Weekly recap
What happened in markets
The Australian sharemarket remained under pressure last week, losing 2.7% over the week as trade tensions and a weak performance from the Energy (-7.5%) sector underpinned market performance. Concerns over oil demand heightened after investors feared the tariffs imposed on two large oil exporters, Canada and Mexico, would hurt demand. As a result, the price of oil dropped 5.2%, putting pressure on Santos (-7.4%), Ampol (-7.5%) and Woodside Energy (-9.4%). Bond yields increased as economic uncertainty continued, which put pressure on the banks. Commonwealth Bank retreated 6.3%, Westpac dropped 4.5% and Macquarie fell 8.2%.
US sharemarkets fell sharply last week, as trade policy uncertainty, disappointing earnings announcements and weak economic data clouded investor sentiment. Big tech was again a key laggard, as concerns over the future of AI spending and demand grew, largely attributed to Marvell Technology (-22.5%), who offered disappointing forward guidance, while Broadcom softened 4.3%, despite beating earnings expectations. Trump’s trade tariffs came into effect on 4 March, which increased concerns over a trade war, sparked by retaliation from Canada and China. Growth fears were also another key theme, after US jobs growth and manufacturing data both slowed.
European sharemarkets also ended lower last week but closed slightly better than US markets. Fiscal stimulus was the major theme, after Germany announced a €500 billion infrastructure fund, while the EU provided a €800 billion defensive initiative, which will help boost GDP. However, Trump’s 25% tariffs on European cars and goods, which came into effect last week, held markets lower. In economic news, the European Central Bank cut interest rates by another 0.25% to 2.50%.
Stock & sector movements
What caught our eye
Having just wrapped up Australia’s February corporate earnings season, we thought it prudent to review and give some thoughts on results.
The February 2025 reporting season was a particularly volatile one! We saw outsized share price gains (and losses) in response to company results. It actually reminded us more of what investors are used to in international markets like the US. For example, the average one day absolute price movement throughout the season was around 7%.
Overall, we saw more companies beat expectations than miss, with a key positive driver being higher margins, driven by lower costs. Another positive included early signs that a consumer recovery was underway, as companies like JB Hi-Fi, Nick Scali, ARB, Harvey Norman and Wesfarmers reported better than feared.
On the other hand, the major banks and miners was where we saw some softness. Higher costs and lower commodity prices were the main respective issues. Given their relatively large proportion of our economy, these weighed on the overall sharemarket and its expected earnings at the aggregate.
There were some particularly noteworthy winners and losers during the season. We have provided some quick summaries below.
Winners
HUB24
HUB24 saw double digit revenue and earnings growth, driven by strong Funds Under Administration (FUA) growth. Furthermore, with the platform provider only holding around 8% market share, there is still a significant runway for further gains. The key question will be whether the company can maintain profit margins as it grows in size and complexity.
NWS
News Corp reported better-than-expected and the divestment of Foxtel was viewed positively, simplifying the business and reducing debt significantly. Management commented on growth potential via Artificial Intelligence monetisation, noting that content will be king in the world of AI.
PNI
Pinnacle’s Funds Under Management of $155 billion was ahead of consensus estimates. Even better is that a good amount of this growth has been organic and affiliate performance fees have also been strong. The distributor’s book is becoming much more diversified as well, with growth in international and alternatives markets.
Losers
VEA
A softer result from Viva Energy, with the main disappointment being the slower and more costly integration and conversion of the On The Road (OTR) retail stores. While those that have been converted performed well, the speed of conversion has been much slower than anticipated. Subdued convenience spending and depressed refining markets also didn’t help.
XYZ
Block’s result was solid, with growth in low double digits, but showed moderation and was a bit lower than hoped. The main disappointment was the lack of positive guidance expected from management for 2025. That being said, the business opportunity remains large and platform enhancements continual, with more recent developments yet to really bear fruit.
CAR
Car Group missed earnings, with its Trader Interactive a key miss on expectations. While currency headwinds did contribute to the weak result, it also looks like growth is normalising after a strong cyclical period for the business. The question will be how much new growth is driven from newer regions like Asia and Latin America.
The week ahead
Locally this week, key economic data points include consumer confidence, household spending insights and the business turnover indicator.
Overseas, attention will be on the US’s Consumer Price Index, Federal Budget balance and Producer Price Index this week. Elsewhere, the Bank of Canada is expected to cut rates by 0.25%.
Portfolio Company Reports
Wade is the head of the Investment Services division at Cutcher & Neale and has over 10 years of industry experience in accounting and investment advisory roles.
Ryan is our Portfolio Manager, bringing over 15 years of experience in managing multi-asset investment portfolios with a specialisation in fundamental equity analysis.
