Global stocks extend slide over Ukraine tension, Rio unveils record profit: ASX to fall


Global sell-down after ASX, Asian markets rallied triggered after several cyber-attacks and declared a state of emergency happened in Ukraine.

Good morning. Deeper in the red. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to reverse gains after a sell-down continued globally.

S&P 500 drops further into correction territory

US stocks slid as escalating tensions between Russia and Ukraine, plus new sanctions from the West weighed on the market.

Investors continued to take risk off the table with the S&P 500 extending its losses for its fourth straight day, falling deeper into a correction down worse than 10 per cent from its recent high on January 3rd, while the Dow fell for its fifth straight day.

Ukraine imposes state of emergency

Ukraine declared a state of emergency that was passed by Parliament overwhelmingly and set to be effective midnight Ukraine time. What it means is that the Ukraine authorities will have the power to restrict movement, put down curfews, prevent mass gatherings when it comes to time, as the country prepares for the worst.

The escalating tension is continuing to drive up the price of oil as investors watch for any additional energy related sanctions on Russia, which is the third biggest oil producer in the world and supplies the majority of oil in the European Union.

All this coming as persistent and elevated inflation is expected to surge which could affect the Federal Reserve's move with a rate rise as soon as next month.

Pope calls for day of prayer, fasting for peace in Ukraine

What was also interesting is that we heard from Pope Francis, the head of the Catholic Church who called on people to pray and fast for peace in Ukraine. He also spoke out along the messages of peace and unification and not division by breaking international norms and international law. This comes after Putin recognised two breakaway regions' independence. A move that was seen by world leaders as a violation of international law protecting Ukraine.

To add some colour, Ukraine is an incredibly natural resource rich country. It has one of the largest reserves of uranium, titanium and iron ore in the entire world, let alone grains as well. While Russia’s main exports are mineral fuels and oils. The impact if things get worse could impact this commodity market and send inflation higher. There’s a reason that Russia wants Ukraine.

Let’s change gears to moves that happened locally.

ASX Wednesday review

Macquarie rated Hub24 (ASX:HUB) as an outperform with a raised price target of $32.40. Its first half results were ahead of the broker’s expectation and they expect the performance on revenue margins to continue. Hub24 is now Macquarie's preferred exposure among wealth platforms.

The best-performing stock was HUB24 (ASX:HUB) amid several broker upgrades with Macquarie being one of them, closing 9.9 per cent higher at $27.11. It was followed by shares in Paladin Energy (ASX:PDN) and Tyro Payments (ASX:TYR).

The worst-performer was Domino Pizza Enterprises (ASX:DMP) with its share price melting 14 per cent lower at $86.13 to close to a one year low after posting its half-year results for the 27 weeks ending January 2. The pizza chain posted a 5.3 per cent fall in its underlying profits and flagged to shareholders that sales growth is set to be “slightly below” the 3 to 5 year outlook. Revenue lifted 10.2 per cent to $1.21 billion beating estimates while EBITDA fell 2.5 per cent to $212.8 million, which was a miss.

It was followed by shares in Costa Group Holdings (ASX:CGC) and JB Hi-Fi (ASX:JBH).

Woolworths (ASX:WOW) jumped 1.4 per cent to $35.68 after the nation’s largest grocer posted first-half financial year 2022 earnings ahead of expectations. An acceleration in supermarket sales growth in the December quarter and growing margins on food sales underpinned its results. The company expects improved financial performance in the second half of financial year 2022 as the trading environment normalises.

Meanwhile, smaller rival Coles (ASX:COL) rose 3.4 per cent to $17.85 amid several broker upgrades after the nation's second-largest supermarket results on Tuesday. Coles defied market concerns of the supply chain disruption and rising costs with a strong supermarket result, attributed by cost savings offsetting pandemic related challenges.

The main thing about war and markets is uncertainty and no one likes uncertainty. When uncertainty eases, markets improve. We saw that on the ASX, Asian markets and at the start of European markets which I’ll go through shortly.

We still haven’t heard from China and their view on Russia’s move which could be a catalyst either way to move or see markets tumble, depending if they support Russia or not.

Figures around the globe

At the closing bell, the Dow Jones lost 1.4 per cent to 33,132, the S&P 500 fell 1.9 per cent to 4,222 while the Nasdaq dropped 2.6 per cent to 13,038.

Across the S&P 500 sectors, energy was the only winner, up 1 per cent. The rest closed lower led by consumer discretionary, staples and healthcare.

The yield on the 10-year treasury note rose 6 basis points to 2 per cent, gold rose on a weaker greenback.

Across the Atlantic, European markets closed mixed amid news during trade of a broad cyberattack against the Ukrainian government and bank websites. This sent the major indexes to their session lows.

Paris fell 0.1 per cent, Frankfurt lost 0.4 per cent and London’s FTSE added 0.1 per cent. In UK trade, miners and oil majors fell while Rio Tinto lost 2.2 per cent. The miner warned shareholders that US sanctions on Russia could disrupt aluminium supply.

