp’s (ASX:GNC) statutory net profit fell due to one-off gains a year earlier, however the company said that strength in the supply chain execution and strong demand increased earnings on an underlying basis. The company finished the year with an after-tax profit of $139 million after posting a $16 million loss in financial year 2020 for the year ending September, and announced a share buyback. Shares are trading 2.3 per cent lower at $6.53.

Iron ore & gold miners rally while banks fall

Iron ore miners BHP (ASX:BHP) up 1.4 per cent at $36.25, Rio Tinto (ASX:RIO) adding 1.5 per cent at $88.82 while Fortescue Metals (ASX:FMG) surging 6.7 per cent at $15.23.

Gold miners are bright with Newcrest Mining (ASX:NCM) adding 1.8 per cent at $25.57, Northern Star (ASX:NST) up 3.3 per cent at $10.47 while Regis Resources (ASX:RRL) are surging 5.7 per cent higher at $2.13.

Banks are lower National Australia Bank (ASX:NAB) leading the declines, 1.7 per cent lower at $29.63, Commonwealth Bank (ASX:CBA), down 1.4 per cent at $107.36, while ANZ (ASX:ANZ) and Westpac (ASX:WBC) shedding 0.2 per cent.

Local economic news

In October, the economy lost 46,300 jobs against a market expectation of a fall of 50,000 while the participation rate rose by 0.1 basis point to 64.7 per cent.

The shed in jobs followed September’s results where employment fell at 138,000 mainly due to the lockdowns seen in NSW and Victoria.

The unemployment rate rose by 0.6 basis points to 5.2 per cent around where it was before the Delta variant outbreaks as per the Australian Bureau of Statistics.

The participation rate saw its first increase since June this year reflecting a large increase in unemployment of 82,000 people.

Broker moves

Ord Minnett boosted Shaver Shop’s (ASX:SSG) rating to an accumulate from a hold with a lifted price target of $1.25. The broker noted that the re-opening of stores in NSW and Victoria is expected to increase earnings amid a surge in trading for the grounds to upgrade its rating. The company flagged that sales in the year to date eased 0.9 per cent which the broker considered quite modest given the widespread closures. Online sales rose 58.6 per cent over the same period and currently represent 50.2 per cent of total sales, raising its target price to $1.25 from $1.20. Shares in Shaver Shop (ASX:SSG) are trading 0.9 per cent lower at $1.05. 

Best and worst performers

The best-performing sector is Materials, up 1.5 per cent. The worst-performing sector is Energy, down 2.3 per cent.

The best-performing stock in the S&P/ASX 200 is Chalice Mining (ASX:CHN), trading 9.42 per cent higher at $9.99. It is followed by shares in Fortescue Metals Group (ASX:FMG) and Regis Resources (ASX:RRL).

The worst-performing stock in the S&P/ASX 200 is Nearmap (ASX:NEA), trading 8.8 per cent lower at $1.96. It is followed by shares in Ramsay Health Care (ASX:RHC) and Xero (ASX:XRO).

Commodities and the dollar

Gold is trading at US$1850.35 an ounce.
Iron ore is 3.2 per cent lower at US$89.50 a ton.
Iron ore futures are pointing to a rise of 2.24 per cent.
One Australian dollar is buying 73.21 US cents.

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