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Stocks reversed early losses as a mid-morning diplomatic breakthrough rekindled hopes a conflict between Russia and Ukraine could be averted.
The S&P/ASX 200 flipped an initial loss of 65 points into a gain of 12 points or 0.16 per cent. The reversal came after US President Joe Biden agreed to meet Russian President Vladimir Putin at a summit.
The development overshadowed a mixed batch of interim earnings. A2 Milk, Endeavour Drinks and Chorus were the pick of companies reporting. Tyro Payments, Super Retail Group and Altium felt the wrath of disappointed investors. AGL Energy surged on takeover interest.
What moved the market
Risk assets rallied and defensive havens turned lower on news of a summit of superpowers brokered by French President Emmanuel Macron. Australian stocks, the Australian dollar and US equity futures rose. Gold, oil and the US dollar declined. Asian equities pared losses.
Biden and Putin will meet after an initial summit this week between US Secretary of State Antony Blinken and Russian Foreign Minister Sergey Lavrov. Both meetings are contingent on Russia not invading Ukraine.
“We are committed to pursuing diplomacy until the moment an invasion begins,” White House press secretary Jen Psaki said. “President Biden accepted in principle a meeting with President Putin following [the Blinken-Lavrov meeting], again, if an invasion hasn’t happened. We are always ready for diplomacy.”
A surge in US futures raised hopes for a positive start when trade resumes tomorrow night. The New York Stock Exchange and other US exchanges are closed tonight for Presidents Day. S&P 500 futures climbed 23 points or 0.54 per cent.
Asian markets trimmed their losses. The Asia Dow fell 0.37 per cent. China’s Shanghai Composite shed 0.36 per cent, Hong Kong’s Hang Seng 0.71 per cent and Japan’s Nikkei 0.77 per cent.
US stocks fell on Friday as investors reduced risk ahead of a long weekend. The S&P 500 dropped 0.72 per cent.
Overseas headwinds have distracted from a generally positive domestic earnings season which showed most companies negotiated last year’s lockdowns and the Omicron wave with minimal damage. More than 70 per cent of companies have increased profits, according to CommSec. Only 11 per cent have reported a loss. The last major week of earnings brings reports from index heavyweights Rio Tinto, Coles, Woolworths and Qantas.
Winners’ circle
AGL Energy climbed 10.61 per cent following an unsolicited bid from a consortium including Canadian investment giant Brookfield and Australia’s third-richest person. Atlassian billionaire Mike Cannon-Brookes was part of a consortium that approached AGL on Saturday with an offer of $7.50 per share.
The unsolicited, preliminary, non-binding offer was pitched at a 4.7 per cent premium to Friday’s closing price. The AGL board this morning rejected the offer as “materially” undervaluing the company. The share price rose as high as $8.09 before finishing at $7.92 as buyers bet on an improved offer.
“The proposal does not offer an adequate premium for a change of control and is not in the best interests of AGL Energy shareholders,” Chair Peter Botten said.
A2 Milk firmed 11.13 per cent after tipping a stronger second half as a new strategy gained traction. First-half earnings slumped 45.3 per cent to $97.6 million as revenues and gross margin contracted.
A share buyback and an increased dividend helped lift Chorus 9.94 per cent. The telecommunications infrastructure firm raised its full-year earnings guidance to $665-$685 million from previous guidance of $640-$660 million following an increased half-year profit of $42 million. The company also raised dividend guidance and will buy back up to $150 million of its shares.
Pub and bottlo business Endeavour Group jumped 10.29 per cent after increasing profits even as sales declined. First-half profit expanded 15.6 per cent to $311 million. Group sales dipped 0.3 per cent as lockdowns impacted the group’s hotels business. Retail earnings rose 10 per cent through cost management and margin improvements.
Among other companies reporting today, Reliance Worldwide gained 0.79 per cent, Aussie Broadband 7.56 per cent, Hansen 10.3 per cent, oOh!Media 5.15 per cent, GDI 0.49 per cent and MACA 3.36 per cent.
Ampol lost 3.14 per cent, Latitude Group 0.98 per cent, NIB Holdings 0.15 per cent, OZ Minerals 0.46 per cent, Silver Lake Resources 1.11 per cent, Adairs 6.11 per cent, Cooper Energy 5.17 per cent, Viva Energy 1.2 per cent, Helloworld Travel 3.94 per cent and Starpharma 5.29 per cent. SelfWealth and Senex Energy were unchanged.
Doghouse
Tyro Payments slumped 25.92 per cent to a 22-month low as the company’s half-year loss more than quadrupled to $18 million. Revenues increased 29.6 per cent and gross profit by 16.3 per cent. Earnings skidded 67.2 per cent to $2.8 million.
Super Retail Group sank 9.49 per cent on news lockdowns and the omicron variant knocked first-half sales down 4 per cent. Net profit fell 35.9 per cent to $110.8 million.
Altium slid 5.92 per cent after first-half profit missed expectations. The tech firm’s after-tax profit of US$22.9 million was 38 per cent stronger than H121, but significantly below the analysts’ consensus. Revenues grew 28 per cent to US$102 million.
Sonic Healthcare fell 3.59 per cent as signs of a slowdown in Covid testing took some of the shine off a record first half. The healthcare firm reported a record net profit of $828 million on revenues of $4.8 billion. However, revenues declined 8.7 per cent in the US and grew just 1 per cent in Europe as Covid testing declined.
BlueScope Steel dipped 1.31 per cent after warning earnings will soften following a record first half. The steelmaker reported first-half underlying earnings of $2.2 billion. “The best half-year performance BlueScope has produced in its 20-year history as a listed company,” CEO and Managing Director Mark Vassella said. Second-half underlying earnings were expected to be $1.2-$1.35 billion.
Nuix fell 4.24 per cent to a record low after reporting a $2.3 million loss for the half year. Revenues contracted 1.5 per cent to $84 million.
US giant Block fell 6.82 per cent to its lowest since its acquisition of Afterpay gave it an Australian listing.
Lendlease finished unchanged after reporting a half-year loss of $264 million during a “reset year”. The developer said this financial year should mark a trough for activity and profitability.
Other markets
Oil declined on the US-Russia summit news as some of the risk premium evaporated. Brent crude fell 37 US cents or 0.4 per cent to US$93.17 a barrel.
Gold dropped US$5.50 or 0.3 per cent to US$1,894.30 an ounce.
The dollar climbed 0.55 per cent to 72.11 US cents.
