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The morning catch up: ASX set to make gains; Zoom beats analyst expectations

Published 22/08/2023, 09:47 am
© Reuters.  The morning catch up: ASX set to make gains; Zoom beats analyst expectations
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ASX 200 futures are up 0.2% to 7,075 points, pointing to a positive start for the ASX.

A green day would reverse recent features.

Yesterday, the ASX200 finished 32 points (-0.46%) lower at 7,115. The Consumer Staples (-1.34%), IT (-1.32%) and Health Care (-0.95%) sectors dragged. The Consumer Discretionary (0.83%) and Energy (+0.65%) sectors were the only two sectors to close higher on the day.

The markets are still factoring in fears over the Chinese economy heightened by smaller-than-expected rate cuts in China. The short-term 1-year loan rate was cut 10bp from 3.55% to 3.45%, and the 5-year rate was left untouched at 4.20%. The market had expected a 15bp to both the 1-year and 5-year rate.

However, there looks to be cautious optimism (for now).

“The overnight rally in the S&P500 and the Nasdaq was inspired by gains for big tech, despite US treasury yields ratcheting 5-9bp higher across the curve,” IG Markets analyst Tony Sycamore said.

“Yields on US 10-year notes and 30-year bonds have both ominously now broken and closed above their respective October 2022 highs, which warns of further upside ahead.”

Leading the way on Wall St was Zoom Video Communications, which reported a net income of $182 million, equating to 59 cents per share, reflecting an increase from last year with revenue escalating to $1.14 billion from the previous $1.1 billion.

Adjustments made for stock compensations and related effects took Zoom's earnings up to $1.34 a share, a significant rise from last year's $1.05 a share, thereby surpassing the average expectations set by analysts.

According to data collected from FactSet, the consensus among analysts had pegged Zoom's expected adjusted net income at $1.06 per share with an anticipated revenue of $1.11 billion.

Moreover, the company's projections for the third quarter depict adjusted earnings ranging between $1.07 and $1.09 per share and revenue forecasts of $1.12 billion to $1.21 billion. These figures stand in stark contrast to average analyst projections which, as per FactSet, were set at $1.03 a share with sales expectations of $1.06 billion.

On an annual note, Zoom's predictions for adjusted earnings hover around $4.63 to $4.67 per share on an anticipated revenue between $4.49 billion and $4.5 billion. Analyst estimates for the same timeframe suggest expectations of $4.32 a share on sales of $4.5 billion.

“In addition to delivering innovation to our customers, in Q2 we delivered GAAP EPS of $0.59 and non-GAAP EPS of $1.34, both up meaningfully year over year. With this strong operating discipline, we grew operating cash flow by 31% year over year to $336 million,” Zoom chief executive Eric Yuan said in a statement announcing the results.

After the release of these financial results on Monday, Zoom's share price saw an over 8% surge during after-hours trading, although it did experience a slight dip later. To provide some perspective on the company's stock performance this year, it has receded by 0.7%, while the broader S&P 500 index (SPX) has flourished with a 15% advance.

What happened yesterday

Here’s what we saw (source Commsec):

US markets

Were mixed on Monday. A rally in big tech spurred a rebound in stocks, outweighing concerns over higher US Treasury yields just a few days ahead of a speech by US Federal Reserve chair Jerome Powell.

Shares of Nvidia jumped 8.5% as HSBC raised its price target on the stock to US$780, ahead of its earnings results on Wednesday. Tesla (NASDAQ:TSLA) halted a six-day losing streak with its shares soaring 7.3%. Palo Alto Networks shares surged 14.8% as the cybersecurity firm forecast late Friday annual billings above expectations.

Johnson & Johnson (NYSE:JNJ) shares lost 3%, weighing on the Dow Jones index, after the healthcare firm said it was expecting to retain a stake of about 9.5% in its newly separated consumer health unit, Kenvue. Goldman Sachs (NYSE:NYSE:GS) was down 0.9% after the bank said it was weighing the sale of a part of its wealth business.

The Dow fell by 37 points or 0.1%. But the S&P 500 index gained 0.7% and the Nasdaq index added 207 points or 1.6%.

European markets

Rose from a six-week low on Monday. Shares of energy and miners added 0.6% and 0.4%, respectively, tracking higher commodity prices. Top metals and oil consumer China cut its one-year benchmark lending rate by a lower-than-expected 10 basis points to stimulate credit demand.

Shares of German automotive supplier Continental surged 5.9% after a report on possible corporate restructuring that would involve the sale of assets, aiding a 1.1% rise in the automobiles index. Real estate shares fell by 2%, leading the decline among sector indexes. German producer prices were down 6% in July compared with the same month last year, after being up by 0.1% in June on a year ago (survey: -5.1%).

The continent-wide FTSEurofirst 300 index rose by 0.1%. In London, the UK FTSE 100 index fell by 0.1%, hitting a six-week low, with homebuilders down by 3.5%.

Currencies

Were mixed against the US dollar in European and US trade.

  • The Euro rose from US$1.0871 to US$1.0913 and was near US$1.0895 at the US close.
  • The Aussie dollar firmed from US63.88 cents to US64.20 cents and was near US64.15 cents at the US close.
  • The Japanese yen eased from 145.35 yen per US dollar to JPY146.38 and was near JPY146.20 at the US close.
Commodities

Global oil prices fell by around 0.5% on Monday on concerns about possible US interest rate increases and uncertainty around future Chinese crude demand. Trading volumes were thin.

  • The Brent crude price fell by US34 cents or 0.4% to US$84.46 a barrel.
  • The US Nymex crude price dipped US53 cents or 0.7% to US$80.72 a barrel.
Base metal prices climbed on Monday.

  • The copper futures price gained 0.4% after Reuters reported that China's state banks acted to stabilise a sliding offshore Chinese yuan but disappointment with China's latest package of measures to boost economic growth capped gains.
  • The aluminium futures price lifted 0.1%.
  • The gold futures price rose by US$6.50 or 0.3% to US$1,923 an ounce.
  • Spot gold was trading near US$1,894 an ounce at the US close. Iron ore futures added US38 cents or 0.4% to US$106.48 a tonne.
On the small cap front

The S&P/ASX Small Ordinaries (XSO) lost 0.11% yesterday.

It’s slow on the news front this morning, but you can read about the following throughout the day.

  • Buru Energy Ltd (ASX:BRU, OTC:BRNGF) has entered into an agreement with Roc Oil (Canning) Pty Limited, which will see Roc assign Buru its 50% joint venture interests in Production Licences L 20 and L 21, containing the Ungani Oilfield. Buru will assume full ownership of Ungani.
  • CuFe Ltd (ASX:CUF) has commenced exploration within E15/1495, North Dam Project, over several field and reconnaissance trips, located 29 kilometres south of Mineral Resources Mt Marion Mine, and 50 kilometres SSE (LON:SSE) of the township of Coolgardie.
  • Incannex Healthcare Ltd (ASX:IHL, NASDAQ:IXHL) has received approval from the US Food and Drug Administration (‘FDA’) to conduct the Company’s Investigational New Drug (IND) opening pivotal IHL-42X Phase 2/3 clinical trial in the United States as planned.
  • International Graphite Ltd (ASX:IG6) has released final assay results from its highly successful 2022/2023 drilling campaign at the Springdale Graphite Project.
  • Read more on Proactive Investors AU

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