The Monday Report – 21 February 2022

This story features CSL LIMITED, and other companies. For more info SHARE ANALYSIS: CSL

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

World Overnight
SPI Overnight	7094.00	– 51.00	– 0.71%
S&P ASX 200	7221.70	– 74.50	– 1.02%
S&P500	4348.87	– 31.39	– 0.72%
Nasdaq Comp	13548.07	– 168.65	– 1.23%
DJIA	34079.18	– 232.85	– 0.68%
S&P500 VIX	27.75	– 0.36	– 1.28%
US 10-year yield	1.93	– 0.04	– 2.03%
USD Index	96.04	+ 0.22	0.23%
FTSE100	7513.62	– 23.75	– 0.32%
DAX30	15042.51	– 225.12	– 1.47%

By Greg Peel

Macro v. Micro

Shelling on the Ukraine border had Wall Street tumbling on Thursday night and our futures down -82 on Friday morning, and by late morning the ASX200 was down -95. Buyers then emerged but made only modest headway in the afternoon.

The index closed up a net 4 points for the week, as a strong earnings season to date battled against the ebb and flow of geopolitical developments.

FNArena’s Corporate Result Monitor (link below) continues to show earnings beats running above 50%, but as of Friday we were only around a third of the way through the season, with this week bringing the other two-thirds.

Friday’s was a comparatively short list of daily reporters in the context, but this did not preclude some big moves, while further big moves were posted by companies having reported earlier.

All sectors closed in the red on Friday but two stood out.

CSL ((CSL)) had been the hero of the week in rallying strongly on its earnings result, having been steadily sold down to that point, but on Friday CSL was slapped again by -4.1%, sending healthcare down -3.1%.

Utilities closed down -4.1% with both Origin Energy ((ORG)) and AGL Energy ((AGL)) having a post Eraring announcement bad day.

News overnight is that Atlassian co-founder and eco-warrior Mike Cannon-Brookes has teamed up with Canadian asset manager Brookfield to make an offer for AGL. If successful, the new owners will can the planned demerger into old/new energy companies and simply speed up the exit from coal-fired power.

The bid to date is nevertheless only just above Friday’s closing price.

Star earnings reporter on the day was embattled Magellan Financial Group ((MFG)), which had the shorters scrambling for stock after it announced a share buyback. The shares jumped 18.5%. It’s still down -60% from its high.

QBE Insurance ((QBE)) is known as a perennial disappointer and by that measure did not disappoint with its result, which had the stock down -8.7%.

Inghams Group ((ING)) has struggled from day one of covid and omicron has only rubbed the chicken salt into the wound. It fell -5.1%.

Incitec Pivot ((IPL)) did not report earnings, but did report a shutdown of its Louisiana ammonia plant after a technical incident. It fell -6.1%.

The best performing sector on Friday were materials, in only falling -0.2%. Investors continued to show their displeasure at Twiggy’s own eco-warrioring and sent Fortescue Metals ((FMG)) down another -3.3%, but gold and coal miners filled out the top five winners’ board after Magellan.

The result season picks up the pace again from today, ahead of an avalanche towards the end of the week. Meanwhile, Putin is yet to invade, Wall Street continued to run scared on Friday night and our futures were down another -51 on Saturday morning.

Play it Safe

Another week has gone by and nothing has changed. Theories abound but the conclusion is consistent: nobody knows.

Biden insists Putin is definitely set to invade but still the US secretary of state will visit his Russian counterpart this week.

Friday was another session of up-down-up-down on Wall Street as traders clutched every little straw of new information, of which realistically there was none. While the US earnings season continues, it’s into its long tail, so unlike our market there’s not much else to impact on sentiment at present.

There may have been some interested buyers about on Friday night but the general feeling was don’t go home long ahead of a long weekend – not under these circumstances. There has been much talk of Putin perhaps waiting for the Olympics to end, so as not to upset his mate, and last night they ended.

It’s no more than a waiting game.

For the record, the trend in this US quarterly earnings season of high-flying growth stocks being shot out of the sky continued on Friday night, with streaming service Roku and online sports betting company DraftKings each dropping -22%.

Otherwise, there’s still much debate about Fed policy, but given the upheaval that would follow a Russian invasion and subsequent sanctions, particularly on oil exports, nothing is set in stone.

If Putin invades tonight, Wall Street is closed.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1899.20	– 1.10	– 0.06%
Silver (oz)	23.92	+ 0.10	0.42%
Copper (lb)	4.55	+ 0.01	0.16%
Aluminium (lb)	1.49	– 0.00	– 0.28%
Lead (lb)	1.07	+ 0.00	0.27%
Nickel (lb)	11.11	+ 0.10	0.88%
Zinc (lb)	1.64	– 0.01	– 0.58%
West Texas Crude	91.07	– 0.52	– 0.57%
Brent Crude	93.54	+ 0.66	0.71%
Iron Ore (t)	133.50	+ 2.85	2.18%

Nothing much to see here, other than iron ore made a bit of a comeback.

The Aussie is down -0.1% at US$0.7182.

The SPI Overnight closed down -51 points or -0.7% on Saturday morning.

The Week Ahead

Aside from it being the biggest week in the local earnings season this week by a margin, we’ll also begin to see lead-in data for Australia’s December quarter GDP result, due next week.

Wednesday brings construction work done and the wage price index – the latter critical to the RBA’s own rate hike timing. Thursday it’s private sector capex.

Wall Street will begin the week with the Conference Board’s monthly consumer confidence survey and end with the Michigan Uni bi-monthly consumer sentiment survey (no difference – just semantics), along with durable goods orders and PCE inflation.

The RBNZ holds a policy meeting on Wednesday.

The US is closed tonight and Japan is closed on Wednesday.

For upcoming earnings result dates, and a summary of results to date, please refer to the FNArena Corporate Results Monitor.

The Australian share market over the past thirty days…

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BHP	BHP Group	Downgrade to Hold from Add	Morgans
BRG	Breville Group	Upgrade to Buy from Hold	Ord Minnett
CSL	CSL	Upgrade to Overweight from Equal-weight	Morgan Stanley
		Upgrade to Accumulate from Hold	Ord Minnett
EDV	Endeavour Group	Upgrade to Neutral from Underperform	Credit Suisse
EVN	Evolution Mining	Downgrade to Underperform from Neutral	Credit Suisse
		Downgrade to Neutral from Outperform	Macquarie
		Downgrade to Hold from Add	Morgans
FBU	Fletcher Building	Upgrade to Outperform from Neutral	Macquarie
FMG	Fortescue Metals	Downgrade to Neutral from Outperform	Macquarie
GMG	Goodman Group	Downgrade to Hold from Accumulate	Ord Minnett
GOZ	Growthpoint Properties Australia	Upgrade to Outperform from Neutral	Macquarie
NEA	Nearmap	Upgrade to Neutral from Underperform	Macquarie
NWL	Netwealth Group	Upgrade to Buy from Neutral	Citi
		Downgrade to Accumulate from Buy	Ord Minnett
ORG	Origin Energy	Downgrade to Neutral from Outperform	Credit Suisse
		Downgrade to Lighten from Hold	Ord Minnett
TWE	Treasury Wine Estates	Upgrade to Outperform from Neutral	Credit Suisse
WES	Wesfarmers	Upgrade to Neutral from Sell	Citi

For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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