Weekly Market Update - 17th February 2020

Peer Wealth

Feb 17, 20203 min read

US jobs growth spurs investor sentiment

Markets

Local and global equity markets moved higher this week supported by stronger than expected corporate earnings and US jobs growth.
US 4th quarter corporate reporting season is more than halfway through with earnings expected to have climbed 2.3% in the period and more than 70% of companies have beaten market estimates.
In local stock news, Boral shares fell sharply after the company confirmed its North American windows business had inflated earnings by $37m over a 20 month period. Poor leadership yet again. CEO Mike Kane has resigned (finally) and the board shouldn’t be far behind him.
JB Hi-Fi shares rose strongly to an all-time high after the company reported a strong Christmas season resulting in a record 1st half profit. Net profit was up more than 6% whilst revenues were up almost 4%.
Transurban has lifted net profit for the half year but has reported softer traffic growth on several Sydney and Melbourne roads over the period. Revenue was up more than 8% on toll price increases with a 2.3% lift in daily traffic.
Suncorp’s 1st half profit has been adversely affected by bushfire and hailstorm claims, with the insurer’s bottom line also hurt by higher regulatory costs and more competition in mortgages.
CSL produced a solid 1st half result, mostly in line with market expectation, with an 11% increase in profit and an upgrade to its full year guidance. Time will tell whether those earnings are sufficient to carry current lofty valuations.
CBA reported stronger than expected 1st half earnings driven by strong net interest income and other banking income performances. The bank is now carrying more excess capital than required, and together with a large franking balance, should see a buy-back within the next 12 months.
Telco’s Vodafone and TPG have been given permission to merge to create a new $15bn mobile and broadband competitor to Telstra after the Federal Court threw out a ruling by the ACCC that the tie-up would harm consumers. The ACCC has been wrong on this from day 1 and has been out of touch with reality for some time.
Carsales.com share price rose to an all-time high after reporting a 22% increase in 1st half profit despite lacklustre Australian new car sales.
Caltex shares have moved higher after the company received an improved $8.8bn bid from Canadian Alimentation Couche-Tard to acquire all its shares at $35.25. The revised price is their best and final offer in the absence of a competing offer.

Economic

Australian mortgage lending grew stronger than expected in December, led by a surge in loans to owner occupiers and 1st home buyers, with the best monthly result since mid-2015.
A US employment report showed 225,000 new jobs last month, coming in well above expectations.
Eurozone industrial production contracted by 2.1% in December, with France and Italy registering the sharpest declines.
German industrial output registered its biggest drop in more than a decade in December.

Politics

In US election news, Democrat Bernie Sanders has narrowly won the New Hampshire primary over Pete Buttigieg, with both each having about a quarter of the vote. Elizabeth Warren finished a long way behind in 4th whilst Joe Biden is almost out of the race.
The US attorney general has suggested that the US and its allies should consider taking a controlling stake in European companies Nokia and Ericsson to counter China-based Huawei’s dominance in 5G wireless technology. The US admitting how far ahead the Chinese are in 5G.
The Coronavirus has now caused more deaths than the 2002-2003 SARS outbreak. Nearly all of these deaths have been in China. The most recent report has more than 60,000 cases and more than 1,370 deaths.