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ASX edges ahead on Friday to cap listless week

Daily Market Update

Perth in lockdown, ASX flat for the week, retailers smashed 

Perth has entered a ‘snap’ three-day lockdown following another hotel quarantine outbreak. Despite this, the market finished slightly ahead on Friday, 0.1%, and finished the week flat.

The highlights over the week were Megaport (ASX:MP1) and Monadelphous (ASX:MND), which jumped 10.5% and 8.6% respectively.

All attention has been on a number of companies delivering quarterly earnings updates. Redbubble (ASX:RBL) and Challenger (ASX:CGF) were the biggest detractors, down 27.3% and 23.8% respectively after surprising investors with poor results.

Amazon competitor Kogan (ASX:KGN) was the first to admit they were facing issues with higher inventories and sales growth struggling to keep up with pandemic levels.

Shares in KGN fell 14.3% on Friday and 19.7% for the week after the company announced earnings would fall 24%, despite another 65% growth in revenue over the quarter.

The company indicated higher than expected inventory levels were impacting costs, whilst price inflation on key products had resulted from supply shutdowns in Asia.

Retailers dropped in unison including JB Hi-Fi (ASX:JBH) which was down 5.0% in sympathy; another reminder following Redbubble’s result that investors need to be wary of extrapolating recent events into the future.

The other news was AMP Ltd (ASX:AMP) announcing their decision to separately list their Private Markets division on the ASX and move on from negotiations with Ares Capital. The listing is set to occur in 2022 with shares adding just 0.9% on the news.

Economic data smashes expectations, but markets deliver weekly loss, American Express struggling

US markets finished the weekly strongly on the back of great economic data, the Dow Jones added 0.7%, the S&P500 1.1%, but it was the Nasdaq leading the way, up 1.4% for the session.

The strength was driven by better-than-expected economic data, beginning with new home sales that were 200k ahead of expectations, hitting 1.02 million in March.

Similarly, leading PMI indicators were nearing record levels, the manufacturing PMI printing at 60.6 and services 63.1.

The economic data is clearing feeding into the market with reporting season thus far seeing earnings reported at an average of 23% above expectations.

Today’s winner was SVB Financial Group (NASDAQ:SIVB) known as the Silicon Valley Bank, which grew assets 90% year over year, a near quadrupling of profit to $US$532 million as its venture capital and private equity backed borrowers continue to power ahead in the pandemic economy.

On the other side, American Express (NYSE:AMEX) dragged the Dow lower, shedding 1.9%, after highlighting they will need travel and associated spending to return to at least 70% of previous levels in order to reach their targeted 9-10% revenue growth this year.

Data, data and more data, green thinking set to dominate, alignment key to corporate success

The pandemic has offered a massive opportunity to companies willing to invest, innovate, and generally think more than one quarter into the future. 

This week’s announcement likely caught very few by surprise with Woolworths (ASX:WOW) further increasing their majority stake in data analytics group Quantium for $223 million.

This is a highly specialised business helping large corporates, including many of Woolies competitors, to not only gather important data from their customers but actually build a strategy to harness it and use it to improve their experience and thereby their loyalty.

This week’s Climate Summit led by President Biden has clearly titled the agenda to cleaner energy and greater sustainability, with solar stocks jumping as much as 5 to 10% on news that the US will seek to halve emissions by 2030.

The Chinese Government also flagged a reduction in coal use, with Australia slowly coming to the party as pressure grows from those countries with which we are seeking new trade deals.

Management and long-term alignment were highlighted once again this week after AGL’s CEO stepped down at 50 years of age unable to commit himself to the recovery.

AMP is now undergoing another unexpected split after several years of short-term focus by the Board and Management.

More than ever, leaders must be entrepreneurial and committed to the future of their company if they have any hope of remaining successful.

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