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ASX on the cusp of five months of gains

Daily Market Update

ASX on the cusp of five months of gains, Seek (ASX:SEK) sold off on split, energy sector boom

The ASX200 (ASX:XJO) rallied 0.9% on Tuesday, overcoming a weak start with the energy and oil sector powering the market higher.

Woodside Petroleum (ASX:WPL) and Origin Energy (ASX:ORG) added 5.7% and 3.6% respectively after the oil price gained 4% overnight on signs of a strengthening global economy.

The IT sector was the primary detractor down 4.1% with property also seeing a strong recovery as Victorian and NSW restrictions look set to be further loosened.

Seek Ltd (ASX:SEK) was the major detractor, falling 7.1% after announcing the sale of a significant stake in their Chinese business, Zhaopin, and the resignation of their CEO Andrew Bassat.

Bassat will be taking over leadership of the ‘Investments’ business within Seek, which is focused on venture capital opportunities with ex-CBA CEO Ian Narev taking over the employment business.

The company reported an 8% fall in profit on the back of a 7% fall in revenue, as job ads take time to recover following the pandemic.

The original Zhaopin investment was just $20 million, with the sale taking their stake to 23.5% and potentially made at a value of $697; that’s some investment.

The company rallied to an all-time high in recent months despite weakening sales and a difficult environment, benefitting from the ‘tech rally’ and remain somewhat expensive given the uncertainty ahead.

China exports drop 5%, OilSearch (ASX:OSH) profit down 93%, AdBri (ASX:ABC) profit increase

Australian exports to China dropped 5% in January, with iron ore and cereal grains among the hardest hit.

Despite the headline, this reduction was somewhat expected given the huge run up in iron ore exports in 2020.

Oil Search Ltd (ASX:OSH) reported a 93% fall in profit to just US$22 million on revenue of US$1.1 billion, also down 32%.

The company was hard hit by the pandemic-driven fall in the oil price, but is likely to recover quickly with production guidance improved, shares rallied 6.4%.

AdBri (ASX:ABC) delivered a 98% increase in profit to $93.7 million despite reporting a 4.1% fall in revenue to $1.5 billion for the full year.

The trend of seeing lower revenue but higher profits is increasingly common in 2021, with cost cutting and production slowdowns reducing costs, and in some cases, existing inventory being used to meet demand particularly in the consumer sector.

The company rallied 10.5% on the news and announced a 45% increase on the prior year.

APA Group (ASX:APA) fell 1.2% despite increasing their dividend by 4.3%. The company reported an $11.7 million loss due to the $249 million write-down of their Orbost Gas Plant which is struggling to meet agreed processing levels.

Nasdaq falls for the sixth straight day, more bond buying to follow, Bitcoin near bear market

The Nasdaq fell as much as 2.5% during the session but managed to finish down just 0.5% as concerns about tech valuations once again gathered steam.

Tesla (NASDAQ:TSLA) lead the falls, down 9% over the session but ultimately finishing just 2.1% lower, with the recent US$1.5 billion investment in Bitcoin a concern for investors following the 18% fall in the last few days.

Federal Reserve Chair Jerome Powell assuaged fears once again, confirming the central bank’s US$120 billion per month money printing policy will not be slowed anytime soon.

This sent markets higher during the session and is forcing investors into a difficult decision. To assume low rates will remain for the foreseeable future, or to start positioning for a less supportive policy environment.

Both have risks, as we have seen overnight, with any signs of continued support sending the market higher.

The US economy reported the strongest increase in home prices in seven years, jumping 10.1% on 2020 levels in January.

Ares Management (NYSE:ARES) is expected to confirm a deal to take a large stake in AMP Capital’s investment business according to Bloomberg.

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