21 February 2022 | Weekly Snapshot

Australian Share Market (ASX200) – eked out a 0.06% gain for the week despite weak offshore leads to be up 3 weeks in a row and now +5% off the January lows. Healthcare (+3.95%) led the gains followed by Consumer Staples (+2.22%) and Industrials (+1.04%). Info Tech (-3.02%) led the declines followed by Telecoms (-2.72%) and Utilities (-2.18%). Economic data was light on with the ASX first half reporting season dominating headlines. The first half period includes the prolonged lockdowns in Victoria and NSW last year which is impacting results for many companies so is a bit of a messy reporting season in that regard. Outlooks are improving although some covid uncertainty remains for the second half but beyond that (into FY23) outlooks are generally positive. Balance sheets are in good shape and dividends are holding up well all things considered. In terms of post result share price performance, companies that are missing estimates are being sold off to a greater extent than those that are beating estimates are rising. This is consistent with the dominant theme of the past few months where the most expensive companies have been falling the furthest. Even if the results are good, if they can’t justify the high valuations then stocks are seeing selling pressure. Gold stocks have returned to favour initially as inflation hedges against the higher than expected inflation readings, but they also caught a safe haven bid on rising geopolitical tensions in Ukraine during the week which is also providing further support for high oil prices.

US Share Market (S&P 500) – down 1.58%, with the Dow (-1.90%) and Nasdaq (-1.76%) also lower for the second week in a row. Consumer Staples (+1.11%) led the gains and was the only sector higher followed by Materials (-0.26%) and Consumer Discretionary (-0.41%) that fell the least. The Energy sector (-3.71%) led the declines followed by Communication Services (-2.47%) and Financials (-2.29%). January’s retail sales came in at +3.8% month on month and was much stronger than expected with other high frequency data suggesting things are picking back up again as the omicron surge subsides. January’s Producer Price Index came in at double what was expected for the month demonstrating that inflation pressures remain high. The 10 yr. yield returned toward prior week levels after moving as high as 2.05% midweek. January’s FOMC meeting minutes from the Federal Reserve were released but contained little in terms of new information on the near term direction for monetary policy. Following the minutes release, market expectations for a 50 basis point rate hike in March dropped back below a 50% chance although this, along with a drop in the 10 yr. yield late in the week could also be due to rising geopolitical tensions in Ukraine. Western powers continued to argue over the weekend that the Russian troop build-up could mean an invasion is imminent, while Russia blamed the West for aggravating the situation

Portfolio Movements

BHP (BHP) 1st half profit more than doubles on strong commodity prices. BHP said that net profit more than doubled to US$9.44 billion for the half, underpinned by strong prices for all of its commodities including copper and coal. The price of iron ore, which contributes the largest share of its earnings, was 9% higher than the same period a year earlier. But other commodities experienced even bigger gains. BHP sold its thermal coal for triple the price it did in the first half of fiscal 2021, and its steelmaking coal for more than double. The price it received for both its copper and nickel was 30% higher than the year-prior period. But higher prices have offset lower outputs of several of those commodities. They also declared an interim dividend of US$1.50 a share, up from US$1.01 a share a year ago.

CSL (CSL) 1st half earnings – profit down, revenue up, plasma collections improving. CSL reported half-year net profit of US$1.76 bill, down 3%. Total revenue of US$6.04 bill was up 5%. CSL said the result was in line with expectations but was a slight beat with revenue $6.04B vs consensus of $5.84B and EBIT of $2.22B vs consensus of $1.93B. CSL noted that its core franchise, the immunoglobulin portfolio, was impacted by industrywide constraints on plasma collections during Covid-19. Immunoglobulin products are manufactured from plasma, and travel restrictions and lockdowns made it more difficult for people to give plasma at CSL’s network of collection centres. CSL said immunoglobulin sales declined 9% in the half. Chief Executive Paul Perreault said “Following the initiatives we have implemented in our plasma collections network, collections have been improving and are expected to underpin stronger sales in our core plasma therapies,” he said. “I’m very encouraged by seeing increased social mobility and the beginnings of a return to a more normalized environment.”

Woodside (WPL) reports full year results – profits soar. Woodside reported an annual profit yesterday that more than tripled, helped by higher prices and strong demand for oil and gas and operational efficiencies. The company posted an underlying net profit after tax of $1.62 billion for the year ended Dec. 31, compared with a profit of $447 million a year earlier. Analysts had expected a profit of $1.36 billion so this was a decent beat. The 2021 result comes as Woodside prepares to combine with BHP’s oil-and-gas business which will see its shareholders own 52% of the combined basis. The Perth-based company has forecast savings from the deal at more than US$400 million, with the deal creating one of the world’s 10 largest producers of liquefied natural gas. The company also declared a final dividend of US $1.05 per share that was much higher than expected.

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