ASX checks into Easter as flight stocks take-off, closes 1.1% higher for the week

Market Reports

by Melissa Darmawan

Aussie shares checked into Easter as flight stocks took off, pulling the local bourse higher for its second straight day. The shine from energy and mining stocks with the charge from tech closed off the four day week with a pop.

The S&P/ASX 200 was 0.6 per cent or 44 points higher at 7,523. Over the last four trading days, it gained 1.1 per cent or 81 points.

The lead from US Delta airlines after a bullish outlook despite jet fuel prices set to weigh offset the chaos from checking-in luggage as Qantas (ASX:QAN) soared 7.1 per cent to a two-month high of $5.45 while travel agent Webjet (ASX:WEB) was neck to neck, adding 7.5 per cent to $5.85 as the two best performers of the session. The rally in Qantas was supported by Moody upgrading the airline’s debt rating to stable as flying returns to normal.

Only the financial sector dabbled in red for what was a weak performance from banks. The nation’s largest bank Commonwealth Bank (ASX:CBA) scratched lower by 0.06 per cent to $106.50, Westpac (ASX:WBC) fell 0.7 per cent to $24.11 while National Australia Bank (ASX:NAB) fell by the same amount, 0.7 per cent at $32.85 with ANZ Bank (ASX:ANZ) closed 0.3 per cent to $27.42. Macquarie Group (ASX:MQG) bucked the trend closing 0.4 per cent higher to $203.68.

However Bank of Queensland (ASX:BOQ) was the worst performer after the lender reported a first half net interest margin on a cash basis of 1.74 per cent versus 1.95 per cent year over year. Profit came in 38 per cent higher compared to the prior corresponding period, however, the gains were from one-off items which lifted its net interest income and hence came in below estimates.

Interestingly, Citi believed that the company's forecasts was handsomely beaten by Bank of Queensland. On first glance, the first half cash earnings were no less than 13 per cent above market consensus however, the source of the upward surprise appears to be attributed to be from writing back $22 million in prior loan provisions the broker said. The negative surprise in total revenues stems from weak housing growth in the newly acquired ME franchise. The analysts cited that the bank's upbeat expectations for the second half should have been well-received however the sell off showed that it wasn't the case.

The focus on China with traders betting on additional stimulus and potentially a benchmark rate cut in banks' reserve requirement ratios helped buoy the local iron ore miners. Fortescue Metals (ASX:FMG) added 1.3 per cent to $21.61, Rio Tinto (ASX:RIO) eked out a gain of 0.03 per cent to $120.54 while BHP (ASX:BHP) closed 1.4 per cent higher to $52.50 as a big contributor to the performance today. Energy players rallied with the circle with Woodside Petroleum (ASX:WPL) rose 1.1 per cent at $32.39 and Beach Energy (ASX:BPT) closed 1.3 per cent higher at $1.60.

There was no reprieve for those locked down in Shanghai after President Xi said China must not relax its Covid zero policy approach. A sharp drop in commodity imports indicating a slowdown in demand is causing investors to be even more concern as they monitor the congestion at docks amid a lack of skilled staff, adding to further jitters on food shortages and inflation.

On the backdrop of inflationary pressures, inflation hedge miners rallied with Northern Star (ASX:NSM) jumped 4.2 per cent at $11.44, Newcrest Mining (ASX:NCM) rose 1.8 per cent to $28.41 and Evolution Mining (ASX:EVN) closed 2.4 per cent higher at $4.66.

Accounting software firm Xero (ASX:XRO) rose 2 per cent to $102.78 and Block Inc (ASX:SQ2) closed 1.9 per cent higher to $168.15.

The jobs report for March from the Australian Bureau of Statistics posted the unemployment rate at 4 per cent unchanged from February's 13.5 year low versus the 3.9 per cent that was expected. The Aussie three-year bond yields hit a one-week low of 2.37 per cent amid this as hawks were expecting the report to cement the central bank’s stance to hike interest rates. This followed central banks in New Zealand and Canada after they increased their cash rates by half a point this week which is what market participants expect the Federal Reserve will also do next month.

Offshore, European stocks and bonds are steady as investors await the outcome from the European Central Bank for cues on the path of monetary policy. Economists expects the central bank to maintain its withdrawal of stimulus.

Meanwhile, market participants are also looking to the corporate earnings season amid concerns on how pricing pressures can be passed down to the consumer and what it could mean to its profit margins after a week dominated by inflation prints from China, UK and the USA. Talks among analysts is that a peak in inflation is near after US producer prices accelerated to over 11 per cent year on year in March.

Back home, the Australian sharemarket will open on Tuesday 19 April.

Have a great Easter and stay safe!

Futures

The Dow Jones futures are pointing to a rise of 59 points.
The S&P 500 futures are pointing to a rise of 8 points.
The Nasdaq futures are pointing to a rise of 40 points.
The SPI futures are pointing to a rise of 40 points when the market next opens.

Broker moves

Barrenjoey rates Incitec (ASX:IPL) as overweight with a price target of $4.50 and Orica (ASX:ORI) as neutral with a price target of $16. Shares in Orica closed 0.4 per cent higher to $16.21 while shares in Incitec closed 0.8 per cent higher at $4.

Morningstar cut National Australia Bank’s (ASX:NAB) rating to a sell from hold while boosting Newcrest Mining’s (ASX:NCM) rating to a buy and South32 (ASX:S32) to a hold vs sell. NAB closed 0.7 per cent lower to $32.85, Newcrest Mining closed 1.8 per cent higher to $28.41while South32 closed 1 per cent higher to $5.17.

Citi downgraded Iluka Resources (ASX:ILU) to sell from neutral with a retained price target of $10.50. The broker cut its rating noting that shares have soared 35 per cent in six months at a time when property statistics in China have deteriorated and points out that there will be no rare earths revenue until the Eneabba rare earths refinery starts in 2025. As a result, Citi has reduced its earnings per share forecasts for 2022 and 2023 by 16 per cent and 19 per cent respectively. Shares closed 1 per cent lower to $12.42.

Best and worst performers

The best-performing sector was Materials, up 1.3 per cent. The worst-performing sector was Financials, down 0.3 per cent.

The best-performing stock in the S&P/ASX 200 was Webjet (ASX:WEB), closing 7.5 per cent higher at $5.85. It was followed by shares in Qantas Airways (ASX:QAN) and Paladin Energy (ASX:PDN).

The worst-performing stock in the S&P/ASX 200 was Bank of Queensland (ASX:BOQ), closing 6.3 per cent lower at $7.99. It was followed by shares in Zip Co (ASX:Z1P) and Ingenia Group (ASX:INA).

Asian markets

Japan's Nikkei has gained 1.2 per cent.
Hong Kong's Hang Seng has gained 0.8 per cent.
China's Shanghai Composite has gained 1.5 per cent.

Wall Street

Over the last three trading days, the Dow Jones lost 0.1 per cent, the S&P 500 lost 1.2 per cent and the Nasdaq lost 1.9 per cent.

Commodities and the dollar

Gold is trading at US$1974.26 an ounce.
Iron ore is 2.2 per cent lower at US$151.40 a ton.
Iron ore futures are pointing to a rise of 0.2 per cent.
Light crude is trading $0.89 lower at US$102.90 a barrel.
One Australian dollar is buying 74.63 US cents.

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