ASX 200 to rise, small caps surge + NextDC, Flight Centre results

ASX 200 futures are trading 21 points higher, up 0.27% as of 8:30 am AEDT.

S&P 500 SESSION CHART

ASX TODAY

• Companies reporting today include Enero Group, Flight Centre ,Kelsian Group, NextDC, Perpetual, Steadfast, Spark New Zealand, Worley and more
• Steadfast Group flagged as potential buyer of Allianz Australia’s Hunter Premium Funding business (The Australian)
• Copper Energy upgraded to Overweight from Neutral at Jarden and target increased to $0.19 from $0.15
• Healius downgraded to Underweight from Neutral at JPMorgan and target cut to $1.00 from $1.30
• Ingenia Communities downgraded to Neutral from Buy at UBS but target increased to $4.90 to $4.76
• Polynovo downgraded to Underperform from Outperform at CLSA but target increased to $2.00 from $1.70
• Woodside resumed Overweight at Morgan Stanley with $34.00 target

MARKETS

• S&P 500 finished higher and near best levels, up from session lows of -0.24%
• Small-cap Russell 2000 outperformed, adding to yesterday's strength. Sectors such as expensive tech, most shorted and biotech were key standouts
• Markets struggled for direction ahead of key US GDP, personal consumption index (the Fed’s preferred inflation measure) and manufacturing data
• Consensus is looking for almost 11% S&P 500 earnings growth in 2024 – This earnings rebound is a key piece of the bullish narrative for stocks
• Barclays raises year-end S&P 500 target to 5,300 from 4,800 citing ongoing inflation normalisation, resilient economy and big tech EPS leadership
• Global hedge funds selling tech stocks at the highest pace in nearly eight months (Reuters)
• Dollar to remain supported by higher yields and resilient growth (Bloomberg)
• Goldman Sachs CEO Solomon says markets overly optimistic on soft landing (FT)
• BlackRock says high rates, persistent inflation and geopolitical risks offer active managers new opportunities (Bloomberg)
• European private credit rebounds to levels last seen in mid-2022 (Reuters)
• Chinese regulators are prioritising stability for yuan exchange rate (FT)
• Bitcoin and Ether surge to two-year highs, fueled by large-scale buying and upcoming Bitcoin halving event (Reuters)

STOCKS

• Expedia to cut about 1,500 jobs amid moderating travel demand (Reuters)
• Shein considering switching its IPO to London due to hurdles in getting approved by the US SEC (Bloomberg)
• Warner Bros. Discovery, Paramount Global no longer pursuing a merger (CNBC)
• Sony to cut 900 PlayStation employees and close London studio (Reuters)
• Apple scrapping EV project, shifting employees to generative AI projects (Bloomberg)
• Intel planning to deliver up to 100 million AI-enabled PCs by 2025 (Nikkei)
• Klarna working on IPO as soon as Q3, seeking US$20bn valuation (Bloomberg)

CENTRAL BANKS

• Kansas City Fed President Schmid urges patience on cuts as inflation, says 'we are not out of the woods yet' on inflation fight (Bloomberg)

GEOPOLITICS

• Biden says he hopes for Israel-Hamas cease-fire by Monday (NY Times)
• NATO and EU states 'considering sending troops to Ukraine' (FT)
• China tariffs on Australian wine expected to be gone by end of March after trade minister meets with Chinese counterpart (ABC)

ECONOMY

• German consumer confidence stabilises at weak levels (Reuters)
• UK grocery price inflation lowest since March 2022 (Reuters)
• Japan core inflation eases to BOJ's 2% target, lowest since Mar-2022 (Reuters)
  
  

Biotech Time?

The SPDR S&P Biotech ETF rallied 5.7% overnight to levels not seen since January 2022. The ETF invests in mostly US-based biotech companies that are generally still in the development and trial phase. If you look at its top holdings – It's filled with companies you've probably never heard of.

Anyway, my point is – The biotech ETF has gone nowhere since the hiking cycle started in early 2022. It's now starting to poke its head to a two-year high. This is a classic scenario where risk assets are pricing in lower rates and beaten down assets, like biotech, are catching a bid.

Our above ETF watchlist tracks the iShares Biotechnology ETF. How are the two ETFs different? – iShares tracks some of the world's largest biotech names (e.g. Amgen, Gilead, Moderna etc.) whereas SPDR tracks more speculative and developmental names.

Woodside Earnings Call Highlights

Woodside (ASX: WDS) delivered an operationally in-line result, with better-than-expected NPAT driven by lower depreciation and amortisation costs. The result was somewhat ugly at face value, with net profit after tax down 74% to $1.66 billion but the company maintained a solid dividend payout ratio of 80%. Woodside finished the session up 0.9%.

Numbers aside, here are some of the nuggets from its 2H23 earnings call.

• Woodside's growth strategy includes expanding its LNG portfolio or deepwater oil projects. The company is comfortable with its current portfolio and is focused on profitably growing the business.
• The company expects Pluto's production profile to ramp back when Scarborough comes online. Pluto has passed the 50% mark but continues to generate significant cash.
• Shenzi represents ~5% of Woodside's production last year. Despite disappointing resource performance from Shenzi North, the company feels it has a good understanding of where Shenzi stands now.
• The impairment charge related to Wheatstone was due to short-term LNG price outlooks. This does not reflect on Wheatstone's underlying performance which remains strong.
• In terms of capital management, Woodside will balance investing for growth, maintaining a strong balance sheet and returning capital back to shareholders. The dividend component currently yields around 3.7%, which could be increased through special dividends or share buybacks.
• Woodside is not currently in discussions with Santos regarding potential mergers or acquisitions but remains open to opportunities that align with their strategic priorities: LNG, deepwater oil and new energy.
  
  

KEY EVENTS

• Trading ex-div: The Lottery Corp (TLC) – $0.08, Maxiparts (MXI) – $0.026, Ooh!Media (OML) – $0.035, Fortescue (FMG) – $1.08, EVT (EVT) – $0.14, Woolworths (WOW) – $0.47, Telstra (TLS) – $0.09, Beach Energy (BPT) – $0.02, Mitchell Services (MSV) – $0.02, Bell Financial Group (BFG) – $0.04, Mystate (MYS) – $0.115
• Dividends paid: Symbio Holdings (SYM) – $0.35, BWP Trust (BWP) – $0.09
• Listing: None

• 11:30 am: Australia Construction Work Done (Q4)
• 11:30 am: Australia Monthly CPI Indicator
• 12:30 am: US GDP (Q4)

This Morning wrap was written by Kerry Sun.