Wall St fired up yesterday, with the Dow ending up over 400 points and the Nasdaq jumping 2%. The ASX is expected to follow suit, with ASX futures up by 1% to 7,173 at the close of trade and results updates from Fortescue, CSL, Corporate Travel, Santos, Tabcorp, Vicinity Centres and Treasury Wine, among others all due today.
Guiding the positivity in the markets was the tentative easing of tension between Russia and the Ukraine.
While US President Joe Biden was still reeling off fighting words, or at least veiled threats if Russia were to invade the Ukraine - the D-Day was supposed to be today - Russia said it was pulling back troops from the border after completing military exercises.
An invasion remains "distinctly possible," the president said, while analysts are taking a cautious approach, saying it is too soon to stop sounding alarm bells.
Investors, however, jumped back into the market with fears of an all-out war allayed.
Andrew Slimmon, senior portfolio manager for equities at Morgan Stanley (NYSE:MS) Investment Management believes the Russia-Ukraine tension may have opened up an opportunity for investors.
“Take advantage of this pullback,” Slimmon said in a phone interview with MarketWatch. Slimmon expects the S&P 500 index can rally to around 5,100 this year, though stocks could “retest” lows seen in late January as hot inflation will continue to worry investors that the Federal Reserve may have to “tap the brakes in an aggressive way.”
“I think as we get later into the year, the market is going to feel better,” Slimmon said. “I am in the camp that believes the Fed is not going to crush the economy and therefore the cyclical, value stocks should be biased in the portfolio over defensive and growth stocks.”
The major US indices arrested their three-day decline, with the Dow Jones Industrial Average rising around 422 points, or 1.2%, to finish near 34,988, the S&P 500 gaining around 69 points, or 1.6%, to close near 4,471. The Nasdaq Composite jumped nearly 350 points, or 2.5%, ending near 14,140.
Here’s what we saw (source Commsec):
- The Aussie dollar rose from near US71 cents to US71.55 cents and was near US71.50 cents in afternoon US trade.
- Global oil prices fell by around 3.5% in response to an easing of Ukraine-Russia tensions. Commsec reports: “Russia also recognised progress in talks between the US and Iran on the potential revival of a nuclear deal. If a deal was done, then more Iranian oil may enter world markets.”
- Brent crude price fell by US$3.20 or 3.3% US$93.28 a barrel.
- US Nymex crude price fell by US$3.39 or 3.6% to US$92.07 a barrel.
- Base metal prices were generally firmer by between 0.2-0.4%. Aluminium was the exception, down 1%.
- The gold futures price fell by US$13.20 or 0.7% to US$1,856.20 an ounce.
- Spot gold was trading near US$1,852 an ounce in afternoon US trade.
- Iron ore fell by US$13.20 or 8.8% to US$136.20 a tonne on attempts by China to "ensure the smooth operation of the market".
Australian market
Liontown signs lithium supply deal with Tesla
Aussie miner Liontown Resources (ASX:LTR) Limited has signed a legally binding sales and purchase term sheet with Tesla.
It’s big news for the WA-based company whose new $473 million Kathleen Valley Lithium Project will supply lithium spodumene concentrate to the EV giant.
The agreement is for five years and is expected to begin in 2024.
Liontown must have started commercial production by 2024 for all conditions to be met.
Tesla is expected to buy 100,000 dry metric tonnes (DMT) in the first year and increase its purchase to 150,000 DMT in subsequent years.
The agreement is subject to completed negotiations and the execution of detailed definitive agreements by May 30, 2022, otherwise, the deal will terminate.
Commenting on the agreement with Tesla, Liontown’s managing director and CEO, Tony Ottaviano, said: “Securing our second offtake sales agreement is another fantastic milestone for Liontown towards the development of the Kathleen Valley Lithium Project, and we are absolutely delighted to have signed this agreement with leading EV manufacturer, Tesla.
“Tesla is a global leader and innovator in electric vehicles and having it sign up to become a significant customer is a tremendous achievement and another huge vote of confidence in the quality of the Kathleen Valley Project. This means that we now have two of the premier companies in the global lithium-ion battery and EV space signed up as foundational customers, marking a significant step towards realising our ambition to become a globally significant provider of battery materials for the clean energy market. Our shareholders should be proud that future Tesla cars will be powered by Liontown lithium.
“We look forward to working with Tesla as long-term partners for many years to come. We are also continuing to progress discussions with additional potential customers for the remaining available production and we are looking forward to announcing additional arrangements in the weeks ahead as we continue to implement our strategy to develop the project and deliver value for our shareholders.”
