ASX closes weaker as oOh!Media plummets

 smh.com.au  08/16/2019 06:33:32  2

  • Australian shares closed trading lower on Friday.
  • Wall Street shares were relatively steady on Thursday despite China's threat to counter tariffs.

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Australian shares fell heavily for a second week running, as global recession fears mounted following the inversion of the US yield curve.

The S&P/ASX 200 Index fell 178.9 points, or 2.7 per cent, to 6405.5 while the broader All Ordinaries lost 177.5 points, or 2.7 per cent to close the week at 6485.9, its worst week since November 2018.

"This week has been a roller-coaster ride for investors as market participants attempt to navigate the swelling tide of angst, precipitated by what is fast becoming a synchronised global slowdown where escalating trade tensions have become akin to pouring kerosene on a pre-existing cyclical slowdown, increasing the probability of recession," said Saxo Capital Markets market strategist Eleanor Creagh.

"Risk off has been the name of the game and global factors have dominated the narrative as trade uncertainty persists and ugly industrial data dampened sentiment."

The major banks weighed the market heavily this week. Commonwealth Bank fell 5.4 per cent to $75.12, ANZ lost 2.3 per cent to close the week at $26.39, NAB slid 2.2 per cent to $27.03 and Westpac declined 1.4 per cent to $27.82.

The major resource stocks were also weaker as the prices of oil, iron ore and base metals slid across the board. BHP Group slid 3 per cent to $36.17, Rio Tinto declined 3.4 per cent to $84.72, South32 fell 4.2 per cent to $2.76, Woodside Petroleum dipped 5.9 per cent to $31.21 and Oil Search closed the week 10 per cent lower at $6.31.

A solid run of earnings wasn't enough to offset the declines.

CSL shares rose 3.4 per cent to $227.40 after reporting a solid 11 per cent profit increase and flagging a greater expansion into China.

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

JB Hi-Fi closed 11.1 per cent higher at $31.05 and Super Retail Group added 13.9 per cent to end the week at $9.75.

Should the European Central Bank embark on a new stimulus program, it is likely to have wide reaching consequences with other global central banks forced to react also.

"If the ECB undertakes such substantive stimulus, it is unlikely to do so alone given the upward pressure it would put on the US dollar," said NAB markets strategist Tapas Strickland.

"Also such an aggressive package is in reaction to a Eurozone economy that has deteriorated over the past couple of months which will also weigh on the global economy.

"The Fed's Bullard played into this view [on Thursday], stating 'I think we're in the middle of a global slowdown and we're just going to have to assess how this is going to affect the U.S. economy'."

UBS reduced its price target on Tabcorp but still retained its 'buy' rating on the company saying while it saw growth opportunities for the company, its digital wagering turnover growth showed signs of slowing after coming in well below analyst expectations.

"We believe the market is yet to fully appreciate the characteristics of the late cycle move to digital lottery tickets; which is now accelerating," said analyst Matt Ryan.

"At the current run rate, we estimate this will contribute 1-3 per cent growth to group lottery revenue [annually] and 3-6 per cent growth to EBIT (earnings before interest and tax)."

UBS reduced its price target on Tabcorp from $5.90 to $5.40.

Woodside Petroleum chief executive Peter Coleman has put the heat on Chevron and BHP over delays on gas processing deals, warning they are running the risk of allowing rivals overseas to capture LNG customers targeted by two huge Western Australian projects.

Mr Coleman said that both the Browse and Scarborough LNG projects - together worth more than $44 billion of investment - were economic based on terms being offered for gas processing and should go ahead.

He accused some partners in the North West Shelf venture of risking the collective benefits of gas resource development for their own self-interest by dragging their heels on agreeing terms for processing gas from offshore fields.

Mr Coleman didn't name the partners in question but pointed to those that had stakes in the North West Shelf venture, but not in the Browse field. That means BHP and Chevron.

Angela Macdonald-Smith has the full story here.

As investors battle to come to grips with the grim reality of heightened market volatility, the second week of reporting season has presented a stark contrast between the haves and have-nots of the ASX.

The first group of companies is focused, dependable and universally long-term in their thinking. Firms in the second category aren't necessarily bad businesses, but they find themselves reshaping their models in an unforgiving environment.

On Monday, the standout result came from an unlikely sector: Retail. JB Hi-Fi chief executive Richard Murray is the product of a culture of great merchants.

James Thomson has the full piece here.

Yesterday

Baby Bunting doubled its final dividend after profits rebounded 43 per cent to $12.4 million in 2019 after a tough year in 2018, when the collapse of several rivals dented sales and margins.

Australia's largest baby goods retailer said earnings before interest tax depreciation and amortisation rose 37 per cent to $24.1 million on a statutory basis or by 46 per cent to $27.1 million on a proforma basis in the 12 months ending June.

The proforma EBITDA result exceeded guidance between $25 million and $27 million and beat consensus forecasts around $26.2 million.

Sue Mitchell has the full story here.

Yesterday

Telstra has sold a $700 million stake in a newly created property trust to a consortium of investors led by Charter Hall.

The telecommunications giant will retain a 51 per cent stake in the property trust, which is valued at $1.43 billion and contains a number of the telco's properties.

The sale, previously flagged by The Australian Financial Review's Street Talk column, is parted of a strategy to unlock equity in some of the telco's property assets.

"When we announced our T22 strategy in June 2018 it included the goal of monetising up to $2 billion of assets to strengthen our balance sheet," Telstra chief executive Andy Penn said.

James Fernyhough has the full story here.

Yesterday

Lynas chief executive Amanda Lacaze welcomed the news Thursday evening that the Malaysian government will allow the company to continue operating in Malaysia and said she hopes this ends the political battles over the rare earths group's operations.

"We are optimistic that this decision will bring an end to the politicisation of Lynas over the past year," she said in a statement on Friday morning.

"We hope today's decision will encourage other international businesses to invest in downstream manufacturing in Malaysia."

The ruling coalition, lead by Prime Minister Mahathir Mohamad, has been at loggerheads over the Lynas operation, but Mr Mohamad has consistently backed the ASX-listed company.

Colin Kruger has the full story here.

Yesterday

Investors have savaged outdoor advertising company oOh! Media's after it cut its profit forecasts, citing a "significant decline in overall media advertising spend" and "general economic uncertainty".

oOh! warned its 2019 financial year earnings will be about $27 million  or 17 per cent  less than it had earlier forecasted, acknowledging it missed the mark on their predictions for the second half of the year. Shares in the company plummeted by as much 40 per cent in mid-morning trading to a low of $2.32.

The company pointed the finger at "current general economic uncertainty and challenging market conditions" that damaged profits and made earnings predictions "more difficult".

oOh! runs outdoor advertising in Australia and New Zealand, including over 9000 digital signs.

Michael Fowler has the full story here.

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