Futures pointed to a strong opening for the ASX this morning and that has come to fruition with the ASX surging at open.
The S&P/ASX 200 is up 1.9% to 6,964.2 in the first 16 minutes of trade.
However, nothing is set in stone in this period of volatility and Wall Street’s poor performance on Thursday could still have a big impact on the local market.
Tesla Inc (NASDAQ:TSLA). was one of the culprits dragging the US market down. The company fell 11.6% on warnings that supply chain issues would disrupt vehicle production.
Elon Musk has put the brakes on several 2022 product launches including an electric ute/SUV hybrid known as Cybertruck, to concentrate on serving customers in its core business.
“The fundamental focus of Tesla this year is a scaling output,” Musk said. “If we were to introduce new vehicles, our total vehicle output would decrease. This is a very important point that I think people do not logically understand.
“Last year, we spent a lot of engineering and management resources solving supply-chain issues, rewriting code, changing our chips, reducing the number of chips we needed, that was ‘chip drama central’ and that was not the only supply-chain issue. So there’s just hundreds of things and as a result, we were able to grow (output) almost 90%.
“If we actually introduce an additional product, that would then require a bunch of attention and resources on that increased complexity of the additional product resulting in fewer vehicles actually being delivered, and the same is true of this year.”
Intel dropped 7% on downbeat guidance.
Netflix tempered Intel and Tesla’s fall with a 7.5% gain.
Here’s what we saw (source Commsec):
- The Aussie dollar fell from US70.97 cents to US70.20 cents and was near US70.30 cents in late US trade.
- Global oil prices were weaker on Thursday. Investors continue to monitor tensions between Russia and Ukraine on the fear that conflict may further crimp global oil supplies. Investors now turn their attention to the OPEC+ meeting on February 2.
- The Brent crude price fell by US62 cents or 0.7% to US$89.34 a barrel.
- The US Nymex crude price fell by US74 cents or 0.8% to US$86.61 a barrel.
- Base metal prices were mixed on Thursday. Zinc rose 0.7% and aluminium rose 0.3%. But other metals fell with copper and nickel down near 1.2%.
- The gold futures price fell by US$36.60 or 2.0% to US$1,793.10 an ounce.
- Spot gold was trading near US$1,794 an ounce in late US close.
- Iron ore rose by US65 cents or 0.5% to US$138.75 a tonne.
Australian market
It’s quarterly season at the moment, which means it’s a bombardment of company updates updating investors on activities over the last three months and with some companies, what is to come in the next three months.
Here are a couple of noteworthy announcements:
Resmed
ResMed CDI (NYSE:CDI) enjoyed double-digit revenue and profits growth for the December quarter, albeit below market consensus.
ResMed reported a net profit of US$201.8 million for the quarter, while revenue came in at US$894.9 million – both up 12%. However, gross margin fell 2.3% to 57.6% due to higher supply chain costs.
"We are working every day to meet the extraordinary demand generated by our competitor’s ongoing device recall," ResMed CEO Mick Farrell said.
"Our second-quarter results reflect continued strong performance across our business resulting in double-digit topline revenue growth, driven by ongoing high demand for our sleep and respiratory care products, and solid growth in our software-as-a-service business."
Consensus for ResMed's total revenue was US$926 million, compared to US$894.9 million, while gross profit was circa $15 million less than predicted.
Newcrest
Newcrest Mining Ltd reported a climb in total gold production of 10% in the December quarter, with it on track to deliver FY2022 production guidance of between 1800 and 2000/koz of gold.
The average realised gold price for the quarter jumped US$20 to US$1,743 per ounce, compared with the September quarter, while the average realised copper price climbed to US$4.37/lb, versus US$4.24/lb.
Newcrest shares are down 9.4% over the past 12 months.
US market
Aussie company Atlassian (NASDAQ:TEAM) Corporation PLC, which trades on the NASDAQ, posted 10,000 net new customers for the second quarter, with revenue surging 37% year-on-year to US$688.6 million ($979.65 million) and its net loss narrowing.
The software company posted a net loss of US$77.5 million, compared with a loss of US$621.5 million a year earlier, and an operating loss of US$66.7 million compared to US$27.7 million in the previous year.
98% of its new Atlassian customers are 'in the cloud' and will pay recurring subscription fees.
