by Melissa Darmawan
Australian technology giants tumbled after investors pressed the sell button on Snap’s missed earnings, sending the Nasdaq futures lower as concerns mount about the tech giant’s reliance on internet advertising. The news pulled Facebook-owner Meta Platforms and Google-owner Alphabet down seven and almost four per cent respectively, disturbing an already fragile sentiment.
At the open, investors learned that across the Tasman, retail sales in New Zealand fell 0.5 per cent in the March quarter after an 8.3 per cent increase in the last December quarter, weighing further on the health of the consumer after last week’s mixed results from retail giants on Wall St.
The news doesn’t get any better after Japan’s manufacturing activity grew at its slowest pace in three months in May. Supply chain challenges due to parts shortages and China’s Covid-19 lockdowns have slowed production and new orders growth, according to the au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index.
In hopes of providing support to China’s economy and to bolster global market sentiment, Beijing has offered more $29.7 billion (140 billion yuan) in additional tax relief. The latest initiative is aimed at businesses to help offset the impact of the Covid-19 lockdowns in the world’s second-largest economy. Adding to the momentum, President Joe Biden is set to review the tariffs imposed by his predecessor President Donald Trump on imports from China, sparking a rally in the offshore yuan to the greenback.
Materials buck tech trend
As investors continue to comb through the news, the local market fluctuated between gains and losses with more gains then losses as the session continues.
Materials continues to hold onto its minor gains, along with financials as they both add 0.2 per cent each. Property is flat while the other sectors are in the red, led by information tech deepening its fall, now by 2.6 per cent.
In some individual names, Tabcorp (ASX:TAH) dives 81 per cent to $1.02 after the demerger of lotteries and Keno.
Nufarm (ASX:NUF) tumbles 14.8 per cent to $4.98 after Sumitomo Chemical sold its 15.9 per cent stake.
A couple of miners are doing some heavy lifting with Mineral Resources (ASX:MIN) up 3 per cent to $61.44, Fortescue Metals (ASX:FMG) added 1.3 per cent, extending its 2.8 per cent gain yesterday.
TerraCom (ASX:TER) continues to rally, up 25.6 per cent in the past three days. Quantum Graphite (ASX:QGL) is trading 10.2 per cent lower to 44 cents, a consolidation after rallying 21 per cent in the same period.
As treasury yields continue to climb and the positive comments from JPMorgan CEO Jamie Dimon about the state of the economy has seen banks rally, National Australia Bank (ASX:NAB) is up 1.2 per cent to $31.14 and Commonwealth Bank (ASX:CBA) is trading 0.7 per cent higher to $105.20.
Meanwhile, shares in Pushpay (ASX:PPH) are in a trading halt as two private equity suitors circle the business. Investors learned this morning that private equity firm BGH Capital and Sixth Street has acquired a 20.3 per cent stake in Pushpay. We will keep an eye on this.
At noon, the S&P/ASX 200 is 0.1 per cent or 8 points higher at 7,157.
The SPI futures are pointing to a fall of 2 points
Broker moves
There have been several brokers reducing Incitec Pivot’s (ASX:IPL) target price after their news to split its Fertiliser and Dyno Nobel businesses into two separate listed companies in the first half of 2023.
Credit Suisse rates Incitec Pivot (ASX:IPL) as outperform, reducing its target price to $4.05 from $4.28. The broker believes that the demerger is a positive move. Prior to public company costs of $25 million to $35 million, the broker anticipates Incitec’s fertilisers to achieve earnings of $180 million to $190 million with earnings largely conditional on Phosphate Hill’s cost position. Currently, it remains tied to fixed price gas contracts through to 2028. Shares in Incitec Pivot (ASX:IPL) are trading 0.8 per cent lower, extending from its 7.5 per cent tumble yesterday to $3.57.
UBS upgraded Wesfarmers (ASX:WES) to a buy from neutral and raised its price target to $56 from $54. The broker cites that its non-retail divisions were the source of the upside to its first half performance and are on track to contributing a large share of earnings. The broker estimates the Chemicals Energy & Fertilisers business along with an exposure to lithium upside can offset the mixed outlook for retail. Shares are bucking the trend of the overall market, up 0.2 per cent to $46.27.
UBS upgraded Evolution Mining (ASX:EVN) to neutral from sell with a reduced price target to $4.05 from $4.13. The broker retains its US$1,500 per ounce long-term gold price forecast and expects supply chain pressures and inflation to persist amid the skilled labour shortages. While Evolution Mining is not the broker’s preferred company, due to current prices, the risk is already priced-in hence the upgrade in rating. Shares are trading 1.3 per cent higher to $3.77.
Best and worst performers
The best-performing sector is financials, up 0.8 per cent. The worst-performing sector is information technology, down 2.3 per cent.
The best-performing stock in the S&P/ASX 200 is Virgin Money UK (ASX:VUK), trading 4.1 per cent higher at $2.68. It is followed by shares in OZ Minerals (ASX:OZL) and Allkem (ASX:AKE).
The worst-performing stock in the S&P/ASX 200 is Tabcorp Holdings (ASX:TAH), trading 81.2 per cent lower at $1.01. It is followed by shares in Nufarm (ASX:NUF) and Block (ASX:SQ2).
Commodities and the dollar
Gold is trading at US$1850.60 an ounce.
Iron ore is 0.2 per cent lower at US$135.95 a ton.
Iron ore futures are pointing to a fall of 0.5 per cent.
One Australian dollar is buying 70.84 US cents.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, Wall St Journal, Reuters
