The Match Out: Stocks rally underpinned by Financials and Materials, best quarter ever for Macquarie (MQG), Suncorp (SUN) improves

A bullish day for local stocks with the market supported by the dominant sectors, when Materials +2.2% and Financials +1.36% take spots 1 and 2 on the leader board it’s hard for the market to do anything but rally. The laggards were again the IT stocks while the Staples are continuing to lag. Overall though, a much more bullish session than overseas and local futures implied.

• The S&P/ASX 200 added +75points / +1.07% to close at 7186.
• Materials (+2.20%) and Financials stocks (+1.36%) led the line while the IT sector (-1.62%) and Staples (-0.80%) fell.
• Macquarie (ASX:MQG) +3.89% rallied on a strong quarterly update, a record period for the silver donut thanks to strength in their market-facing divisions. While no guidance was given, this sets MQG up very well for a strong FY22 result – remember, MQG are a March year end.
• Suncorp (ASX:SUN) +5.53% also strong today after printing 1H22 cash profit of $361m versus ~$330m expected, plus a 23c dividend.
• Appen (ASX:APX) -7.41 hit hard on further Facebook-related selling – they report on 24th Feb and this will be one of the most highly anticipated results of the season – remember, MQG ($11.80pt ) reckon a miss is assured, RBC ($11.00 pt) are bearish on their relevance business while Jeffries ($15 pt), Barrenjoey ($15.40) and Wilsons ($15.25) are bullish. We own APX from $11.76.
• Nearmap (ASX:NEA) -6.12% hit on a Macquarie downgrade to sell – the stock has halved in the last 12 months while MQG have had a neutral rating on it.
• Magellan (ASX:MFG) +7.18% bounced today from the depths of despair. Looking at their market cap ~$3.3bn to FUM ~$93.5bn, they’ve never been cheaper. It’s interesting to compare that to Platinum (ASX:PTM) capped at $1.5bn with FUM of $22bn….clearly some negativity/outflows already baked in. What’s that line from that lowly investor about blood on the streets, even when it’s your own!
• Iron Ore stocks were strong today, Fortescue (ASX:FMG) +3.25%, ASX:BHP +3.71%, ASX:RIO +2.17% on a JP Morgan upgrade as Iron Ore futures trade through US$150/t – not many had that in their near term forecasts and now we’re starting to see begrudging upgrades from the bulge brackets.
• Bond Yields were strong today, the yield on the local 10-year has reached 2.13% - its highest level since March 2020.
• Iron Ore Futures +2.89%.
• Gold was higher at US$1819 at our close.
• Japan up a touch +0.24%%, Hong Kong and China both down -1.62% & -2% respectively.
• US Futures are pricing a flat open.

ASX 200 (weekly chart for something different)

Macquarie $201.57

MQG +3.89%: a record quarter for Australia’s largest Investment Bank today saw shares rally back above $200. The strong performance was driven by the market-facing business that benefitted from strong investments and trading revenues with the company saying net profit YTD is “substantially up on FY21 YTD.” The annuity style business that houses asset management and banking services was weaker in the quarter mostly due to performance fees but in part offset by income from the infrastructure arm. Despite a softer quarter, profit is running in line with the previous year. Surplus capital grew to $11.5b, plenty of room for capital returns come the full year result out in the middle of the year. They didn’t provide any specific guidance for the full year, but reading between the lines of the commentary suggests a strong 2H is expected though Macquarie remains cautious on the medium-term outlook.

MM is long and bullish MQG.

Suncorp $12.03

SUN +5.53: A positive session for the insurer/bank today following a strong beat at 1H22 results relative to expectations. While cash earnings of $361m were down 29% YoY, they were well ahead of the ~$330m expected while the dividend of 23c was also a beat. It was a challenging half no doubt, however the general insurance division benefitted from higher premiums, lower catastrophes and a better insurance margin. All in all, a good read through for IAG and the insurance sector more generally after a tough few years.

MM is neutral to bullish SUN ~12.

Broker Moves

• Sims Cut to Neutral at Macquarie; PT A$15.60
• QBE Insurance Cut to Neutral at Macquarie; PT A$12.10
• Metcash Cut to Neutral at Macquarie; PT A$4.10
• Evolution Cut to Neutral at Macquarie; PT A$4.20
• Nearmap Cut to Underperform at Macquarie; PT A$1.30
• Imdex Cut to Hold at Bell Potter; PT A$3
• GPT Group Raised to Buy at UBS; PT A$5.60
• James Hardie GDRs Raised to Outperform at CLSA
• Imdex Cut to Hold at Canaccord; PT A$3.02
• Deterra Cut to Neutral at Credit Suisse; PT A$4.20
• GrainCorp Cut to Hold at Morgans Financial Limited; PT A$8.06
• APA Group Cut to Hold at Morgans Financial Limited; PT A$9.98
• Wesfarmers Cut to Neutral at JPMorgan; PT A$57
• Super Retail Raised to Overweight at JPMorgan; PT A$14.50
• ANZ Bank Raised to Outperform at Credit Suisse; PT A$28.50
• ANZ Bank Cut to Hold at Jefferies; PT A$28
• Altium Raised to Buy at Bell Potter; PT A$40
• ANZ Bank Cut to Hold at Bell Potter; PT A$28.50

Major Movers Today

Enjoy your night

The Market Matters Team.

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