The company also passed more than US$2 billion in lifetime sales on its Marketplace platform.
"Hiring remains our top priority," founders Mike Cannon-Brookes and Scott Farquhar said in a letter to shareholders. "Thanks to our award-winning culture, mission, and “TEAM Anywhere” program, we’re well-positioned to ramp up hiring over the coming quarters as we seize the massive market opportunities in front of us.”
While Atlassian has been caught in the NASDAQ’s tech sell down and is down 25%, shares are still up 28.13% over the past year as demand continues to ramp up for its collaboration software.
Atlassian last traded at US$290.89 per share, giving it a valuation of US$73.52 billion.
Apple
Apple Inc (NASDAQ:AAPL). reported record sales in the holiday quarter.
The tech giant beat estimates due to high iPhone demand in China. It also withstood supply chain constraints and omicron variant disruptions.
Chief executive Tim Cook warned that October could see chip shortages affecting the manufacturing of most Apple products, which would lead to over US$6 billion ($8.5 billion) in lost sales.
Chief financial officer Luca Maestri confirmed this and said it was more than $6 billion, but constraints would decrease in the March quarter.
“The level of constraint will depend a lot on other companies, what will be the demand for chips from other companies and other industries. It’s difficult for us to predict, so we try to focus on the short term,” he said.
US economy grows
The US has staged a solid recovery last year, growing at its fastest pace since 1984.
However, inflation and Omicron are now posing major challenges, which threaten to dampen consumer demand and stifle the recovery.
Supply chain issues are also causing headaches for businesses.
US GDP expanded by 5.7% last year, the Commerce Department said in its latest quarterly report, reversing 2020’s downturn.
In the October-November period alone, GDP grew 6.9%, topping expectations, although this figure is likely to be inflated.
“The upside surprise came largely from a surge in inventories and the details aren’t as strong as the headline would suggest,” Oxford Economics' Kathy Bostjancic said.
“What’s more, beneath the headline GDP print, the handoff to 2022 is weak. With consumer spending retrenching in December and Omicron dampening economic activity,” she said in an analysis.
“Our tentative Q1 GDP forecast right now is zero,” Ian Shepherdson of Pantheon Macroeconomics said, pointing to a grim start of the year.
President Biden has welcomed the report, highlighting “the fastest economic growth in nearly four decades, along with the greatest year of job growth in American history.
“For the first time in 20 years, our economy grew faster than China’s.
“This is no accident,” Biden said. “My economic strategy is creating good jobs for Americans, rebuilding our manufacturing, and strengthening our supply chains here at home to help make our companies more competitive.”
European market
Good news for Facebook
Facebook has been cleared by an EU Commission to acquire customer service technology Kustomer. The one caveat is that rivals maintain unfettered access to the platform.
The Kustomer technology is a software that allows businesses to manage customer interactions by phone, email, text messages, WhatsApp, Messenger and Instagram within one tool.
The commission runs the EU’s powerful antitrust authority and was asked by 10 national authorities to carry out the investigation, with Austria making the original demand.
Approval was granted on Thursday with strict demands, including the nomination of an outside trustee who would ensure that Meta sticks to its promises.
“Our decision today will ensure that innovative rivals and new entrants in the customer relationship management (CRM) software market can effectively compete,” said EU Competition Chief Margrethe Vestager in a statement.
“The commitments offered by Meta ensure that its rivals will continue to have free and comparable access to Meta’s important messaging channels,” she said.
Facebook, which is now part of the broader Meta Group is pushing to link e-commerce services to its platform, which has raised some red flags. However, the company believes it will create choice in the market.
“We are pleased with the European Commission’s Kustomer merger clearance. It shows that our acquisition of Kustomer will create more choice in the competitive CRM market,” a Meta spokesperson said.
Generally speaking
European markets were higher yesterday.
Defensive sectors led gains with both healthcare and utilities up 2% and telecom up 1.7%.
Banks, which benefit from rising rates, rose by 1.4%.
Shares in Deutsche Bank rose 4.4% after posting the biggest profit in a decade.
The pan-European STOXX 600 index was 0.7% higher.
The German Dax index lifted by 0.4%.
The UK FTSE index rose by 1.1%.
In London trade, shares in Rio Tinto rose by 2.5%. Shares in BHP gained 1.9%.