Asian markets closed higher. Hong Kong’s Hang Seng added 0.6 per cent on reports that regulators tapped China Huarong Asset Management and its peers to buy property assets from embattled developers. China’s Shanghai Composite added 0.9 per cent higher while Tokyo’s Nikkei closed for a national holiday.

Yesterday, the Australian sharemarket closed 0.6 per cent higher at 7,206 with almost a broad base rise led by information technology with property and utilities as the laggards.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to an 1.3 per cent fall.

Local economic news

Business spending has been underpinning by the availability and help of government incentives. Today, the Australian Bureau of Statistics is set to release private capital expenditure (CAPEX) for the December quarter.

A big range from 0.5 per cent to 4 per cent for the period, leading to market expectations for CAPEX to come in at 2.5 per cent.

This would more than recover the Delta-lockdown-related decline of 2.2 per cent in the September quarter, with an annual growth for 2021 of 10 per cent.

Also, CAPEX will give us a glimpse of the December quarter GDP blueprint which is slated next Wednesday after the Reserve Bank board meeting on Tuesday.

The Bureau of Statistics is set to release its average weekly earnings for November and the detailed estimates on the job market for January.

Company news

Rio Tinto (ASX:RIO) has unveiled its second biggest profit in Aussie corporate history. The mining giant is set to reward shareholders with the nation’s biggest ever dividend worth $23.24 billion (US$16.8 billion) attributed to record prices for iron ore, copper and aluminium.

Underlying earnings for 2021 came in at $29.6 billion (US$21.4 billion), the biggest in Rio’s 149-year history, leading to a $6.60 (US$4.79) per share of final and special dividends.

The final and special dividends took the miner’s total dividends for the year to a smashing $14.40 (US$10.40) per share.

BHP took the record in 2011 for its US$21.68 billion underlying profit in a year amid a stronger Aussie dollar compared to today. This means the profit by Rio is significantly larger than the BHP’s 2011 results.

Shares in Rio Tinto (ASX:RIO) closed 1.2 per cent higher at $119.87 yesterday.

Reporting season

There are over 19 companies set to release earnings updates today.

Appen (ASX:APX)
Atlas Arteria (ASX:ALX)
Auckland International Airport (ASX:AIA)
Blackmores (ASX:BKL)
Brambles (ASX:BXB)
Coventry Group (ASX:CYG)
Cromwell Property Group (ASX:CMW)
Eagers Automotive (ASX:APE)
Flight Centre Travel Group (ASX:FLT)
Iluka Resources (ASX:ILU)
Insignia Financial (ASX:IFL)
Link Administration Holdings (ASX:LNK)
Nine Entertainment Co. Holdings (ASX:NEC)
Perpetual (ASX:PPT)
Qantas Airways (ASX:QAN)
Qube Holdings (ASX:QUB)
Ramsay Health Care (ASX:RHC)
Reece (ASX:REH)
Southern Cross Media Group (ASX:SXL)
Zip Co (ASX:Z1P)

Ex-dividend

There are 13 companies trading ex-dividend today.

Baby Bunting Group (ASX:BBN) is paying 6.6 cents fully franked
BHP Group (ASX:BHP) is paying 210.7334 cents fully franked
Breville Group (ASX:BRG) is paying 15 cents fully franked
Challenger (ASX:CGF) is paying 11.5 cents fully franked
Enero Group (ASX:EGG) is paying 6 cents fully franked
Hansen Technologies (ASX:HSN) is paying 7 cents 50.13 per cent franked
OZ Minerals (ASX:OZL) is paying 18 cents fully franked
Platinum Asia (ASX:PAI) is paying 2.5 cents fully franked
Pact Group Holdings (ASX:PGH) is paying 3.5 cents 65 per cent franked
Platinum Capital (ASX:PMC) is paying 3 cents fully franked
Tamawood (ASX:TWD) is paying 11 cents fully franked
Whitehaven Coal (ASX:WHC) is paying 8 cents unfranked
Woodside Petroleum (ASX:WPL) is paying 146.7505 cents fully franked

Dividend-pay

There are three companies set to pay eligible shareholders today, Amcil (ASX:AMH), Flagship Investments (ASX:FSI), and Goodman Group ASX:GMG).

Commodities

Iron ore has gained 1 per cent to US$138.05. Its futures point to a 0.4 per cent gain.

Gold has gained $4.70 or 0.3 per cent to US$1912 an ounce. Silver is up $0.29 or 1.2 per cent to US$24.65 an ounce.

Oil has gained $0.14 or 0.2 per cent to US$92.05 a barrel.

Currencies

One Australian Dollar at 8:20 AM strengthened after we received the wage growth data yesterday, buying 72.33 US cents (Wed: 72.19 US cents), 53.42 Pence Sterling, 83.18 Yen and 63.99 Euro cents.

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