Thursday 27th January 2022
ASX200 enters correction on Fed rate hike, energy, utilities outperform, Kogan tumbles again
It was an eventful day in global markets, with the US indices initially trading higher after learning that the Federal Reserve were considering increasing the cash rate for the first time in many years in March this year.
The market turned quickly, with the selloff in technology accelerating once again.
Australia was not immune, with the market initially opening higher, only two falls as much as 3% lower and ultimately finish down 1.8%.
The high multiple retailing and technology sectors continued to underperform, down 5 and 3.7% respectively.
The energy and utilities sectors were the only winners, gaining 2.1% and 1.2% after the oil price exceeded US$90 per barrel for the first time in seven years.
Beach Petroleum (ASX: BPT) and Santos (ASX: STO) gained 8.8 and 3.6% on the news.
The worst performers remain company-specific, with Evolution (ASX: EVN) and Silverlake (ASX: SLR) down 11% each.
OZ Minerals (ASX: OZL) also weakened after reporting copper production at the lower end of guidance and suggesting a weaker year in 2022.
Kogan, Premier show the barbell of retail, Life360 beats
Kogan’s (ASX: KGN) collapse has continued with the stock down another 12.3%. After being dumped from the ASX200 the share price is now down 75% from 2020 higher of $24 per share.
The same issues are afflicting the company, with sales and revenue exceeding expectations, but gross profit being heavily impacted by ‘supply chain’ issues and fluctuations in demand after overstocking in 2021.
The company reached 4 million active customers, but growth has slowed to just 10% for new members and 9% for sales.
Premier Investments (ASX: PMV) exhibited the other end of the retail sector, with shares gaining 2.1% after announcing a 0.5% sales increase for the first half.
Whilst nothing to write home about, it was a great result given the significant 2020 comparables.
Online sales continue to grow strongly, moving 27% higher and now representing 25% of all sales.
Offering an insight into the challenge facing the property sector, the company has exited four stores on the basis that the landlords were seeking ‘unrealistic’ rents.
Strong GDP growth not enough, markets continue to digest Fed forecast, Microsoft, Tesla, McDonalds report.
The US benchmarks starting off on a positive note following the news that seemingly everyone was expected that the Federal Reserve ‘may’ increase rates this year, not that they had already done so.
For the time being the risk-off mood has continued, but investors remain focused on backing the winners in reporting season, with Dow Chemicals (NYSE: DOW) one such winner adding 5% and assisting the Dow Jones to a lesser fall, down 0.1%.
The selling pressure remains firmly focused on tech, with the Nasdaq down 1.4% and the S&P500 0.5%, with everyone waiting for Apple’s massive earnings report tomorrow to see how far the fear has spread.
Earlier in the week, Microsoft (NYSE: MSFT) fell despite reporting that they had surpassed US$50 billion in quarterly sales in December, a 20% jump in revenue spurred by their Azure cloud business which grew 46%.
US$50 billion in a quarter is equivalent to the entire market value of Telstra (ASX: TLS).
Tesla (NYSE: TSLA) also weakened after reporting a record US$2.9 billion in earnings after sales surged 65% to US$17.7 billion.
The issue was the CEO highlighted supply chain risks and the fact that car supplies will be lower in 2022.
Finally, US GDP growth exceeded expectations hitting 6.9% on the back of economy-wide inventory restocking, something expected to improve inflation outcomes.
Drew is editor of The Inside Network's publications and a principal adviser at Wattle Partners.
