ASX Flirts With Record High as Trade War Fears Take a Break

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Welcome to Equity Espresso’s Market Recap.

The Australian share market advanced for a second straight day, with the S&P/ASX 200 index rising 1.23% to 8520.70, coming within 12 points of its record high. Ten out of eleven sectors finished higher, led by strong performances in Financial (+2.00%) stocks, with Commonwealth Bank reaching a new record close of $162.64. The Australian dollar eased to US62.65¢.

The rally followed positive momentum from Wall Street. Markets found relief in the absence of new developments regarding U.S. tariff negotiations, while Trump's attention shifted to America's relationship with major oil exporters.

Energy (-0.31%) stocks fluctuated with volatile oil prices, as Brent crude dropped below $US75 before recovering some ground amid White House discussions about Gaza policy. Woodside (+0.20%) closed higher, while Santos (-0.57%) declined.

Gold steadied near $US2,870/oz after setting new records on Wednesday, supported by rising geopolitical tensions following Trump's comments about U.S. control of Gaza, potential Iran nuclear negotiations, and an upcoming Ukraine peace plan.

Company News

• Beach Energy (-4.95%) adjusted its FY25 production guidance to 18.5-20.5 million barrels from 17.5-21.5 million while reporting a 15% increase in half-year production to 10.2 million barrels.

• News Corp. (+5.77%) reported a 5% increase in quarterly revenue to $US2.24 billion and a 20% growth in earnings to $US478 million, excluding Foxtel. Growth was primarily driven by strong performance in its REA real estate business, Book Publishing, and Dow Jones segments.

• PEXA (-3.04%) announced that Les Vance, Australia's chief executive, will resign effective next month. This follows the retirement of former CEO Glenn King and the replacement by Russel Cohen. The company also increased its expected impairment forecast to $35-40 million from $15-20 million.

• REA Group (+1.21%) reported a lift in revenue of 20% to $873 million, while EBITDA increased 22% to $535 million. Net profit grew 26% to $314 million, while reported profit surged 246% to $441 million, including gains from the PropertyGuru sale. The company increased its interim dividend by 26% to $1.10 per share.

   

Wall Street

U.S. markets finished higher on Wednesday, with the Dow rising 0.71%, the S&P 500 gaining 0.39% and the Nasdaq adding 0.19%. The gains came despite significant drops in major tech stocks, with Alphabet falling 6.9% after disappointing cloud revenue and AMD declining 6.3% following weak data centre sales forecasts.

Eight S&P 500 sectors advanced, led by Real Estate (+1.58%), while Communication Services (-2.79%) was the biggest faller. Investors appeared to look past the weak tech earnings, focusing instead on potential future Federal Reserve rate cuts and broader market opportunities.

Alphabet (-6.94%) shares fell after the company reported Q4 revenue of $96.47 billion, missing analyst expectations, and announced plans to invest $75 billion in A.I. development in 2025—significantly above the expected $58.84 billion. The company's cloud revenue disappointed at $11.96 billion, falling short of Wall Street's projected $12.19 billion.

Uber (-7.56%) shares fell despite Q4 revenue growing 20% to $11.96 billion and net income reaching $6.9 billion, as earnings per share of 23 cents missed analysts' expectations of 50 cents. The company also provided softer-than-expected Q1 guidance, projecting gross bookings between $42-43.5 billion, below market estimates.

AMD (-6.27%) shares dropped despite beating overall Q4 expectations with earnings of $1.09 per share and revenue of $7.66 billion. The decline came as data centre segment performance missed estimates, overshadowing the company's Q1 revenue guidance of $7.1 billion, above analysts’ projections.

S&P500 Sector Performance

Economic Data

• Australian Import of Goods jumped by 5.9% month-over-month in December 2024, up from a 1.4% growth in the previous month - marking the largest value since March 2024 of $38.94 billion.

• U.S. ISM Services PMI declined to 52.8 in January 2025 from 54 in December 2024, well below forecasts of 54.3.

• The U.S. Trade Deficit widened to $98.4 billion in December 2024, following a $78.9 billion gap in November and above forecasts of a $96.6 billion shortfall. The highest trade deficit since March 2022 came after U.S. companies rushed to secure goods ahead of tariffs.

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🌎️ Around The Globe

• China's market regulator, SAMR, is investigating Apple's App Store for potential anti-competitive practices. The investigation will focus on commission fees charged to developers and the platform's policies.

• Google has released its Gemini 2.0 AI model suite to the public, featuring three versions: Flash for high-volume tasks, Pro Experimental for coding, and Flash-Lite for cost efficiency, as part of its expanding A.I. development strategy.

• Google will eliminate its diversity hiring targets and evaluate its DEI initiatives, ending a program that began in 2009, which achieved its goal of increasing underrepresented group hires by 30% in 2022.

• Nissan is reportedly withdrawing from the $60 billion merger discussions with Honda, which would have created the world's third-largest automaker, with sources citing growing complications between the Japanese manufacturers as the reason for the breakdown in talks.

• USPS resumed accepting mail and packages from China and Hong Kong shortly after suspending service. It is working with Customs to implement tariff collection mechanisms following Trump's new 10% China tariff and the closure of the "de minimis" trade loophole.

• Workday will cut 1,750 jobs, representing 8.5% of its workforce. This is the enterprise HR platform's first major layoff, while other tech companies have conducted multiple rounds of reductions in recent years.

Markets

ASX Company Movers

Commodity Prices

Bonds

Forex

Global Health Check

ETF Prices

🔍️ ETF Watch

An intriguing new ETF to keep an eye on:

VanEck launched Australia's first equity long-short ETF (ASX: ALFA) on January 23, 2025, offering investors access to an actively managed portfolio combining both long and short positions in Australian equities.

The fund analyses thousands of real-time data points to identify statistical probabilities for stock performance. Using a combination of quantitative and technical trading signals and macroeconomic data, ALFA ranks approximately 230 ASX stocks on a zero-to-one scale, selecting its highest conviction positions.

Australian Index

Australian Sectors

Global Indices & Sectors

Global Strategy

Property & Infrastructure

Fixed Income

Mixed Assets

Geared

*1-year, 3-year and 5-year returns are calculated as of December 31, 2024.

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DISCLAIMER: Please note that the information provided in this newsletter is for educational purposes only and should not be considered financial advice. It is not intended to encourage you to buy/sell assets or make economic decisions. We strongly recommend conducting your research before making any investment.