Russia adds more troops to Ukraine border, triggering afternoon retreat: ASX closes 0.2% higher

Market Reports

by Melissa Darmawan

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Jitters triggered on Russian troops amassing at Ukraine border

The landing this afternoon was cushioned by company earnings which impressed investors earlier today. The local bourse rallied to touch fresh four week highs, adding 0.9 per cent to then close at session lows with a marginal gain, continuing its winning streak for a second straight day.

Equity markets and US futures moved lower after senior Biden administration officials said that Russia added around 7,000 troops at the border with Ukraine, stating that the claims by Moscow withdrawing its troops were “false.”

Investors have been navigating concerns around mounting tensions between Russia and Ukraine while attempting to focus on the outlook ahead amid the landscape of global central banks pivoting their attention to combat surging hot inflation.

The slew of commentary from central bankers, fresh economic data plus company results has seen traders attempt to re-adjust their portfolio as financial conditions are set to tighten this year.

Given the changing dynamics, investors are faced with lingering uncertainty which has underpinned the volatility of markets around the world.

Thematics from reporting season

However certain thematics have emerged so far from this reporting season with companies largely weathering the recent Omicron disruptions. Tightness in the labour market affecting productivity was prevalent while supply chain issues dragged. Meanwhile, margin pressure was maintained.

It will be interesting to see what would happen if pricing pressures rise and what headwinds or tailwinds it could present. Nevertheless, cost cutting agendas have been on the cards with the likes of Westpac (ASX:WBC) unveiling its intention and much success from Computershare (ASX:CPU) to help maintain its trajectory. 

Not surprisingly, companies have held back from providing earnings guidance amid the uncertainties.

Healthcare leads again

Healthcare shares led the gains with a 3 per cent rally lifted by CSL (ASX:CSL) closing 5.1 per cent higher at $277 while consumer discretionary led the falls by 3.4 per cent dragged down by Wesfarmers' (ASX:WES) tumble. It was the worst performer of the session, diving 7.5 per cent to $50.81 for its worst day since March 2020 after the Bunnings parent gave its interim dividend a haircut by 9 per cent. A fall in profit driven was compounded by supply chain disruptions and rising costs and store closures. Investors combed through the formal results with the group bottom-line numbers having been pre-released in January. Earnings from both the Bunnings and Officeworks chains came in below expectations as margin pressure intensified in the half. The company did not provide earnings guidance for financial year 2022, but expects to see higher costs continue for Bunnings, Officeworks and Kmart due to supply chain issues and inflation.

A couple of shooting stars from Challenger (ASX:CGF), which jumped 6.7 per cent to $6.74 as its first-half profit update shone. IPH shares (ASX:IPH) skyrocketed 9.2 per cent to $9.03 as the best performer of the session after reporting revenue growth of 6 per cent, thanks to strong performances from Australian, New Zealand and Asian activities.

Sequoia Financial Group (ASX:SFG) posted a 51 per cent surge in revenue to $79.1 million, a 57 per cent increase in net profit after tax to $2.6 million during the first half of the financial year. Shares closed 4.9 per cent higher at 75 cents.

Cleanaway Waste Management (ASX:CWY) soared 4.2 per cent to $2.99 after the group's first-half financial year 2022 operating earnings and interim dividend came in above our estimates. The company guided to second-half earnings being broadly similar to the first half.

Tabcorp (ASX:TAH) jumped 4.1 per cent to $5.36 as group net profit beat expectations, thanks to a operating earnings margin of 20 per cent in its soon-to-be spun off lotteries division.

Elsewhere, Telstra (ASX:TLS) declined 4.2 per cent to $3.90 despite reiterating its full-year guidance and maintaining its dividend after its profit sunk by more than double. Investors focused on weaker than expected growth in the key metric of average revenue per user in its mobile business, rather than first-half financial year 2022 underlying operating earnings and an interim dividend that met expectations. The telco giant did unveil strong results in post-paid mobile subscribers of 84,000, versus estimates of 17,000.

Domain (ASX:DHG) sank 6.2 per cent to $4.37 after it posted earnings for first-half financial year 2022 below estimates with management flagging to shareholders that cost pressures is set to continue into the second half.

Jobless rate steady, part time employment surges

Not to mention, investors also digested the mixed labour figures with the jobless rate steady at 4.2 per cent while the participation rate edged higher to 66.2 per cent in January from the month before as per the Australian Bureau of Statistics.

There were 12,900 new jobs added to the economy, pulling back from the 64,800 new jobs in December. However the interesting point of the report was that part-time employment increased by 30,000 people from 23,300 people in December. Hours worked fell 8.8 per cent in January amid Summer holidays and the Omicron wave which ripped through the nation that saw millions of Aussies in isolation leading to staff shortages.

After a week of commentary from the Reserve Bank, yesterday deputy governor Guy Debelle said that an interest rate rise in the next 12 months is possible, but not inevitable. However, economists think otherwise with rate hikes as soon as June are expected. The central bank believes that the uptick in inflation would abate and was prepared to be patient to be sure.

Outlook ahead

Looking ahead, Wall St is set to receive its weekly jobless claims and data on housing starts plus manufacturing. Tomorrow, Aussie investors will have a day off from economic news as the reporting season continues with QBE (ASX:QBE) next to unveil its results.

At the closing bell, the S&P/ASX 200 was 0.2 per cent or 11 points higher at 7,296.

Futures

The Dow Jones futures are pointing to a fall of 154 points.
The S&P 500 futures are pointing to a fall of 27 points.
The Nasdaq futures are pointing to a fall of 117 points.
The SPI futures are pointing to a fall of 5 points when the market next opens.

Best and worst performers

The best-performing sector was healthcare, up almost 3 per cent followed by industrials, up 0.9 per cent and energy gained 0.8 per cent. The worst-performing sector was consumer discretionary, down 3.4 per cent, followed by communication services, down 3 per cent and information technology, down 2.9 per cent.

The best-performing stock in the S&P/ASX 200 was IPH (ASX:IPH), closing 9.2 per cent higher at $9.03. It was followed by shares in Challenger (ASX:CGF) and CSL (ASX:CSL).

The worst-performing stock in the S&P/ASX 200 was Wesfarmers (ASX:WES), closing 7.5 per cent lower at $50.81. It was followed by shares in Block (ASX:SQ2) and Novonix (ASX:NVX).

Asian markets

Japan's Nikkei has lost 1 per cent.
Hong Kong's Hang Seng has lost 0.6 per cent.
China's Shanghai Composite has gained 0.1 per cent.

Commodities and the dollar

Gold is trading at US$1874.04 an ounce.
Iron ore is 3.0 per cent higher at US$140.30 a ton.
Iron ore futures are pointing to a fall of 3.3 per cent.
Light crude is trading $1.18 lower at US$90.65 a barrel.
One Australian dollar is buying 71.81 US cents.

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