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Some of the shine came off the share market’s dazzling start to the month as investors sifted a mixed bag of earnings for clues to the strength of the recovery.
The S&P/ASX 200 hit an 11-month peak before fading to a mid-session loss of 26 points or 0.37 per cent. Gains in energy and tech stock were dwarfed by declines in financials and other rate-sensitive sectors.
What’s driving the market
The market caught its breath following a frantic rally that propelled the ASX 200 up 273 points or 4.1 per cent in six sessions since the start of the month. Buying interest was tempered by an overnight rise in the dollar back above 77 US cents. The Aussie was last up 0.09 per cent at 77.15 US cents.
The first big day of half-year earnings reports delivered the usual mix of winners and losers. The market rewarded Macquarie Group, Suncorp and James Hardie, but took a big stick to Challenger, Emeco and Dexus.
US futures marked time after another round of record closes overnight. S&P 500 futures eased a point or less than 0.1 per cent. The S&P 500 put on 0.74 per cent overnight as all three major indices all hit fresh peaks.
Going up
Macquarie Group was the morning’s big winner, flying up 6.9 per cent to an 11-month high after reporting a sharp improvement in trading conditions. The nation’s largest investment bank said profits were boosted by increased commodities trading and deal-making over the December quarter. The full-year result was expected to be “slightly down” on FY20.
Insurer Suncorp jumped 3 per cent after delivering a 39.5 per cent bump in first-half cash earnings to $509 million. The company reported strong top-line growth in its consumer and commercial portfolios. The news helped lift rivals IAG and QBE 2.4 and 0.7 per cent, respectively.
A 59 per cent improvement in net profit lifted fibre cement manufacturer James Hardie 1.6 per cent. Global net sales increased by 20 per cent over the quarter.
Aside from Macquarie, the only advances on the ASX 20 index were Afterpay +1.4 per cent and resources giants Fortescue +0.6 per cent, Newcrest +0.4 per cent and Woodside Petroleum +0.1 per cent. BHP dipped 0.1 per cent and Rio Tinto 1 per cent.
Technology was the best of the sectors, rising 0.5 per cent as Afterpay set the pace with support from Appen +0.9 per cent, Xero +0.8 per cent and Nanosonics +0.8 per cent.
Furniture retailer Nick Scali jumped 1.8 per cent to a record after announcing it will refund $3.6 million in JobKeeper payments to the Federal Government. The company last week reported record half-year sales and net profit.
Going down
Macquarie’s boost to the financial sector was outweighed by declines in main street banks. ANZ sank 1.5 per cent, Westpac 0.9 per cent and NAB 1.4 per cent. Commonwealth Bank shed 1.2 per cent ahead of tomorrow’s half-year trading update.
Challenger was another weight on the sector, diving 13.4 per cent as investors sniffed at the fund manager’s swing back to profit. The company reaffirmed full-year profit guidance and declared an interim profit of 9.5 cents. Rival IOOF fell 3.1 per cent.
REITs declined as Dexus’s result exposed the impact of Covid on property valuations. The property giant reported a 55.5 per cent dive in half-year net profit to $442.9 million, driven by revaluations of investment properties amid office vacancies and rent relief. Shares in the company slid 2.5 per cent.
SCA Property Group eased 0.6 per cent despite increasing net profit by 14.1 per cent. Vicinity Centres fell 2.7 per cent, Charter Hall Retail 2.3 per cent and Goodman Group 2 per cent.
Aristocrat Leisure and Transurban fell 2.1 and 1.2 per cent, respectively. Both have significant US earnings exposed to an overnight slide in the greenback. Other heavyweight drags on the index included Wesfarmers -1.1 per cent, Woolworths -1.1 per cent, CSL -0.7 per cent and Telstra -0.2 per cent.
Mining services provider Emeco Holdings slumped 8.9 per cent on news of a $3.8 million decline in first-half profit to $37.7 million. Perenti Global dropped 4.2 per cent.
Other markets
A cautiously positive morning on Asian markets saw China’s Shanghai Composite gain 0.06 per cent, Hong Kong’s Hang Seng 0.31 per cent and Japan’s Nikkei 0.3 per cent.
Oil added to last night’s 13-month high. Brent crude climbed 24 cents or 0.4 per cent to $US60.80 a barrel. Gold rallied $4.70 or 0.3 per cent to $US1,839 an ounce.
Hot today
New of a US$495,000 grant from the Michael J. Fox Foundation lifted biotech Alterity Therapeutics (ASX:ATH) to a near three-month high. The funds will go towards determining the optimal dose for Alterity’s lead drug candidate for Parkinson’s. Phase II clinical trials are due to start later this year. The share price hit 5.3 cents before shaving its rise to 18 per cent at 4.6 cents.
