A 9 per cent share price slump for Woolworths has dragged the ASX into the red. As the supermarket giant warns of slowing sales and rising costs. The benchmark ASX 200 index was off 0.3 per cent to 7,356 by 11.45 AEDT. While the broader All Ordinaries was also down 0.3 per cent.
The falls were largely driven by market heavyweight Woolworths, which released a surprise profit warning to the market this morning. Woolworths has warned that lingering COVID restrictions and rainy weather have reduced outdoor home entertaining, and hit food and beverage sales.
Food sales have also fallen back to more normal levels now that people in New South Wales, Victoria and the ACT are again able to dine out. All of the company’s sales growth has come from home deliveries. Which it said had lower profit margins, with in-store sales declining.
Meanwhile, extra precautions related to COVID are expected to directly cost the company an additional $150 million in expense over the current half year, with indirect costs of an additional $60-70 million.
All up, Woolworths is expecting to achieve earnings before interest and tax (EBIT) of $1,190 million to $1,220 million for the current half-year. Down from $1,329 million in the same period a year ago. That is as much as a 10 per cent drop in earnings. And has been met with a corresponding 8.6 per cent fall in the company’s share price to $37.07 by 11.30 AEDT.
Rival Coles fell 3.7 per cent on expectations that its earnings would also be hit by similar factors.
New ACCC Boss Announced
The federal government announced the nomination of Gina Cass-Gottlieb as the next chair of the Australian Competition and Consumer Commission (ACCC). If her nomination is agreed to by the states and territories, Ms Cass-Gottlieb would commence the role on March 21 next year. Replacing current chair Rod Sims, who has been in the top job for a decade.
Ms Cass-Gottlieb comes to the role from law firm Gilbert + Tobin, where she has practised in competition and regulation for more than 25 years. She is already a member of the Reserve Bank’s Payment Systems Board and would be the ACCC’s first female chair, if her appointment is approved.
CSL in Trading Halt
Biotech giant CSL was on a trading halt, as it prepares to announce a widely expected takeover move for Swiss pharma company Vifor. Meanwhile, fellow biotech Polynovo, which specialise in a new form of burns treatment, was the biggest gainer on the ASX 200 (up nearly 12 per cent) after reporting positive US sales momentum.
Afterpay was down 5 per cent to $89.97, even as its shareholders overwhelmingly voted to approve the proposed takeover by Block (formerly known as Square). Which now only requires approval from the Spanish central bank before proceeding. Block shares, which Afterpay shareholders will receive as part of the merger, were down 3.2 per cent in the US overnight.
Other big losers on the local market were travel stocks. With Flight Centre down 2.9 per cent to $17.16 and Qantas off 1.6 per cent to $4.87 on fears of further disruptions to reopening plans locally and globally due to the Omicron COVID variant.
US Market Pulled Lower By Travel Fears
Travel-related stock fell, with the fastest-spreading variant accounting for around 40 per cent of COVID-19 infections as new cases surge in London, as well as at least one death in the United Kingdom.
Travel stocks were hit particularly hard in North American trade. Norwegian Cruise Line Holdings, Carnival and Royal Caribbean Cruises all slumped. While the S&P airlines index shed more than 2 per cent.
“It’s transportation, restaurants, all the things that if it got bad enough that we started putting new restrictions on people, it would not be good for them,” Tom Martin, senior portfolio manager at Globalt Investments in Atlanta, told Reuters.
“They all have been bid [up] over the past several months by the idea that we were going to get back to business as usual.”
Most of the 11 major S&P 500 sector indexes fell, with only defensive sectors, including consumer staples, utilities and real estate gaining. By the close, the S&P 500 and Dow Jones indices were both down 0.9 per cent, as 4,669 and 35,651 points respectively. While the tech-heavy Nasdaq dropped 1.4 per cent to 15,413. Apple dipped, even after JP Morgan raised its price target on the iPhone maker to the highest on Wall Street. The company is close to becoming the first in the world to hit $3 trillion in market value.
The relative absence of large tech stocks on the Australian share market means that local falls are expected to be more moderate. The ASX SPI 200 was down 0.6 per cent at 7,339 points. The Australian dollar also fell overnight to 71.2 US cents by 11:45am AEDT.
Focus On The Fed
The US central bank meets tonight and tomorrow night AEDT and is expected to signal a faster wind-down of asset purchases. Which could also usher closer a start to interest rate hikes.
“Everyone is focused on the Fed this week and what guidance we get in terms of bond purchases and interest rates,” Ryan Jacob, chief portfolio manager at Jacob Internet Fund, told Reuters.
“There’s an expectation that there will be an acceleration of tapering, and there’s little anxiety leading up to that.”
A Reuters poll of economists sees the central bank hiking interest rates from near zero to between 0.25 per cent and 0.5 per cent in the third quarter of next year, followed by another in the fourth quarter.
Positive updates about vaccines and antibody cocktails to combat the new COVID-19 variant. Along with a recent reading on inflation that was in line with consensus, has pushed the S&P 500 index to a record closing high on Friday.
Originally written by ABC News 14th December 2021 – see original article here.
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