Global markets were higher overnight, with the US market (S&P 500 index +0.6%) at all-time highs as several solid earnings results boosted sentiment ahead of tonight's monthly US unemployment data (nonfarm payroll report).
Energy and Financials led the market higher, while the healthcare sector was in the red. Uber rose +4% after reporting a smaller than expected loss, ViacomCBS surged up +7% after reporting strong streaming numbers and announcing a deal with Comcast. Cardinal Health and Cigna were both down -13.4% and -11.5% respectively after posting weak results and guidance. Travel stocks were also strong bouncing back from covid related concerns earlier in the week with American Airlines rising +7.5%, while casino company Caesars Entertainment jumped +6.4%.
European stocks were higher overnight, with the Stoxx 600 index up +0.4% higher on a mixture of results. Novo Nordisk (+5.2%) and Siemens (+2.6%) both jumped on stronger results, While Adidas fell -6% after losing Chinese sales due to a boycott and covid-19 related factory closures in Vietnam.
Woodside Petroleum (WPL:AX)
Oil and LNG producer Woodside Petroleum were higher after announced the capital cost for the Scarborough project is expected to be $12 billion, +5% above the previous cost estimate in November 2019 partly due to increased offshore production capacity and an additional. The costs estimate was below what market had expected and is to a level where it would be financially viable.
The overall recovery in oil price is encouraging the forecasted shortfall in supply for LNG, and WPL’s LNG growth projects are the main catalyst of maintaining our BUY recommendation.
With a strong balance sheet and with hopefully the worst from covid-19 behind us, we feel comfortable at current valuations assuming oil prices remain supportive around current levels. However, we have a high-risk caveat given the volatility in the oil price, upcoming capital expenditure costs, and challenges the sector may face from an ESG point of view.
Australia & New Zealand Market Movers
The Australian market finished a touch higher yesterday (ASX 200 index +0.1%) heading into a fresh all-time high.
Gains were fairly muted, led by real estate and consumer discretionary, while energy and miners were laggards on weaker commodity prices.
James Hardie broke into fresh all-time highs as well after a fellow building company reported strong result hinting at strong demand to continue.
Resolute mining jumped +4.5% after finalising the sale of it Bibani gold mine to Canada’s Asante Gold. Pinnacle Investment Management Group jumped +9% after releasing a solid result, while furniture retailer Nick Scali ended the day down despite a strong set of numbers for its 2021 full year result – risks are clearly building across the consumer discretionary sector and Nick Scali have to contend with: higher supply chain costs, and an uncertain demand profile, particularly given lockdowns and the Christmas trading period.
The New Zealand market was lower on Thursday (NZX 50 index, +0.3%) with trading halted early due to network connection issues.
Plexure shares continue to slip down another -3.2%. Spark (-1.7%) and a few of the gentailers were lower likely hit by local interest rates rising.
In M&A news, The Australian is reporting Z Energy may be in the cross hairs of at least two suitors with Shell, Exxon, Chevron and Vitol mentioned as potential suitors.
Interestingly, My Food Bag has started rolling out the next phase of its growth strategy, expanding into the broader online food and grocery market with a range of new products and recipes. It recently added ~20 new products to the My Food Bag Kitchen range and will build this up to ~75 "hard-to-find" products within the next few months.
3 Things Markets will be Watching this Week
- Key events this week include US Earnings season scheduled to provide quarterly updates including Alibaba, Nio, Nikola, Geneal Motors, Kraft Heinz, Booking Holdings, Uber, Square and Dropbox
- Employment data (Nonfarm payrolls) and ISM manufacturing survey data in the US.
- Locally, the RBA cash rate call is the key event along with the latest employment data in NZ. Earnings season kicks into gear with Resmed, REA Group and News Corp all scheduled to report.