Santos reports soaring profits
Santos Ltd (ASX:STO) has more than tripled its annual underlying profit.
The company has benefitted from higher oil and LNG prices and will review its assets and returns to shareholders after sealing a $21 billion merger with rival Oil Search and delivering a bumper dividend to investors.
Underlying profit was 230% higher to US$946 million ($1.32 billion), which outdid consensus forecasts of US$933 million, due to a 60% surge in its average oil price to US$76 a barrel.
Santos will pay a dividend of US8.5 cents, up 70% on the previous year.
"We will now seek to further optimise the portfolio, reduce gearing and conduct a review of our capital management framework including returns to shareholders," Santos chief executive Kevin Gallagher said.
The Oil Search merger delivered Santos a $25 billion market capitalisation and assets and projects spanning Australia, Papua New Guinea and Alaska.
Treasury Wines profit falls
On the downside, Treasury Wine Estates Ltd has suffered a 7.5% loss in net profit after tax to $109.1 million.
The loss is due to China’s trade sanctions and the subsequent plunge in shipments to that region.
Net sales revenue declined 10.1% to $1.26 billion for the half year.
Flagship brand Penfolds endured a 19% decline in earnings before interest, tax, SGARA and material items (EBITS) to $165.1 million and a lower EBITS margin of 43.1%.
However, the penfolds brand did grow in other key Asian markets, with net sales revenue up 119%, while distribution rose in Europe, the US and New Zealand.
On today’s results announcement, TWE’s chief executive officer Tim Ford commented: “We are very pleased with our first-half results, where we delivered comparable EBITS growth of 28% when taking into account the effective closure of the Mainland China market, while at the same time continuing with the implementation of important changes across the business.
“This performance reflects the focused execution of our plans and strategic priorities, led for the first time by Penfolds, Treasury Americas and Treasury Premium Brands. Each division is now on a clear and positive trajectory towards their respective long-term growth objectives, with the benefits of separate focus and accountability already very evident throughout TWE.
“Following the past two years of significant change within TWE and the markets in which we operate, we have shifted our focus from a mindset of ‘recovery and restructuring’ to one of ‘growth and innovation’. We have great confidence that by leveraging the unique strengths of our business – our people, our brands and our asset base – we are well placed to capitalise on the significant opportunities across the global markets in which we operate.”
US markets
While the Ukraine news has dominated over the past week, it seems some companies have been taking advantage of the softening of news around the pandemic.
Airbnb (NASDAQ:ABNB) is one such company and it has released impressive earnings results.
eToro analyst Josh Gilbert said: "Airbnb (NASDAQ:ABNB) announced its Q4 earnings today of US$0.07 per share on revenue of US$1.53 billion, compared to analyst expectations of US$0.03 per share on revenue of US$1.45 billion.
"With pandemic-implemented travel restrictions continuing to ease around the world, Airbnb (NASDAQ:ABNB) seems to be moving from strength-to-strength, and this is highlighted in this latest report by beating on both the top and bottom lines.
"Despite the Omicron variant creating waves throughout the world in Q4, Airbnb saw its nights and experiences sector climb by 58% year-over-year. Not only was this significantly higher than in Q4 2019, but it demonstrates that people are becoming less concerned about COVID-19 and are eager to travel again.
"This was Airbnb's third consecutive profitable quarter, thanks to its booking values that skyrocketed, up 90% year-over-year. This is most likely due to consumers booking lengthier stays as most companies now allow for work-from-anywhere flexibility.
"What's clear to see from this report is that travel is coming back and in a big way. Given the state of the travel industry over the last two years, Airbnb investors will be thrilled with this report, as the company is now doing better than it was before the pandemic. In addition, its forecast was bright, with Q1 revenue estimates exceeding analyst expectations. Airbnb may also set a record number of quarterly stays, illustrating its resilience against the pandemic once again."
Back on the Ukraine for a second, benefitting from the de-escalation were banks and so-called 'mega cap' technology stocks.
Travel dependent stocks also lifted sharply on re-opening hopes.
Shares in Intel rose 1.8% after it announced a $5.4 billion deal to buy Israeli chipmaker Tower Semiconductor.
European markets
They were also firmer on Tuesday, based on the Ukraine-Russia news.
Healthcare rose by 2.2% with shares in AstraZeneca up 5.8% after positive updates from a late-stage trial for a prostate cancer treatment.
The pan-European STOXX 600 index rose by 1.4%.
The German Dax index rose 2.0% and the UK FTSE index rose by 1.0%.
In London trade, shares in Rio Tinto fell 1.3% and BHP lost 1.5%.