The ASX200 ended the penultimate week of April, surrendering -1.8% of the month’s gain, with a string of profit downgrades combining with the country’s high vulnerability to the global fuel crisis caused by the Iran war – the oil price continues to grind higher with no clear resolution in sight for the conflict. A wave of profit downgrades swept the ASX, led this week by Cochlear’s earnings shock, which sent its shares plunging 40%. Other companies warning that surging energy costs will weigh on earnings included Qantas, Worley, a2 Milk, Orora, Cleanaway and Qube. The ASX is also struggling because its two heavyweight sectors have come off the boil, the banks and resources.
- The bank results in May are vital to the local markets’ relative strength – if they’re not “too bad”, we could be trading back towards our highs in the blink of an eye.
The winners’ and losers’ enclosures last week were dominated by good old-fashioned company fundamentals, with the market particularly ruthless toward bad news:
Winners: Treasury Wines (ASX:TWE) +12%, Tabcorp (ASX:TAH) +10%, James Hardie (ASX:JHX) +10%, Data#3 (ASX:DTL) +8%, Centuria (ASX:CNI) +8%, Reece (ASX:REH) +8%, NEXTDC (ASX:NXT) +8%, Endeavour (ASX:EDV) +7%, and Zip (ZIP) +7%.
Losers: Cochlear Ltd (ASX:COH) -42%, IGO Ltd (ASX:IGO) -24%, 4DMedical (ASX:4DX) -18%, Generation Development (ASX:GDG) -18%, Paladin (ASX:PDN) -13%, HUB24 (ASX:HUB) -13%, Temple & Webster (ASX:TPW) -12%, and Lynas (ASX:LYC) -12%.
Weekly snapshot: Last week was relatively void of fresh major economic and geopolitical news, while the Iran War continued to cast its shadow over risk assets:
- The week started on the back foot with the Strait of Hormuz closing just as quickly as it opened, sending oil prices spiking ~8%, but the ASX managed to erode early losses to end flat.
- Wednesday was “Cochlear Day” plus the Bank of Queensland disappointed the market, renewing the selling across the influential banks – the subsequent negative sentiment drove the ASX to a triple-digit loss.
- The market felt “broken” in the second half of the week, focusing on any bad news, delivering four consecutive down days.
Overseas markets closed the week out in mixed fashion, with US tech names taking line honors. In Europe, the UK FTSE and German DAX retreated -0.8% and -0.1% respectively. In the US, the tech-heavy NASDAQ surged 2%, helping the S&P 500 gain 0.8%. Leading the charge were the semiconductor stocks, which posted their 18th positive session in a row on Friday, and ended the week with an 11% gain.
- The SPI Futures are calling the ASX200 to open down 0.2% on Monday, taking their lead from soft European indices, as opposed to Wall Street.
