Global markets were lower on Friday as US stocks sold off and the Nasdaq technology index had its worst daily percentage decline in about three weeks. A spike in new coronavirus cases and data showing a stall in US business activity in February fuelled investors’ fears about economic growth.
The focus as the week begins is the status of the coronavirus: is the outbreak worsening in China? is there about to be a surge in cases outside of China?
The COVID-19 virus remains a key market focus with a jump in cases reported in the Middle East, South Korea and Italy, while Japan is seeing outbreaks in several unconnected areas. While the number of new cases in China continues to increase at a slower rate, economic disruption is becoming widespread. Over the weekend, France’s Finance Minister also highlighted a 30-40% fall in tourists. We are bracing for a volatile start to the week.
Stock in Focus: BHP Billiton (BHP:ASX)
BHP shares have retraced as iron prices slipped due to concerns around the coronavirus impacting short-term demand for iron ore. BHP also announced that there could be further commodity price pressure if containment procedures for coronavirus continue to drag on longer than expected.
This masked what was a somewhat solid first half result for the first half of the 2020 financial year, as BHP’s underlying net profit after tax rose +29% from last year to $5.2 billion, reflecting stable operating performance, higher iron ore prices and favourable exchange rate movements, all partially offset by lower volumes due to planned outages, petroleum natural field decline and copper grade decline.
The result was strong but slightly below analysts’ expectations, while offering an attractive US$0.65 per share interim dividend (up +18% from last year) which was modest as BHP wanted to take a conservative approach to their balance sheet and net debt given possibility of near-term weakness.
We currently have a BUY rating on BHP.
Members should look out for a full update on BHP to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was loiwer on Friday (ASX 200 Index -0.33%) as investors digested a number of company profit annoucnments. Generally, blue chip stocks are rewarding investors by producing results that are justifying their rich valuations, while technology market darlings are facing a reality check. In stock news, Poultry group Inghams has clipped its payout on a 69% drop in first-half profit as last year's processing setbacks saw the firm fail to keep up with customer demand for chicken.
The New Zealand market was a touch higher on Friday (NZX50 +0.07%) with the market rounding out the second week of major earnings with a 2% weekly gain. Fisher & Paykel Healthcare supported the NZX as the company lifted its full-year earnings guidance, and Precinct Properties added to gains after reporting strong earnings. On the flipside, Genesis Energy reported a 16% decline in first-half operating earnings and trimmed the top end of its full-year guidance by $10 million.
3 Things Markets Will be Watching this Week
- Coronavirus headlines are likely to sway investor sentiment.
- Local earnings season across Australia & NZ continues this week.
- Overseas earnings season winds down.
Have a Great Day,