28 FEB 2022 – Monday Market Highlights – Transcript

Kate Power
Good morning. It’s Monday the 28th of February and I’m Kate from Milford as widely feared and speculated the geopolitical landscape in Eastern Europe worsen this week, as Russia began a military invasion of Ukraine, the ramifications of which are still uncertain. This cause markets to be volatile across all asset classes, with the most obvious impact being on oil and energy prices. Russia supplies about 40% of Europe’s natural gas and as such, the European natural gas prices soared last week, Crude Oil prices surged to just over $100 per barrel on Thursday, the highest level since 2014. Oil did retrace some of this settling just above $90 per barrel at the end of last week. US President Joe Biden announced the US would release more crude oil from its strategic reserves in hopes to alleviate some pricing pressure. Gold prices also surged above $1,096 per ounce, given gold is considered a safe haven for investors, and hence is attractive in uncertain times. Following the news on Thursday, the NASDAQ experienced a large intraday move after being down 3.4% early in the session, and finishing up 3.3% Friday’s session. So most indices on the backfoot again with the Dow, s&p 500 and NASDAQ off by about point 8% In the morning, but all climbed throughout the day and closed up between 1.5 and 2.5%. Staying in the US the core PCE Price Index print for January was 5.2% which was point 1%. above expectations. This is the preferred measure of inflation for the Federal Reserve, and is another data point that suggests inflation is a lot stickier than many market participants anticipated. Moving closer to home the RBNZ had hiked their cash rate by 25 basis points, bringing it to 1%. In Australia, the wage price index rose in line with expectations but was still short of the level required for a hawkish RBA. Interestingly, total wages including bonuses was strong, indicating companies are likely paying bonuses to attract and retain staff further evidence of a tight labor market. Turning to equity news, it was another busy week in reporting season with 95% of ASX companies having now reported results for the December half. On balance earnings across the market have been above analysts expectations with the median company beating consensus at the end Pat line by point 7%. This has been largely driven by the financials and energy sectors. Bates have outnumbered Mrs by a ratio of four to three. Despite the complex operating environment many companies have faced during the reporting period, supply chain and labor constraints have been the prominent headwinds called out Rio Tinto reported record annual profit with underlying earnings up 72% year on year, driven by strong metal prices. They also declared a big dividend of $10.40 per share of 87% versus the PCP. This is a full year dividend payment of $16.8 billion the second largest dividend recorded in the footsie ever block previously called square who earlier this year completed the acquisition of afterpay reported gross profit of 1.1 8 billion up 47% year on year. This was an approximate 2.5% beat to consensus. The beat was driven by square the seller ecosystem and a better than feared cash up result. The outlook commentary suggests both cash up and square gross profit to increase sequentially, each quarter driven by favorable comps, new products, international expansion and select pricing adjustments. The better than expected result and Outlook commentary drove a meaningful rally in the share price closing up 32.5% on Friday. Looking to the week ahead, we will continue to monitor the Russia Ukraine conflict closely and we will keep a careful eye on any further sanctions by Western governments. We also have the final day of Australian reporting season today, with the remaining 5% of companies do to report their half or full year results. It is a relatively quiet week ahead with regards to specific economic news. In Australia the RBA press conference will be held on Tuesday to announce their decision on the official interest rate, which is expected to remain unchanged at point 1%. Finally, we can expect the euro area inflation rate print for February where inflation is forecast to rise by point 1%. Thanks for listening and we’ll see you next week