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Risk-off moves on global financial markets curbed a second day of share-market gains as investors fretted about the economic fallout from the Russia-Ukraine crisis.
The S&P/ASX 200 climbed 51 points or 0.73 per cent.
The last major session of the interim earnings season produced more winners than losers. Gold miners, oil producers and agribusinesses rallied on fresh Russian sanctions. Lenders declined with market rates.
What moved the market
A resilient ASX battled deteriorating US equity futures and a surge in energy prices after western nations tightened the screws on the Russian economy in what some commentators called the “weaponisation of money”. The Russian rouble fell 30 per cent today to an all-time low.
The escalation in sanctions doused hopes the ASX would mimic Friday’s 2.51 per cent surge on the Dow, the blue-chip average’s biggest gain in more than a year.
S&P 500 futures skidded 104 points or 2.36 per cent this afternoon after the European Union blocked Russia’s central bank from most of its reserves and kicked some of Russia’s banks off the international payments system. A fall of that scale tonight would erase Friday’s 2.24 per cent rally.
Dow futures fell 561 points or 1.65 per cent after President Vladimir Putin put Russia’s nuclear weapons on high alert.
Investment manager Natixis suggested overtly bearish investor sentiment might offer an opportunity for investors with longer-term timeframes.
“Retail sentiment has now moved below the lows seen at the peak of the COVID selloff in 2020 to nearly 10-year lowsand other investors bases have followed suit similarly,” Natixis portfolio strategist Garrett Melson said.
“Sentiment is most reliable as a contrarian indicator at extremes, which current measures certainly suggest we are. While we continue to expect inflation and the path of policy rates to be the key driver of markets contributing to volatility in the first half of the year, it’s hard to be too bearish after we’ve already endured so much multiple rerating and sentiment as depressed as it is.”
Much of today’s gains came in the closing auction, where institutional traders find the buying/selling depth they need to buy in bulk. The ASX 200 bounced 20 points in the auction.
Back home, an above-average interim earnings season concluded with updates from InvoCare, Waypoint REIT, Imugene, Allkem and Sandfire Resources (more below).
“Just under 67 per cent of the companies that reported half-year results lifted profits – above the 60 per cent long-term average,” CommSec’s economics team wrote.
“Almost 88 per cent of the 138 companies reported a statutory profit – the most in two years and in line with the long-term average,” they added.
Companies were seen to be harbouring cash ahead of what is expected to be a series of rate rises in the next few years. Aggregate cash holdings increased by 60 per cent to record levels, according to CommSec. Costs increased, but 52 per cent of companies elected to increase dividend payouts.
Winners’ circle
A long-awaited consolidation in the Buy Now Pay Later space kicked off after Zip Co announced it will acquire US-facing rival Sezzle in an all-scrip merger. Sezzle shareholders will receive 0.98 Zip ordinary shares for every share, valuing the firm at around $491 million.
The transaction offers Sezzle shareholders a 22 per cent premium to the last traded price. Trade in both companies was halted ahead of today’s open while Zip Co raised capital to strengthen its balance sheet and fund growth.
GrainCorp jumped 5 per cent as grain prices responded to the threat of supply disruptions. (Russia and Ukraine are both major growers.) Wheat futures increased 8 per cent this afternoon after trading at a nine-year high last week.
Oil producers rallied after crude shot back through US$100 a barrel on the threat of disruption to Russian supplies. Brent crude was lately up US$5.22 or 5.3 per cent at US$103.15 a barrel. Santos gained 1.54 per cent. Woodside Petroleum put on 2.11 per cent.
Gold also surged as traders sought havens. The yellow metal climbed US$25.40 or 1.35 per cent to US$1,913 an ounce. Gold Road Resources tacked on 5.5 per cent, Regis Resources 4.55 per cent and Newcrest 3.42 per cent.
Perseus Mining rallied 4.89 per cent after entering an agreement to buy Canada’s Orca Gold. Perseus, which already owns 15 per cent of the shares in Orca, will pay 0.56 Perseus shares for every outstanding Orca share.
A return to profit lifted funerals business InvoCare 4.53 per cent. The company swung to a first-half profit of $80.2 million from a loss of $11.5 million in the prior corresponding period. Reported profit was boosted by a recovery in mark-to-market funds under management.
Servo and convenience store REIT Waypoint firmed 1.11 per cent on an 18.5 per cent increase in net tangible assets per security over the first half. Net profit grew 58.5 per cent to $443.6 million.
Takeover target Virtus Health lifted 2.76 per cent after private equity firm BGH Capital sweetened its bid. BGH raised its non-binding offer to acquire the company to $7.65 a share from a previous bid of $7.10. Virtus said its board had yet to evaluate the proposal.
Imugene held steady despite more than doubling its half-year loss to $14.8 million. The biotech aims to develop cancer treatments.
Doghouse
Insurer Suncorp fell 3.23 per cent after receiving more than 5,000 claims following flooding in Queensland and NSW. The insurer said it had comprehensive reinsurance arrangements in place. Rivals IAG and QBE shed 3.97 and 2.46 per cent, respectively.
Sandfire Resources dropped 4.29 per cent after cutting its interim dividend. Shareholders will receive three cents per share, down from eight cents in the prior corresponding period. The cut came despite record half-year revenues of $311.8 million and a 24 per cent increase in net profit to $55.2 million.
Record revenues and a strong pricing outlook failed to keep lithium miner Allkem in the green. The company formed by a merger of Orocobre and Galaxy Resources declared a first-half profit of US$13 million on revenue of US$192 million. The miner’s shares dropped 0.33 per cent despite forecasting lithium prices will be 125 per cent higher in the second half.
Fortescue Metals fell 2.42 per cent as its shares went ex-dividend.
Other markets
A down-session in Asia saw the Asia Dow shed 0.47 per cent, Hong Kong’s Hang Seng 1.4 per cent, China’s Shanghai Composite 0.21 per cent and Japan’s Nikkei 0.32 per cent.
The dollar was collateral damage to the “risk off” mood. The Aussie slid 0.1 per cent to 71.78 US cents.
