Wall St marks best run for the year, Playtech shareholders reject $3.9b Aristocrat deal: ASX to rise

Market Reports

by Melissa Darmawan

Wall St gains for 4th day as impressive results from Google parent Alphabet bolstered the tech sector. Alphabet eyes the Dow on stock split plan. Overview of RBA's speech "The Year Ahead". Westpac (ASX:WBC) to release trading update. 

The Australian sharemarket is set to consolidate after Wall St’s rise.

US stocks in longest winning streak for the year

US stocks climbed for a fourth day as big tech earnings rolled in. Impressive results from Google parent Alphabet and Apple last week defied ongoing supply chain issues as tech shares make a comeback. What a contrast from January, when risk was taken off the table, Nasdaq and S&P 500 slipped into correction territory, and stocks suffered its worst month since the start of the pandemic.

The tech index is still down 9 per cent for the year and slowly staging a recovery. There’s more earnings on deck with Facebook/Meta next to report, another catalyst on its way.

Private sector jobs fall for first time since pandemic

Investors shrugged off fresh data on the state of the job market, ahead of Friday's January jobs report from the Labor department. ADP reported that the private sector lost 301,000 jobs in January, a massive miss compared to expectations of 200,000 added jobs. The leisure and hospitality sector saw the biggest decline for the month. This is the first loss since December 2020, highlighting the impact of Omicron on the job market.

Alphabet eyes the Dow on stock split plan

Though let’s talk about Google owner Alphabet, defying the gloom as its soaring internet ad business bolstered its fourth quarter results. Alphabet said revenues surged 32 per cent year-on-year to US$75.3 billion and profits jumped 36 per cent to US$20.6 billion. YouTube ad revenue came in 25 per cent higher from the same time last year to US$8.6 billion. Incredible. Though, the 20-for-1 stock split excited investors as it could mean that Alphabet might be eyeing the Dow in a bid to make their shares more affordable.

I’m going to put this in context from a psychological perspective. Alphabet shares closed 7.5 per cent higher at US$2,960. So round this up to US$3,000 a share, so $4,200 Aussie dollars. Imagine what cash balance an investor would need to have to own a decent portion of these direct shares in their portfolio? Yes, you could get exposure through exchange traded funds, and managed funds, but it’s not like you can buy a fraction of an Alphabet share! The deal is set to give 19 more shares for every one a shareholder owns.

Paypal sinks on earnings miss

Meanwhile, PayPal posted mixed results and provided weak guidance for the next quarter. Shares tumbled 25 per cent at US$132.57.

OPEC+ gradually pumps more oil

Turning to the energy markets, with President Biden approving the deployment of 3,000 troops to Ukraine, the weekly EIA crude oil inventory report and a short OPEC+ meeting, the alliance has agreed to boost output by an additional 400,000 barrels a day by March as stockpiles fell.

RBA talk overview

Back home, the speech by RBA governor Philip Lowe at the National Press Club reinforced that “it is still too early” to tell whether inflation will remain elevated. The central bank is “prepared to be patient”, adding that “as we navigate towards full employment, we have scope to take the time to distil the balance between supply and demand in the economy.”

He said that “over time and as conditions allow”, policymakers will “need to navigate a return to more normal settings of monetary policy”. Dr Lowe did acknowledge that under certain circumstances, a rate hike later this year is "plausible".

Investors now await for the RBA to release its quarterly statement on monetary policy and latest forecasts on Friday.

Numbers on Wall St

At the closing bell, the Dow Jones gained 0.6 per cent to 35,629, the S&P 500 added 0.9 per cent to 4589 while the Nasdaq jumped 0.5 per cent to 14,418.

Across the S&P 500 sectors, nearly a rally across the board with only consumer discretionary as the outlier, down 0.5 per cent. Communication services was the best performer up 3.1 per cent, thanks to Google, followed by real estate, utilities, and healthcare. Materials added the least by 0.2 per cent, with energy up 0.4 per cent.

The yield on the 10-year treasury note dipped 3 basis points to 1.77 per cent as investors buy into the bond, gold rose on a steady greenback.

Figures around the globe

Across the Atlantic, European markets closed higher ahead of the ECB and Bank of England rate announcements. Paris added 0.2 per cent, Frankfurt closed flat, down 0.04 per cent and London’s FTSE also added 0.6 per cent.

On the London Stock Exchange, Rio gained 0.1 per cent, BP fell almost 1 per cent and Shell lost 0.7 per cent.

In Asian markets, Tokyo’s Nikkei added 1.7 per cent, while Hong Kong’s Hang Seng and China’s Shanghai Composite were closed.

Yesterday, the Australian sharemarket closed 1.2 per cent higher at 7,088, up for its second straight session to a six day high underpinned by gains from the resources sector.

The best-performer was Champion Iron (ASX:CIA), closing 6.2 per cent higher at $6.73. It was followed by shares in Auckland International (ASX:AIA) and Worley (ASX:WOR), while the biggest loser was Credit Corp Group (ASX:CCP), closing 6.3 per cent lower at $32.65. It was followed by shares in Block (ASX:SQ2) and Amcor (ASX:AMC).

Full coverage on yesterday's action, join me here for “From rout to rally, RBA's path to normalisation”.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.1 per cent gain.

Local economic news

The Australian Bureau of Statistics is set to release its December building approvals and international trade figures.

It will be interesting to see how the nation’s trade surplus comes in for December as the iron ore price has faded from its peak, though imports are lifting as the economy reopens from delta lockdowns.

IHS Markit has also scheduled its services and composite index for January.

Company news

Aristocrat Leisure's (ASX:ALL) bid for UK listed Playtech fell through after British shareholders of the gambling software company rejected the $3.9 billion deal. Aristocrat needed approval from 75 per cent of Playtech shareholders with the votes coming in less than 55 per cent of that according to Reuters. Shares in Aristocrat Leisure (ASX:ALL) closed 0.9 per cent higher at $41.29 yesterday.

Ex-dividend

There are two companies trading ex-dividend today

Advanced Share (ASX:ASW) is paying 0.5 cents fully franked
Kkr Credit Income Fund (ASX:KKC) is paying 1 cent unfranked

Dividend-pay

There is one company set to pay eligible shareholders today, Arena REIT No 1 (ASX:ARF).

Trading updates

Alterra (ASX:1AG)
Centuria Office REIT (ASX:COF)
Nick Scali (ASX:NCK)
VGI Partners Asian Investments (ASX:VG8)
Westpac (ASX:WBC)

Commodities

Iron ore was unchanged at US$141.75 a tonne due to the Chinese New Year holiday.

Gold has gained $5.80 or 0.3 per cent to US$1807 an ounce. Silver is up $0.06 or 0.3 per cent to US$22.66 an ounce.

Oil has added $0.13 or 0.2 per cent to US$88.33 a barrel.

Currencies

One Australian Dollar at 8:25 AM has strengthened since Wednesday (71.31 US cents), buying 71.35 US cents, 52.57 Pence Sterling, 81.65 Yen and 63.12 Euro cents.
 

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.