Home / Worst ASX session in two months amid mixed results

Market falls, BHP merges with Woodside, CBA’s correction
 
It was another rough day for the ASX200 (ASX: XJO) with the selling pressure continuing to grow as reporting season picks up steam.
 
The financial sector was the biggest contributor to the markets 0.9% fall, dragged down 1.7% by Magellan Financial Group (ASX: MFG) and the Commonwealth Bank (ASX: CBA) which is nearing a technical 10% correction.
 
Materials were also weaker ahead of BHP’s massive announcement with healthcare a rare winner, up 0.4%. Whilst technically occurring after market, BHP’s deal to merge its oil and gas division with Woodside Petroleum (ASX:WPL) will garner all the headlines tomorrow.
 
Under the deal BHP’s oil and gas assets, valued at US$14 billion will be transferred into a new entity, 48% owned by BHP shareholders, with all debt remaining in BHP.
 
The combined entity will move Woodside from being an also ran to a top ten energy producer but most importantly it allows BHP to improve its environmental credentials and double down on the future, which they see in potash.
 
The risk of not living up to expectations was on show today with coffee machine retailer Breville Group (ASX: BRG) falling 9.0% despite delivering a record $1 billion in sales, the group decided to cut their dividend significantly.
 
Westpac costs increase, Santos cash flow positive, Magellan’s surprise
 
Magellan Financial Group (ASX: MFG), was the worst performer today, dropping a surprising 10.2% after delivering its financial year results. The selloff was a surprise as there was little new information in the update, with performance fees down 40% to just $30 million the likely trigger.
 
Yet the group’s core strategies have been underperforming for 12 months so this wasn’t anything the market didn’t already know. The group reported an 8% increase in management fees to $631 million, with profit down 33% but a $1.14 per share final dividend announced.
 
Assets under management remain easily above $100 billion and management confirmed that the investment in Barrenjoey was performing better than expected. An expected result but unexpected reaction.
 
Westpac (ASX: WBC) will be forced to shut more branches and stand down staff as they seek to cut $8 billion in costs, but management have flagged the potential capital returns. It is rare to see a company seeking to save money whilst paying it out to shareholders.
 
Santos (ASX: STO) reported a 22% increase in revenue to US$2.04 billion delivering a US$354 million profit and a 5.5 cent per share dividend.
 
The company has finally recovered from its highly indebted position but the merger with Oil Search stands out as both a major risk and opportunity given the difficult backdrop for the energy sector; I side with the former.
 
US falls as retail sales sink, Afghanistan risk and Delta concerns grow
 
US markets fell in unison overnight, the Dow Jones down 0.8%, the S&P 500 down 0.7% and the Nasdaq 0.9%.
 
The selling pressure came after retail sales were reported to have fallen 1.1% in July, far greater than the 0.3% reduction predicted.
 
It’s another sign the end of stimulus and heightened underemployment may be impacted on the economy’s trajectory. Not surprisingly the key input into inflation in recent months, auto sales, fell 3.9% in July as conditions continue to normalise.
 
Fund managers are reportedly taking more defensive positions, increasing healthcare, insurance and utilities holdings following reporting season.
 
Walmart Inc. (NYSE: WMT) was the only real report of note, with same store sales continuing their mature growth of 3% behind a 6% increase in online sales that are now 100% higher over the last two years.