Buyers made a fleeting impression on the local share market in early trade on Thursday, although initial improvement was seized upon by sellers to have the ASX 200 lower at lunch – albeit by a smaller margin compared to the losses of recent day. Although brief, the early gains suggest that after a 6.5% fall this week, buyers were being attracted back into the market. In a similar pattern of trade, US indices surrendered early improvements to end lower also, although tech stocks measured by the NASDAQ managed to weather the broader selling of US stocks by posting a modest, yet symbolic gain.
At lunch, Healthcare was the only ASX subgroup to be higher, driven by a 2.2% improvement for CSL (CSL). By comparison, Sonic Healthcare shares were flat, and Ramsay Healthcare (RHC) was 1.8% lower after reporting results. Banks were the main reason for the loss in the overall market, with all of the big lenders down in the order of 1.5%. Commodity facing stocks remained challenged, as underlying prices which were generally lower in the last day as the coronavirus spreads outside China. These fears will remain a key downside risk for commodity prices until markets are convinced that daily new infection rates outside China have peaked. BHP held back the Materials sector with a loss of 1%, while investors marked down shares in Rio Tinto (RIO) seeing through its result to focus on the absence of a share buyback or special dividend.
Energy names were hampered by a near 3% fall for oil prices, overnight following hundreds of new coronavirus cases being reported in Asia, Europe and the Middle East; Santos (STO) was lately down by 2.6%.
Travel focussed names were still on the radar for sellers. Shares in Flight Centre (FLT) – Australia’s largest travel agent, were flat at lunch after reporting 1H results. FLT posted a 27% slide in underlying profit before tax to $102.7m, which was in-line with the company’s recently revised guidance. FLT said it will pay a reduced $0.40 per share interim dividend, a 33% reduction on last year’s interim payment. The slowdown in travel due to the Coronavirus has seen FLT reduce its profit expectations for the year. It is now forecasting underlying earnings of between $240m – $300m for FY20 (previously $310m – $350m). In relation to the Coronavirus, FLT said it “…will continue to monitor developments, particularly the ongoing efforts to contain the virus’s spread”. FLT is down 10% in February and 20% so far this calendar year.
Elsewhere, Australia’s second largest miner, Rio Tinto (RIO) reported a full year result that was marginally ahead of the market’s expectations. Revenue for the year rose 5.9% to US$45.4 billion underlying profit jumped 17.8% to US$10.4 billion. However net profit, which includes one-off charges, fell 41% to US$8.01 billion. The fall in net profit was primarily due to increased net impairment charges of US$1.6 billion from the Oyu Tolgoi underground project in Mongolia and the Yarwun alumina refinery in Queensland. More than half of RIO’s earnings are derived from its iron ore business. Iron ore contributed US$24.1 billion, an increase of $29%. A short time ago RIO shares were down 1.7%.
Skin regeneration group Polynovo (PNV) was noteworthy for its more than 2.2% shareprice gain. The group reported a $2.4 million loss, despite a 129% surge in revenue. PNV said that it’s NovoSorb sales for the half year were 129% higher than the same period last year. However, the Company said the rate of increase in sales is growing in existing markets and should grow further as new markets come on stream. BTM sales in January 2020 were more than three times the sales in January 2019. Based on year to date performance, PNV expects that NovoSorb sales for FY20 should comfortably double FY19.
In currency trade, a notable feature of the last 12 hours has been the Aussie dollar comfortably breaking down below the 0.6600 level to 0.6550, once again because of concerns the coronavirus will slow the global economy and the increased prospect for RBA rate cuts in the medium term.
Published by CommSec