Jarden Brief: Rising oil price pushes up US energy sector

The US energy sector had a decent performance on a muted day for the market. Photo / Getty Images

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand

The S&P NZ50 finished the day down 0.6 per cent.

The best performing sector on the day was Materials, which climbed 1.6 per cent, followed by Financials, which rose 0.4 per cent. Meanwhile, the Utilities sector dropped 2.0 per cent after gentailer stocks continued to lose their spark.

Lab testing has confirmed that the new South Auckland community case possesses the highly infectious UK covid strain. However, there were no community cases yesterday and 11 out of 42 close contacts of the South Auckland case have tested negative. The first 60,000 doses of the Pfizer vaccine have arrived on our shores, and border staff will begin vaccinations this weekend.

Generator Retailer Contact Energy was today put into trading halt after the company announced it would be raising $400 million to support capital investment, including the concurrently announced contract to build the Tauhara power station.

The Tauhara project has a $580 million budget. The company also announced a strategic review of its thermal assets, an interim cash dividend of 14 cents per share and a new dividend payout ratio of between 80 and 100 per cent of operating free cash flow. Jarden is joint lead manager and underwriter of this transaction.

A continued sell-off triggered by announced changes in the ICLN index led to Mercury Energy falling 5.4 per cent as the worst performer of the day, followed by Trustpower, which fell 3.5 per cent.

SkyCity fell 1.0 per cent after it confirmed it has closed its Auckland casino and will be implementing social distancing at its Hamilton and Queenstown sites. SkyCity's Auckland hotels will remain open to accommodate existing guests.

The best performing company on the day was construction company Fletcher Building, which gained 1.6 per cent.

The second best performing company was outdoor wear retailer Kathmandu Holdings, which recovered 1.6 per cent after potential oversells post-interim result last Friday.

INTERNATIONAL
US Markets:

US markets continued to be relatively muted, with both the NASDAQ index and the DJIA unchanged and the S&P 500 up 0.5 per cent.

The best performing sector of the day was the Energy sector, which rose 1.4 per cent off the back of a steadily increasing oil price. Meanwhile, Materials and Financials both moved up 1.0 per cent. The Utilities sector was the only one in the red, down 0.8 per cent.

Biotech stocks topped the market movers, with Illumina Inc up another 11.9 per cent following a strong rally last Friday. The diagnostics company disclosed a positively received quarterly report, and noted strong growth in its sequencing business. The company's earnings per share for the quarter was US$1.22, beating consensus of US$1.11. Illumina is now up more than 37 per cent since the start of the year, rising to US$504.76 per share.

Vaccine developer Inovio gained 9.4 per cent to US$14.20 after media reports that a US hedge fund had set a lofty price target.

Asian markets:

Asian markets were muted with all Chinese indices closed due to Chinese New Year celebrations. The Nikkei was the only large exchange still trading, up 1.9 per cent to 30,084, while the KOSPI index was up 1.5 per cent.

Commodities:

Gold continued to lose some momentum, falling 0.3 per cent to US$1,818.20 per ounce while oil advanced another 1.2 per cent to US$60.20. Meanwhile, Bitcoin dipped back to US$48,656 after a rally sent it within touching distance of the symbolic US$50,000 mark.

Australia

The S&P ASX200 finished the day up 1 per cent.

The best performing sector on the day was Materials, which gained 1.6 per cent, followed by the Consumer Discretionary sector, rising 1.3 per cent. Meanwhile, Utilities fell 0.8 per cent as the worst performing sector.

The best performing company on the day was aerial imagery technology and location data company Nearmap, which rose 18.1 per cent after its latest result seemed to rebuff criticism published by short seller J Capital. Buy now pay later company Zip Co Ltd was also able to continue its strong momentum, up another 15.7 per cent and now up 126.5 per cent since the start of the year.

Australia's largest construction company, Cimic (up 1.2 per cent) has announced its intention to dispose of its Middle Eastern Operations 15 years after entry to the region. The decision to exit has been driven by expectations of moderate oil prices, a weakening property market and declining infrastructure spending after the 2024 world cup.

It also comes after a controversy surrounding the arrest of a second executive responsible for Cimic's middle east operations. The arrests were in relation to allegations of bribery connected to contracts in Iraq.

Having already taken an AU$1.8 billion dollar write down in the division and paying off AU$1.4 billion of debt last year, the Middle Eastern operation still has AU$151 million worth of liabilities.

Oil producer and explorer Beach Petroleum, falling 4.6 per cent, was sold off after releasing its first half results. Revenue of A$726.3 million was down 23 per cent on the same period last year. Profit before tax of A$182.9 million was down 54 per cent. This performance was largely driven by a 38 per cent fall in the average price that Beech received for its oil – down to A$64.90 per barrel. Earnings guidance, previously for A$900 million to A$1 billion has been reduced to A$900 million and A$950 million.

• For more information on the latest market moves, get in touch with Jarden.

Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimer