ASX 200 (XJO) morning report – BHP, WBC & COH shares in focus

The S&P/ASX 200 (ASX: XJO) is set to edge lower when the market opens on Wednesday according to ASX futures. Here’s what’s in the news.

ASX 200 recap

The ASX 200 managed to overcome the Westpac Banking Corp (ASX: WBC) decision to cancel its dividend, finishing 0.8% higher as the financial sector fell 0.6% for the day.

The biggest contributors came from healthcare and consumer discretionary with both CSL Limited (ASX: CSL), up 4.4%, and Wesfarmers Ltd, up 1.3% to an all-time high, climbing ahead of their earnings reports this week.

Cochlear Limited (ASX: COH) was the standout adding 9.8% despite falling profits, whilst Treasury Wine Estates Ltd(ASX: TWE) took a major hit as the Chinese announced an anti-dumping probe against Australian wine exports; shares fell 14.3%.

Featured video: The Australian Finance Podcast – Money catch-up

Westpac cancels dividends

Westpac officially cancelled its dividend on Tuesday, despite reporting a 19% increase in cash profit to $1.32 billion; shares fell 2.3% as a result. Management cited the impact of low interest rates on profit margins as the key reason but announced some 40% of deferred loans had recommenced repayments. Impairments were increased by another $826 million and capital remains at the low end of the Big Four at just 10.8%.

Summary: Dividend cut a disappointment but ultimately the right decision for a sector seeking to recapitalise.

BHP announces exit from coal

BHP Group Ltd (ASX: BHP) reported a $9.06 billion profit but failed to meet analyst estimates, sending the share price down 0.5%. The profit was 1% lower than 2019 as a combination of COVID-19 disruptions and inconsistent production impacted margins, resulting in a slight cut to the dividend. The company took a $778 million hit from power contract cancellations after moving to renewable energy sources and announced the demerger or sale of their coal operations.

Summary: Another solid result, coal exit a positive, dividend remains secure.

Cochlear share price jumps

Cochlear reported a 6% fall in revenue to $1.4 billion as the cancellation of elective surgeries around the world continue to hurt; shares led the market 9.8% higher. The result was a 42% fall in profit to $154 million and an effective cancellation of the dividend. Cochlear declined to offer guidance as elective surgeries remain uncertain, particularly in the UK where they are yet to recommence and in parts of Australia.

Summary: The end to a difficult year with more uncertainty ahead, but strong leverage to lifting of restrictions.

S&P 500 delivers fastest ever recovery

The S&P 500 hit an all-time high, the fastest recovery from a 20% fall in history, up 0.2%. The rally was supported by a continued weakening of the USD and another 4.1% jump in Amazon.com Inc. (NASDAQ: AMZN) shares.

The USD has hit a two-year low against major currencies as President Trump’s geopolitical rhetoric seems to be pushing capital overseas.

Walmart Inc (NYSE: WMT) reported earnings overnight, delivering a massive beat on revenue expectations behind a 9% increase in sales and 97% growth in e-commerce trade in the second quarter alone.

Looking forward, CSL and Brambles Limited (ASX: BXB) report today in Australia and graphics chip maker NVIDIA(NASDAQ: NVDA) in the US.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.

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Disclosure: Drew Meredith is the author of this post. He may maintain positions in the securities mentioned.

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