Russia & Ukraine tensions shoot down shares, Seven Group flags lift in FY22 earnings: ASX to fall

Market Reports

by Melissa Darmawan

European markets slumped, Asian markets fell while ASX lifted set-off on hope as Presidents Joe Biden and Vladimir Putin agreed in principal to hold a summit on the basis that “if an invasion hasn’t happened”. Meanwhile the Kremlin said the summit was not a done deal. Wall St was closed for Presidents' Day holiday.

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Mounting Ukraine tensions push markets lower

Summit on or off? I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to fall as investors continued to digest mixed signals between Russia and Ukraine.

Following a report that French President Emmanuel Macron proposed a meeting between President Joe Biden and Vladimir Putin, markets found a sanguine moment. Equities rallied, gold lost its shine amid the West, setting aside the warning of an imminent invasion. The hopes of a diplomatic resolution helped calm investor’s nerves.

Then it all changed after the Kremlin said that the summit wasn’t a done deal, sending equity markets lower in Europe. Vladimir Putin also said that Russia will recognize the independence of two breakaway regions of eastern Ukraine, intensifying a dispute with the West as the US warns Moscow that this could serve as a precursor to an invasion.

From optimism to doubt, investors are on tenterhooks that the situation can escalate at a blink of an eye. Amid the engagement of diplomatic talks to help take the tension off, the risk for an invasion continues to percolate as market participants monitor the situation.

Wall St and the US bond market was closed on Monday for Presidents Day after posting losses last week. Technology stocks on the Stoxx 600 tumbled to its lowest point since March last year. The price of nickel, a key ingredient in electric car batteries, hit the highest level in more than a decade amid this geopolitical tension on a tight market. All sectors across the major indexes in Europe slumped.

ASX Monday wrap

Meanwhile, reporting season continues to unfold locally, with the A2 Milk Company (ASX:A2M) as the best performing stock, after the company upgraded its revenue guidance, closing 11.1 per cent higher at $5.89. It was followed by shares in AGL Energy (ASX:AGL) and Endeavour (ASX:EDV).

AGL Energy (ASX:AGL) soared 10.6 per cent to $7.92 after the energy giant rejected a $7.50 a share takeover offer from billionaire Atlassian founder Mike Cannon-Brookes and Canadian investment giant Brookfield, stating that the unsolicited bid undervalued the company despite it being offered at a premium of 4.7 per cent to AGL’s closing price of $7.16 a share on Friday.

While the worst performer was Tyro Payments (ASX:TYR) after its first-half financial year 2022 net loss came in steeply higher than expected, amid shrinking margins and rising operating expenditure, closing 25.9 per cent lower at $1.61.

It was followed by shares in PointsBet Holdings (ASX:PBH) and Super Retail Group (ASX:SUL).

Super Retail (ASX:SUL) tumbled 9.5 per cent to $11.63 as investors focused on Rebel Sport’s weak sales performance in the first six weeks of the second half of financial year 2022, and increased promotional spending in the BCF outdoor business, versus first-half earnings.

China’s plan for a centralised platform to buy iron ore

Elsewhere, China’s means to curb soaring iron ore prices is to establish a centralised platform for suppliers to negotiate sales, according to Bloomberg. Beijing wants purchases of the steelmaking material to be facilitated through a single state-backed platform versus it being conducted independently.

Nevertheless, with the geopolitical tensions whipsawing markets, oil prices rallied, gold is sitting comfortably at US$1,900, while corporate earnings have provided a cushion for less than steeper fall. Don’t forget, investors are also navigating through the outlook of interest rate hikes with JP Morgan forecasting nine interest rate hikes in the US this year.

Figures around the globe

At the closing bell, Paris fell over 2 per cent to a four week low, Frankfurt lost 2.1 per cent to levels around March 2021, and London’s FTSE shed 0.4 per cent to a three week low.

Asian markets closed lower. Tokyo’s Nikkei lost 0.8 per cent, Hong Kong’s Hang Seng lost 0.7 per cent while China’s Shanghai Composite closed flat, down 0.1 points.

Yesterday, the Australian sharemarket closed 0.2 per cent higher at 7,234.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a fall of almost 1 per cent.

Local economic news

Today ANZ and Roy Morgan’s weekly consumer confidence figures are due.

Company news

Seven Group’s (ASX:SVW) profit has more than doubled in the first half of the 2022 financial year, lifted higher by Boral’s contribution. Trading revenue rose 3.1 per cent to $3.96 billion while EBIT rose 28.9 per cent to $510.9 million. Net profit soared 235.6 per cent to $1.22 billion, which included $757 million relating to the Boral acquisition.

On an underlying continuing operations basis, the net profit after tax of $302 million was up 21.5 per cent for the half-year. Kerry Stokes' Seven Group has lifted earnings guidance to double digits from 8 to 10 per cent for the 2022 financial year after the conglomerate upgraded guidance for its Coates Hire business and confirmed they are set to pay down a $2.97 billion loan facility in full by March.

Shares in Seven Group (ASX:SVW) closed 0.4 per cent higher at $22.36 yesterday.

Reporting season

There are nine companies set to release a trading update.

Alumina (ASX:AWC)
Cochlear (ASX:COH)
Coles Group (ASX:COL)
Costa Group Holdings (ASX:CGC)
Estia Health (ASX:EHE)
G8 Education (ASX:GEM)
Hub24 (ASX:HUB)
Monadelphous Group (ASX:MND)
Seven Group Holdings (ASX:SVW)

Ex-dividend

There are six companies trading ex-dividend today,

Amcor PLC (ASX:AMC) is paying 16.85 cents unfranked
IPH (ASX:IPH) is paying 14.5 cents 40 per cent franked
MA Financial Group (ASX:MAF) is paying 12 cents fully franked
Reckon (ASX:RKN) is paying 2 cents fully franked
Tabcorp Holdings (ASX:TAH) is paying 6.5 cents fully franked
Wesfarmers (ASX:WES) is paying 80 cents fully franked

Dividend-pay

There is one company set to pay eligible shareholders today, Transurban Group (ASX:TCL).

Commodities

Iron ore has gained 4.1 per cent to US$139. Its futures point to a 4.01 per cent gain.

Gold has gained $6.40 or 0.3 per cent to US$1,906 an ounce. Silver is down $0.02 or 0.1 per cent to US$24.02 an ounce.

Oil has gained $2.88 or 3.2 per cent to US$93.95 a barrel.

Currencies

One Australian Dollar at 8:10 AM has strengthened since yesterday (Mon: 71.69 US cents), buying 71.96 US cents, 52.89 Pence Sterling, 82.62 Yen and 63.57 Euro cents.
 

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