China lockdowns hit sharemarket, materials, energy slump, EML tanks

News that Beijing was set to follow Shanghai into massive lockdowns to avert the threat of Omicron sent global share markets into a shockwave in this shortened week.

The S&P/ASX200 fell another 2.1 per cent with every sector lower, led by the materials and energy sectors which fell 5.1 and 4 per cent respectively.

The drivers were a significant fall in the iron ore price, down 10 per cent, on concerns of a slowdown in Chinese steel mills, and a pause in demand for oil amid lockdowns. 

The losses were widespread with popular battery plays Mineral Resources (ASX: MIN), Lynas (ASX: LYC) and Iluka (ASX: ILU) down 10 per cent, 5 and 6.8 per cent respectively.

Those companies unlucky enough to be reporting were Woodside (ASX: WPL) and South 32 (ASX: S32), with the former reporting a 17 per cent fall in sales revenue in the first quarter despite further increases in oil and gas prices.

Production fell by 1 per cent but management continues to expect the tailwind of oil-linked LNG prices to continue into the final quarter of the year.

On a sector basis, the industrials and real estate sectors both ‘outperformed’ on the day delivering a return of 0.7 per cent with Boral (ASX: BLD) a standout up 1.4 per cent. 
 
EML Payments down, South 32 flags higher costs, Nufarm’s supply chain risk
 
Prepaid card and payments provider EML Payments (ASX: EML) picked the worst possible day for an earnings downgrade with shares falling 38 per cent after management reduced their earnings expectations by just 8 per cent.

Management confirmed that the Australian and US businesses were performing well, but that execution issues in Europe were impacting the launch of their planned new programs.

Revenue guidance was cut from $250 to $235 million with profit cut by another 10 per cent.

South 32 (ASX: S32) fell another 7.8 per cent, among the worst on the market, despite maintaining production guidance with investors clearly concerned about the warning around higher costs and lower profits due to unfavourable currency movements, higher raw material costs and increasing royalty payments.

Hiring platform Airtasker (ASX: ART) gained more than 16 per cent after the company reported a 25 per cent jump in volume on their marketplace on the back of a surge in job ads for mould and waterproofing work.

Nufarm (ASX: NUF) gained 1.9 per cent, the top on the market after confirming their Russian exposure was not material, but writing down $30 million in costs and reiterating earnings guidance of between $320 and $340 million.
 
Market havoc continues as disappointments grow, Musk buys Twitter, Microsoft beats
 
The selloff in global markets intensified on Tuesday with all three benchmarks dropping more than 2 per cent as corporate earnings reports began to disappoint.

The Nasdaq was the hardest hit, falling 4 per cent as the discretionary, technology and communication sectors faces the brunt off the volatility down 3 per cent or more.

The Dow Jones & S&P500 outperformed, falling 2.4 and 2.8 per cent but markets are becoming increasingly impatient with poor outlook statements.

Twitter (NYSE: TWTR) shares fell by around 3 per cent to US$50 per share, below the US$54.20 bid by Elon Musk which seeks to privatise and refresh the company’s approach.

The deal is set to proceed with the board’s backing marking an end to one of the worst-performing tech IPOs.

Shares in Microsoft (NYSE: MSFT) fell in after-hours trading despite delivering a sales and earnings beat, with general revenue increase 10 per cent.

Importantly, the cloud computing Azure business saw growth accelerate to 46 per cent and the Office 365 unit returned to growth after the first price hike in close to a decade.

United Postal Service (NYSE: UPS) shares fall 3.5 per cent after the company reported an 8 per cent increase in revenue as the e-commerce boom continues but a weakening in global growth.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.