US Government Shutdown | Woodside Petroleum

25 January 2019


Global markets were mixed once again overnight, as a rally in shares of chipmakers and airlines lifted the Nasdaq Tech Index, while the Dow Industrials wavered due to concerns about the China-US trade dispute and the longest US government shutdown ever.

The political impasse in the US has resulted in the longest ever government shutdown, and there are growing concerns around the hit to economic growth, at least in the near term. 

Meanwhile, Apple supplier Texas Instruments Inc rose 6% after what analysts called better-than-feared results. The company however warned of weak demand in China, a key market for many chipmakers. So far, earnings announcements have been a positive for markets – and we reiterate that the current US corporate earnings season is going to be the key near-term factor in terms of driving markets.


Stock in Focus: Woodside Petroleum (WPL:ASX)

As we touched on yesterday, the price of crude oil has tumbled since October last year, after trading at above $70 a barrel, prices are currently sitting at just over $50 a barrel. Shares in oil & gas producer WPL managed to rebound after taking a hit from falling oil prices late last year. 

Part of the recent recovery was an uptick in oil prices and a strong fourth quarter update. WPL announced revenue for the 2018 fourth quarter was $1,419m, up +43% from the same corresponding period last year due to +10% increase in production and stronger pricing. 

WPL remains our preferred energy sector pick, with most of its exposure in LNG which is expected to see increased demand that will create a supply shortfall in 2020. WPL also offers a healthy 5% dividend yield and has a healthy balance sheet.

Australia & New Zealand Market Movers

The Australian share market was higher on Thursday (ASX 200 index +0.38%) buoyed by gains for energy giant Santos and an uplift in the banking sector. National Australia Bank has ended its pledge to hold standard variable rates by announcing a surprise across-the-board rate rise of up to 16 basis points. The energy sector saw some strong performances over the session. Natural gas producer Santos jumped +3.9% after it delivered a record quarterly revenue and strong production number. Sales revenue benefited from higher average liquefied natural gas and domestic sales gas prices and the finalised acquisition of Quadrant Energy in November 2018, Santos said.


The New Zealand market was essentially flat yesterday (NZX 50 index +0.03%) as trading was mixed on concerns that US economic growth will take a hit from the longest-ever government shutdown and as investors pared back expectations of a New Zealand rate cut.  Expectations that the Reserve Bank of New Zealand could move to cut rates were pared back after the release of inflation data, which showed signs of emerging cost pressure. The biggest gainer for the day was Pushpay, with its shares up nearly +6%.


3 Things Markets Will be Watching this Week

  1. US corporate earnings season continues this week.
  2. The Bank of Japan makes a policy decision on Wednesday, and the European Central bank will also make a decision on Thursday.
  3. China releases it 4th quarter economic growth (GDP) numbers on Monday.


Have a Great Day,


The political impasse in the US has resulted in the longest ever government shutdown, and there are growing concerns around the hit to economic growth, at least in the near term. 

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