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CBA and miners help ASX continue record run

Daily Market Update

CBA hikes dividend, announced buy back, IAG delivers another loss
The ASX200 (ASX: XJO) finished at another record on Wednesday, adding 0.3% with the Commonwealth Bank (ASX: CBA) extending its dominance as Australia’s largest company. The share price rallied 1.5% almost singlehandedly pushing the market higher.
Outside of the major banks it was a generally risk on day with energy and miners also rallying strongly following a strong report from Mineral Resources (ASX: MIN) which sent competitors including Orocobre (ASX: ORE) up 6.3%.
Technology continues to be sold off with Megaport (ASX:MP1) the worst performing following a broker downgrade. But all eyes were on the CBA which managed to double its 2020 dividend despite reporting revenue growth of just 2% to $24 billion.
Profit improved 6% to $10 billion with the final dividend back to $2 per share and $3.50 for the full year; a stark improvement from last year’s $2.98.
Where many competitors raised capital in 2020, CBA avoided doing so and is now undertaking a $6 billion off-market buy back in an effort to distribute some $2.1 billion in excess franking credits to shareholders; this will be highly attractive for those holding shares in superannuation.
On the negative side, net interest margin continued to weaken as the RBA’s support was removed and digital investment was increased as they are face with growing fintech challengers.
Insurance hurts, Seek split, lithium booms but costs increasing
Insurance Australia Group’s (ASX: IAG) report evidenced the incredibly difficult business model faced by insurers, delivering a $427 million loss sending shares down 2.7%.
The group saw revenue increase just 1.7% to $18 billion with profit hit by a spike in injury claims, customer and staff remediation from underpayments. Management are hopeful these are in the past and the future looks bright, but it appears the difficult conditions will continue.
On the positive side Challenger Financial Group (ASX: CGF) jumped 4.6% after investors were able to digest yesterday’s improving result.
Seek Ltd (ASX: SEK) has confirmed it will move its online education and venture capital businesses into a separate unit trust, valued at $1.415 billion and looking to raise an additional $460 million from external investors; shares were down 1.5%.
Mineral Resources (ASX: MIN) continued its record run, delivering all-time highs in tonnes produced, shipped, revenue and profit. Earnings were up 150% to $1.9 billion, and profit doubled to 230% to $1.1 billion. The dividend was doubled but the share price remained flat.
Inflation disappoints, oil falls, gold rallies, markets higher
It was another broadly positive day for the US and European markets with the Nasdaq the only detractor falling 0.2% as the likes of Apple (NYSE: AAPL) and Alphabet (NYSE: GOOGL) were hit with more pressure on the monopolies they control through their app stores; it’s not just China seeking to regulate.
The Dow Jones and S&P 500 both finished higher, supported by a recovery in the oil price and more positive news for the financial sector, they were up 0.6% and 0.3% respectively.
Despite protestations of the opposite, the Federal Reserve’s call that inflation will be transitory appears to be correct with the latest inflation data released overnight.
Whilst headline inflation remained at 5.4%, a 20-year high, primarily due to the low starting point, core inflation which excluded more volatile price changes rose just 0.3% in the month and decelerated from 4.5% to 4.3% per annum.
Surprise, surprise, one of the biggest detractors was a reversal in used car prices which were just 0.2% higher compared to 30% in the previous quarter.
Gold bullion jumped on the news, as did despite Biden’s increasing pressure on OPEC to increase production.

The Inside Adviser

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