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ASX sinks to third straight losing week, Ingham’s margin hit, QBE jumps on profit result

Daily Market Update

The local market finished the week 1.1 per cent lower, as the S&P/ASX200 dropped 0.9 per cent on Friday, marking the third straight week of declines. Earnings season remains as varied as any in recent history, with significant sector and stock level dispersion. Technology and property were the largest detractors on Friday, down 2.3 and 1.7 per cent after higher-than-expected producer price inflation in the US heightened the threat of more rate hikes. WiseTech (ASX:WTC) fell by 3.6 per cent after the company announced the purchase of intermodal rail solutions provider Blume Global for US$414 million from a group of private equity firms. Shares in Afterpay owner Block (ASX:SQ1) fell by 7.8 per cent on valuation concerns but QBE Insurance (ASX:QBE) railed 7.4 per cent, topping the market, after reporting just a 3 per cent increase in profit to $770 million, surprising investors. Margins remain under pressure at Inghams (ASX:ING) with the company suggesting chicken prices were set to increase as profit fell by 55 per cent as fuel, feed and packaging costs increased. Across the week Orora (ASX:ORA) was the standout, adding 17.5 per cent, while Sonic (ASX:SHL) gained 16.2 with Star Entertainments (ASX:SGR) disastrous 12 months continuing, dropping 20 per cent after a massive write-down.

US markets hit by inflation concerns, Nasdaq outperforms, Deere & Co surges

All three US benchmarks finished the week lower following news that Producer Price inflation actually accelerated by 0.7 per cent in January, stoking concerns that interest rates may sit about 5 per cent for an extended period of time. The Dow Jones fell 0.4, the Nasdaq 0.6 and the S&P500 0.3 per cent, with the Federal Reserve continuing their heavy commentary on future rate hikes. Agricultural and construction equipment maker Deere & Co (NYSE:DE) gained more than 7.5 per cent after the company beat expectations to deliver a doubling of profit to US$1.96 billion for the quarter. Revenue jumped by more than 32 per cent with strong growth across every business unit while also benefitting from higher prices. It was the opposite story for Door Dash (NYSE:DASH) which fell 7.5 per cent as the food deliver company reported a significantly higher net loss for the quarter. This was despite the best quarter ever seeing revenue growth exceed 40 per cent and transaction value moving based US$14 billion. Both the Dow Jones and S&P500 fell over the week, the third week in a row, down 0.1 and 0.3 per cent, while the Nasdaq managed a 0.6 per cent gain.

  • Earnings season delivers records, rate concerns growing, value, or value trap?

    Among the highlights of the week was the Commonwealth Bank dropping a massive $5.1 billion profit for the first half of the financial year. The group powered ahead with 75 per cent of loan funding coming from deposits, announcing some 700,000 new accounts while confirming that net interest margin had jumped significantly back over 2 per cent. The group has benefited from higher interest rates allowing a jump in profits but have warned of impending pain with the CEO stating they would seek to support borrowers rather than punish them. Sticking on the topic, Westpac warned that almost half of its $471 billion in home loans were written using interest rate buffers that are set to be exceeded, which will place further pressure on the RBA to slow rate hikes. Among the worst performs of the week were Star Entertainment and AMP, the fund manager that is in the process of being sold off. Both are popular ‘cheap’ value investments, but having lost 20 and 15 per cent of their value, but the risk of these continuing to be value traps remains.

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