ASX rises on heavyweights despite Transurban fall

Macquarie maintained its profit guidance in a trading update on Tuesday morning, saying it expected an increase of up to 15 per cent in the 2019 fiscal year compared with the 2018 fiscal year. The bank said trading conditions had been satisfactory through the December quarter with “significant realisations” across the group.

Challenger shares rose on Tuesday despite the company announcing its interim profit for the first half of the year had collapsed to $6.1 million, down from $195.4 million for the same period a year earlier. The company cited market volatility, industry disruption and political uncertainty as the major factors behind the fall. Its shares rose 1.2 per cent to $7.92.

Newcrest Mining rose 1.4 per cent to $25.08 after announcing it would divest its Séguéla project in Ivory Coast for $30 million. The miner has entered into an agreement with Roxgold, which will pay an upfront consideration of $20 million cash, then a deferred payment of $10 million contingent on first gold production.

Transurban fell 1.9 per cent to $12.22 after it reported a 56 per cent fall in interim profit on Tuesday. While the toll road operator’s proportional earnings before interest taxation depreciation and amortisation rose 9.8 per cent to $1 billion, it still disappointed analyst expectations of $1.03 billion.

 

Stock watch

JB Hi-Fi

UBS retained its ‘neutral’ rating on JB Hi-FI but increased its price target slightly following the electronics retailer’s stronger-than-expected first-half result. The company’s net profits after tax was 4 per cent ahead of the broker’s forecasts. “On trading, management noted recent sales had been more volatile and consumers were becoming more focused on promotions and events,” said analyst Ben Gilbert. “Management’s tone was in our view more cautious than usual, highlighting growing uncertainty.” Despite the uncertainty, the broker suggested the company may being conservative with its guidance, which suggests the retailer is set for a softer second half. The broker lifted its price target from $23.20 a share to $23.50 to reflect its earnings upgrade and lower capital expenditure.

What moved the market

European yields

The yield of German 10-year government bonds has hit its lowest level since 2016 in recent weeks as the market prices in the increasing likelihood the European Central Bank keeps rates lower for longer or even loosens monetary policy further. “Our current forecast is for the 10-year Bund yield to end this year and next at 0.25 per cent,” said Capital Economics markets economist Simona Gambarini. “But we wouldn’t be surprised if it fell to an even lower level at some point this year and even turned negative as it did in 2016, when global growth jitters and the UK’s unexpected decision to leave the EU led to a bout of risk aversion.”

Zinc

The price of zinc hit a two-week low on Monday as speculators exited their positions in response to concerns over the US-China trade talks. Last week it was reported that US President Donald Trump and Chinese President Xi Jinping would not be meeting before the March 1 deadline for a trade deal. Just last week, the price of zinc hit a 7-month high after rallying 14.3 per cent through the end of January. In the last few days, however, the price of the base metal has dropped more than 3.5 per cent. On Monday, the price of zinc slid 2.2 per cent to $US2,644 a tonne. Australia is one of the largest producers of the metal in the world.

Pounded

The British pound dropped on Monday following its disappointing fourth quarter GDP report which showed annual economic growth in the United Kingdom had hit its weakest level in almost seven years. Sterling slid almost 0.7 per cent on the back of the report, with the UK’s economic growth expanding at a below-consensus quarterly pace of just 0.2 per cent and pushing the country’s annual growth to 1.3 per cent, the weakest print since the second quarter of 2012. Bank of England Governor Mark Carney has already said the uncertainty surrounding Brexit was creating tensions for businesses in the country.

 

Business conditions

Business conditions rose to 6.6 in January following a sharp decline in December but still remain slightly above the long run average. While the bounce was broad and across most component indexes, labour market capacity utilisation continued its fall. “After the sharp decline in December, Australian business conditions bounced to a bit over the long-run average level, but remain well down from the levels of mid-2018,” noted ANZ senior economist Felicity Emmett. “Even taking into account the bounce in January, the drop in business conditions suggests a substantial loss of momentum in the economy.”

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