Tech Back on Top | Woodside Update

23 January 2021

Global markets were mixed overnight (S&P 500 index +0.03%) as the advance in US stocks stalled with major indexes at or near records, though technology shares continued to march higher.

Meanwhile, fresh tensions surfaced between US companies and Beijing. China’s three biggest telecommunications firms said they requested a review of the NYSE’s decision to delist their shares. Separately, Twitter locked the official account of the Chinese embassy to the US, citing a violation of its “dehumanization” policy.

The European Central Bank (ECB) left all policy settings unchanged, with President Lagarde saying “Risks surrounding the euro-area growth outlook remain tilted to the downside, but less pronounced”, adding “the roll-out of vaccines…allows for greater confidence in the resolution of the health crisis”.

 

Woodside Petroleum (WPL:ASX)

Even as a surprise increase in US crude inventories led to a dip crude oil prices which hit energy stocks overnight, the energy sector has been the best performer globally in 2021. This is a big reversal in fortunes as energy was the worst performer in 2020 on the back of oversupply and as COVID-19 lock-downs crippled energy demand.

Woodside shares slipped 1.6% yesterday amid sector weakness and a fourth-quarter report that featured a 2% slump in production for the prior period, which was a slight miss of market expectations.

That said, we continue to rate WPL as our top energy sector pick due to its low-cost operations. This allows WPL to operate with a cash profit even in these volatile times, making them the most resilient amongst Aussie peers in a low oil price market, in our view. While there could still be more near-term volatility ahead, we are BUY rated on WPL as a way to play vaccines and a return to normal economic activity. Members should look out for a full update in our weekly report.

 

   
Australia & New Zealand Market Movers

The Australian market was higher on Thursday (ASX 200 index +0.8%) as investors pushed the ASX 200 to a fresh 11-month high.
The picture for earnings in Australia also firmed with the latest labour force report supporting expectations of a quick return to pre-pandemic activity. The jobless rate dropped to 6.6% in December as the economy created 50,100 new jobs.

The earnings recovery was on display in an update from multi-brand retailer Mosaic. Shares in the company leapt 31% as Mosaic said it expected operating earnings of between $40 million and $45 million, well above market expectations.

Technology also led the local market higher with the buy now, pay later sector driving the gains. Zip Co shares soared 23% after a second-quarter update showed an 88% increase in revenue compared with the year-earlier period.

On the flipside, Cleanaway Waste Management fell -8.5% after announcing that chief executive Vik Bansal will step down after five years in the role.
 

The New Zealand market added to gains yesterday (NZX 50 index +0.7%) as US President Joe Biden’s inauguration passed uneventfully and cleared the path for more fiscal stimulus in the world’s biggest economy.

US church donation company Pushpay Holdings led the local market higher, climbing 5.3% to $1.60. The stock is still down almost 12% so far this year and it appears buyers are returning to the stock.
Air NZ’s Chair has been in the media reiterating the airline is still on track for a capital raise in the first half of the calendar year.

 

3 Things Markets will be Watching this Week

  1. ​​​​​​​​​​The week ahead is a busy one with Biden’s inauguration on Wednesday (US time) a focal point.
  2. There are also a number of central bank decisions including the European Central Bank and the Bank of Japan.
  3. Quarterly US earnings season is underway, with the week ahead dominated by financials. Key results include: Netflix, Procter & Gamble, United Air, Bank of America, Morgan Stanley, Goldman and Gilead.

Team

Meanwhile, fresh tensions surfaced between US companies and Beijing. China’s three biggest telecommunications firms said they requested a review of the NYSE’s decision to delist their shares. Separately, Twitter locked the official account of the Chinese

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