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The share market fell to a two-week low before steadying as a major restructure at BHP overshadowed the biggest day of earnings season to date.

The S&P/ASX 200 flipped a 40-point opening dive into a tentative mid-session gain of five points  or 0.07 per cent.

A recovery in the banks and gains in traditional defensive sectors helped offset a 6 per cent slump in BHP after the mining giant announced a shift in direction last night.

Coles, Tabcorp and Domino’s Pizza rose after issuing earning updates. CSL, Woodside and OZ Minerals declined.    

What’s driving the market

Two of the market’s three largest companies by market weighting reported full-year earnings, but BHP grabbed the headlines for other reasons. The Big Australian announced it was coming home, abandoning the dual-listed structure of the last 20 years.

If approved by shareholders, the company will “unify” its listings. BHP Ltd – the Australian operation – will acquire BHP Plc, the UK entity formerly known as Billiton. The unified company would have its primary listing on the ASX and smaller listings in the UK, South Africa and the US.

At the same time, the company announced it will exit the oil industry by merging its energy assets with Woodside Petroleum, and push into potash by investing in a Canadian project. A 42 per cent increase in revenue and profit were almost an after-thought in a blizzard of announcements. Investors will receive a final dividend of US$2 per share.

The share price tanked 6.27 per cent as investors digested the implications for its various listings. Overnight, the UK listing climbed 3.4 per cent. Woodside fell 0.92 per cent (more below).

The wider market rose for the first time in three sessions. Bond proxies have been this week’s best performer as fading growth expectations depress yields. The yield on ten-year Australian government bonds eased this morning to its weakest since February before a partial recovery.

“Investors across the world appear to be primarily concerned about potential slow growth in China as an indication of global economic weakness. The latest Chinese economic data demonstrating a slowdown in retail sales and factory output in July has contributed to cool investors’ enthusiasm, raising fears that the economic recovery is losing steam,” Kalkine Group CEO Kunal Sawhney said.

“Major exporting nations like Australia are anxious over the spillover effect of China slowdown,” he added

US stocks fell from record levels overnight, ending five-session winning runs for the Dow and S&P 500. The declines came amid speculation of choppier waters ahead as the delta Covid variant slows the global economy.

“The stock market is way overdue for a correction, Covid cases continue to spike higher darkening economic reopenings, consumer data shockingly has collapsed recently — including consumer confidence last Friday and retail sales and homebuilders’ sentiment today — several stocks have stopped reacting positively to good earnings, inflation reports remain hot, and Federal Reserve taper talk is everywhere,” Jim Paulsen, chief investment strategist at Leuthold Group, said.

Going up

The nation’s second largest healthcare company by market weighting, Fisher & Paykel, rallied 2.88 per cent as revenues largely weathered a decline in demand for ventilators. Revenue over the four months to the end of July was $583 million, just two per cent lower than the same period last year when the first wave of Covid boosted demand.

A 27.2 per cent increase in full-year earnings helped lift Domino’s Pizza 6.39 per cent. The fast food outfit increased global sales by 14.6 per cent to $3.74 billion.

A record profit in its lotteries business and improvements at its TAB outlets helped Tabcorp raise group revenue 8.8 per cent. Shareholders will receive a final dividend of 14.5 cents per share, a 31.8 per cent increase on last year. The share price edged up 0.1 per cent.

Coles expects shopping behaviour to normalise next year as increased vaccination diminishes the need for lockdowns. Trading conditions remained volatile this quarter as lockdowns encouraged shoppers to buy local, avoiding shopping centres and CBD stores. The supermarket increased full-year net profit by 7.5 per cent to $1.005 billion. The share price improved 0.1 per cent.

Packaging giant Amcor surged 3.07 per cent to an all-time high after increasing adjusted full-year earnings per share 16 per cent and predicting further growth. The firm expects growth in adjusted EPS of 7-11 per cent and adjusted free cashflow of $1.1-$1.2 billion this financial year.

Winners among other companies reporting this morning included Vicinity Centres +1.43 per cent, Nearmap +0.1 per cent, Southern Cross Media +3.81 per cent, EML Payments +1.69 per cent, Pro Medicus +7.17 per cent and EBOS Group +2.92 per cent

Less well-received were earnings from Sims -3.97 per cent, Bapcor -4.82 per cent, OZ Minerals -1.52 per cent, Netwealth -6.02 per cent, McPherson’s -3.9 per cent and Super Retail Group -0.61 per cent.

The big four banks provided much of the morning’s strength. CBA rallied 1.15 per cent, ANZ 0.39 per cent, NAB 0.84 per cent and Westpac 1.63 per cent.

Going down

Biotech CSL eased 1.02 per cent as a forecast contraction in profit this year overshadowed a strong FY21 result. The company declared a better-than-expected full year net profit of $2.375 billion, up 13 per cent on FY20. CEO Paul Perreault warned rising costs would impact margins this year.

“We see FY22 as a transitional year as we continue to invest and deliver against our long term strategy,” Mr Perreault said. “CSL’s net profit after tax for FY22 is anticipated to be in the range of approximately $2,150 million to $2,250 million at constant currency.”

Woodside Petroleum swung back to profit over the first half as LNG and oil prices recovered from the pandemic crash. Net profit was $317 million, versus a loss of $4.067 billion over the same period last year. The company boosted its interim dividend to 30 US cents per share. The share price eased 0.92 per cent as the market continued to adjust to the merger deal with BHP.

Away from earnings, Rio Tinto retreated 1.55 per cent, Newcrest 0.7 per cent, Afterpay 0.77 per cent and Wesfarmers 0.59 per cent

Other markets

Asian markets improved as the morning advanced. The Asia Dow rose 0.11 per cent, China’s Shanghai Composite 0.54 per cent, Hong Kong’s Hang Seng 0.6 per cent and Japan’s Nikkei 0.52 per cent.

US futures shrugged off early weakness. S&P 500 futures were recently ahead a point or 0.02 per cent.

Oil struggled to hold the US$69 level. Brent crude dipped three US cents or 0.04 per cent to US$69 a barrel.

Gold reversed last night’s US$2 retreat, rising US$3.60 or 0.2 per cent to US$1,791.40 an ounce.

The dollar edged off last night’s nine-month low. The Aussie rose 0.07 per cent to 72.6 US cents.

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