Pre-Open Data
Key Data for the Week
- Monday – EUR – Markit Manufacturing PMI was 58.4 in February, down on the January result.
- Monday – UK – Rightmove House Prices jumped 2.3%, to be up 9.5% over the year.
- Tuesday – US – Markit Manufacturing PMI
Australian Market
The Australian sharemarket added 0.2% yesterday, lifted by news the US and Russia will meet in an attempt to resolve the current Ukraine stand-off.
As a result, the price of Brent crude oil eased from US$94 per barrel to US$92, as investors hope the talks will ease pressure on surging oil prices. The oil majors were mixed; Woodside Petroleum added 2.7%, while Santos and Beach Energy conceded 1.9% and 0.7% respectively.
The Financials sector enjoyed gains to rise 0.6%. Westpac was the best performer of the big four banks, up 1.4%, while NAB added 0.6%. Commonwealth Bank lifted 0.4%, while ANZ closed the session 0.1% higher. Fund managers lost ground; Australian Ethical Investment dropped 2.5%, while Magellan Financial Group lost 1.2%.
The Information Technology sector was among the hardest hit during yesterday’s trade, as it lost 2.7%. Bookmakers lost ground; Pointsbet Holdings slumped 11.1%, while Tabcorp Holdings shed 1.7%. Accounting software provider, Xero, shed 1.3%, while buy-now-pay-later providers Block and Zip dropped 6.8% and 7.8% respectively.
The Australian futures market points to a 0.99% fall today, driven by weaker overseas markets.
Overseas Markets
European sharemarkets lost ground overnight, as Russia-Ukraine tensions weighed on investor sentiment. The Information Technology sector was among the worst performers, as Infineon Technologies lost 5.9% and ASML Holdings shed 3.4%. By the close of trade, the UK FTSE 100 slipped 0.4% and the STOXX Europe 600 fell 1.3%, while the German DAX gave up 2.1%.
US sharemarkets were closed overnight for Presidents’ Day.
CNIS Perspective
The world’s largest energy names are on course to buyback shares at near-record levels this year, as soaring oil and gas prices enable them to distribute bumper profits to shareholders.
The seven major names, including BP, Shell, ExxonMobil and Chevron, are set to return a minimum US$38 billion to shareholders through buyback programs and a further US$50 billion in dividends this year.
Like most commodities, oil and gas are reliant on cycles. Right now, we are firmly in a boom period as the oil price edges closer to US$100/barrel, recovering strongly on demand post COVID lockdowns, compounded by geopolitical tensions in eastern Europe.
However, pressure to cut emissions, along with uncertainty over future oil demand, has meant profits are being returned to shareholders, and much less capital expenditure on replacing diminishing supply than in the past.
The big question mark is whether buybacks by oil companies are ultimately in the best interest of the long-term viability of these businesses. With the world heading quickly towards greater dependence on renewable energy, perhaps now is the opportunity to divert greater amounts of profit to alternative energy investments.
BP, which is arguably the most ambitious of these major companies, is improving their green energy stance. Total capital expenditure in its low-carbon energy division was US$1.6 billion in 2021, however, still significantly less than its earmarked US$4 billion in share buybacks this year. Getting left behind in energy adoption could one day leave management of some of these big names rueing this as their missed opportunity.
Should you wish to discuss this or any other investment related matter, please contact your Wealth Management Team on (02) 4928 8500.
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