ASX wins gold, snapping 3-week fall: Closes 1.9% higher over the week

Market Reports

by Melissa Darmawan

With the start of the Olympic Games in Beijing, Australian shares participated in its own games with its V-shape performance today, ending a three week fall with its best week in 6 months, helped by a broad based rally and a flat close from communication services.

The sour sentiment to start the session was undone supported by impressive Amazon earnings in after hours trade in Wall St and futures pointing to a brighter start.

In a week where central bank outcomes from the European Central Bank, Bank of England and our local Reserve Bank dominated the spotlight, market participants digested the plans on how each central bank planned to tackle hot inflation.

RBA eyes inflation peak at 3.75% in June

The quarterly Statement on Monetary Policy from the Reserve Bank of Australia (RBA) laid out its forecasts to inflation, unemployment and economic growth following Governor Phillip Lowe’s commentary on its interest rate decision this week.

The central bank expects GDP growth to peak five per cent in June instead of December this year. Previously it was tipped to peak in December at 5.5 per cent, but now December is set to see a growth of 4.25 per cent.

The unemployment rate is expected to fall to 3.75 per cent by the end of the year where previously, it expected it would remain at 4.25 per cent.

The RBA is also expecting trimmed mean inflation to exceed its target band of 2 to 3 per cent in June, with inflation to hit 3.25 per cent before subsiding to 2.75 per cent in December until June 2024.

Hong Kong plays catch up on track to post stellar gain

Helping boost sentiment after lunch was the Hong Kong Hang Seng playing catchup, on track to post its biggest post-Lunar New Year holiday gain since 2009. A more optimistic tone after the biggest one day loss in US stock market history from Facebook owner Meta Platforms wiping off over US$250 billion in market cap, so pretty much the market cap of Netflix.

Traders sold on the news that the social media giant is looking to back down on videos, trimming its gross margins from the 80 per cent they currently make, following a similar model to YouTube, where the content creator will get paid.

News Corp impresses, REA falls on hot cost guidance

The parent of The Australian and The Daily Telegraph, News Corp (ASX:NWS) posted its highest ever quarterly revenue of $2.7 billion, a 13 per cent pop compared to the same time a year ago. Shares soared 5.7 per cent at $33.38. Newscorp also co-parents Foxtel with Telstra (ASX:TLS), with the pay tv company celebrating a 19 per cent rise to over 3.9 million paid subscribers primarily due to the Binge and Kayo streaming services. There are now over one million Kayo subscribers, compared to 648,000 in the prior year. However, News Corp said revenues in the subscription video services business decreased 3 per cent at $13 million, with rises at the Kayo and Binge businesses offsetting the decline in residential broadcast subscribers.

Meanwhile, News Corp owned REA Group (ASX:REA) declared a record dividend for the first half of the financial year, after a surge in revenue and profits. Revenue came in 37 per cent higher, EBITDA jumped 27 per cent, while after tax profit grew 31 per cent compared to the same time a year ago. The nation’s largest property listing provider unveiled an interim record dividend of 75 cents per share fully franked, up 27 per cent from the prior year. Though investors focused on its increased cost guidance for the full year, rather the earnings that came in ahead of expectations. Shares closed 0.4 per cent lower at $143.45.

Boral tanks, Westpac pops amid broker notes

Boral (ASX:BLD) tanked 41.8 per cent lower at $3.80 as the company traded without the rights to its recently announced $3 billion capital return. This was made up of a $2.65 per share capital reduction totalling $2.9 billion, and a 7 cents per share unfranked dividend totalling $77 million.

Pointsbet (ASX:PBH) jumped 5.1 per cent at $5.14 after regulators in Canada's Ontario gave its tick of approval as a licensed sportsbook in Ontario with the deal slated to be effective from April 4 this year.

Westpac (ASX:WBC) rose 2.1 per cent at $21.52 amid broker notes following the bank’s first- quarter financial year 2022 results. Interestingly, most brokers downgraded its target rating for the bank. However, the note from Morgans cited that while pressure on the net interest margin continues, the broker thinks the outlook looks less concerning. The broker said that Westpac has shown its ability to cut costs, and is Morgan’s preferred bank in the sector. Add rating retained with a price target $29.50.

Its peers Commonwealth Bank (ASX:CBA) fell 1.6 per cent to $94.10, ANZ Bank (ASX:ANZ) declined 1.4 per cent to $27.09 while National Australia Bank (ASX:NAB) bucked the trend, rising 0.9 per cent to $27.91 and Macquarie Group (ASX:MQG) surged 2.9 per cent to $192.34.

Hawkish Fed on the cards?

Investors now turn to the closely watched non-farm payroll figures for January. Some analysts are expecting the data-dependent Federal Reserve to discount the figures due to seasonality factors, ahead of inflation figures next week. If the inflation print heads further north from its current seven handle, a more hawkish Fed could be on the cards.

At the closing bell, the S&P/ASX 200 was 0.6 per cent or 42 points higher at 7,120. Over the week, it closed 1.9 per cent or 132 points higher.

Futures

The Dow Jones futures are pointing to a rise of 196 points.
The S&P 500 futures are pointing to a rise of 52 points.
The Nasdaq futures are pointing to a rise of 285 points.
The SPI futures are pointing to a rise of 25 points when the market next opens.

Best and worst performers

The best-performing sector was industrials, up 1.2 per cent. The worst-performing sector was communication services, down 0.01 per cent.

The best-performing stock in the S&P/ASX 200 was Liontown Resources (ASX:LTR), closing 6.2 per cent higher at $1.46. It was followed by shares in News Corporation (ASX:NWS) and PointsBet Holdings (ASX:PBH).

The worst-performing stock in the S&P/ASX 200 was Seek (ASX:SEK), closing 3.8 per cent lower at $28.31. It was followed by shares in ARB Corporation (ASX:ARB) and Adbri (ASX:ABC).

Asian markets

Japan's Nikkei has gained 0.5 per cent.
Hong Kong's Hang Seng has gained 2.7 per cent.
China's Shanghai Composite is closed due to Chinese New Year.

Wall Street

Over the last four trading days, the Dow Jones gained 1.1 per cent, the S&P 500 gained 1 per cent and the Nasdaq gained 0.8 per cent.

Commodities and the dollar

Gold is trading at US$1806.93 an ounce.
Light crude is trading $0.65 higher at US$90.92 a barrel.
One Australian dollar is buying 71.48 US cents.

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