Global Fears Overshadow Local Earnings

By Glenn Dyer | More Articles by Glenn Dyer

Australian shares are looking to open higher this morning after Wall Street and other markets offshore ended the week with a solid gain on Friday.

Following that positive global lead, ASX 200 futures jumped 41 points, or 0.6%, on Friday night pointing to a positive start to trade for the ASX later this morning.

Eurozone shares and the US S&P 500 both jumped 1.4% on Friday on the back of talk that Germany could allow its budget to move into deficit if Germany slides into recession and on earlier comments from an ECB official pointing to a significant monetary easing at the central bank’s next meeting in early September.

The ASX 200 Index fell 178.9 points, or 2.7%, to 6,405.5 last week while the wider All Ordinaries shed 177.5 points, or 2.7% to close at 6485.9, its worst week since November last year.

Global share markets, including Australia, are down around 6% from their highs of late July.

The AMP’s chief economist, Shane Oliver pointed out at the weekend that the biggest falls on the ASX were seen “in communication services stocks on the back of Telstra’s earnings result, energy and material stocks and financials, and only the defensive health sector seeing a gain on the back of good earnings news.”

Those global growth worries and expectations for further monetary easing saw bond yields fall sharply with the Australian 10-year bond yield hitting a new record low of 0.85%.

Oil and metal prices rose slightly but the iron ore price fell further (but steadied on Friday at around $90 a tonne). The $A was little changed at around 67.50 US cents as the greenback edged higher.

That’s despite some solid results from the likes of CSL and JB Hi-Fi for example.

The major banks weighed the market heavily. Shares in the Commonwealth Bank fell 5.4% to $75.12, ANZ lost 2.3% to close the week at $26.39, NAB slid 2.2% to $27.03 and Westpac shares did best of all, only down 1.4% to $27.82.

The major resource companies were also weaker as the prices of oil, iron ore and base metals weakened (although iron ore prices firmed a touch on Friday).

Ahead of the release of its 2018-19 results tomorrow (Tuesday) BHP shares lost 3% in value to end at $36.17, Rio Tinto lost 3.4% to $84.72, South32 fell 4.2% to $2.76 (it is due to report on Thursday), Woodside Petroleum fell 5.9%t to $31.21 and Oil Search closed the week 10% lower at $6.31 (its due to report tomorrow).

Some reasonable profit reports couldn’t alter the sell-off.

CSL shares rose 3.4% to $227.40 after reporting an 11% jump in earnings and a higher dividend

JB Hi-Fi and Super Retail Group both firmed this week too after proving resilient to the slowing retail landscape.

JB Hi-Fi shares jumped 11.1% at $31.05 and Super Retail Group shares were up nearly 14% at $9.75.

Shares in Seven West Media rose 6.6% on Friday to close at 40 cents after CEO Tim Worner stepped down immediately after a six-year stint and was replaced by former sales boss, James Warburton.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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