Afternoon Report / ASX recovers from early weakness on very strong employment data, Banks strong again, BlueScope rallies (BSL, SEK, CWN)

WHAT MATTERED TODAY

The market opened lower this morning thanks to late weakness on wall street, however there was an obvious about turn at 11.30am when better than expected employment data was released in Australia. The print was strong on a number of fronts with 178k jobs added v a loss of -27k expected while the unemployment rate came in at 7.0% v 7.1% forecast. The participation rate was the highlight at 65.8% v 64.8% which shows an underlying level of optimism towards finding a job i.e. a very good sign.

Source: Bloomberg

This is a strong read today and we saw most impact felt towards the most economically exposed sectors (banks) while we also saw buying in the higher beta / risk on names (tech). Of the companies that updated the market today, both BlueScope (BSL) and Seek (SEK) provided strong updates – more on these below, however it’s another sign that the Australian economy is starting to build momentum.

Asian markets were mostlky lower today, while US Futures were trading flat during our time zone – the relative strength locally fitting with our expectation that Australia is enterting a period of global outperformance as banks regain form.

The ASX 200 finished up +16pts / +0.25% to close at 6547. Dow Futures are trading flat

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE

Bluescope (BSL) +5.29%: Strong today post their AGM where they upgraded 1H21 earnings guidance for underlying EBIT to be $475m, up 80% on 2H20. That’s a big bounce back in earnings and we should see upgrades to full year expectations filter through. The market had been expecting $825m of EBIT for the full year, the run rate today shows room for upgrades of 10+%.

Bluescope (BSL) Chart

Seek (SEK) -1.01%: hosting their AGM today, seek upgraded guidance as the job market continues to perform better than feared and a swift recovery gets underway. The company now expect revenue to come in at around $1.6b and EBITDA near $400m -  a better than 10% beat to current market consensus. The company did place a caveat on the targets, saying forecasting remains difficult, though they are seeing job ads rise as companies reimpose roles that were made redundant when times were far more uncertain. Tying in with the comments was local unemployment data today which was far stronger than expected. Seek looks strong, seemingly swatting the recent Blue Orca short selling attack with ease.

Seek (SEK) Chart

Crown (CWN) -1.87%: Ended lower today however the biggest negative reaction to the overnight news was first up. The performance today shows that a) the delay is not material & b) it’s not a huge surprise. The lack of aggressive selling is a positive sign, those who were going to sell the stock , would have.. stocks remaining bid on bad news are generally one positive update away from a strong rally.

Crown Resorts (CWN)

BROKER MOVES

·         Pact Group Rated New Equal-Weight at Morgan Stanley; PT A$2.60

·         United Malt Cut to Hold at Jefferies; PT A$5.25

·         United Malt Cut to Underperform at Credit Suisse; PT A$4.23

·         Virgin Money UK Raised to Overweight at Barclays; PT 165 pence

OUR CALLS

No changes today

Major Movers Today

Have a great night

James, Harry & the Market Matters Team

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