Reporting season was in full swing this week and around 126 of the 193 companies due to report have now fronted up to the market. Despite all of the earnings excitement, some bigger issues took the stage.
Does Packer know something we don’t?
On Thursday, James Packer sold his stakes in advertising employment classifieds website, Seek Limited and fund manager Magellan Financial Group.
The transactions, brokered by UBS, saw Packer sell Seek at a 4.9 per cent discount and Magellan at an 8.6 discount to Wednesday’s closing price.
Despite Packer’s sale, Seek closed up 5.4 per cent on Thursday. They reported earnings for the financial year in line with analyst expectations. The forecast for Seek is promising as they pursue growth opportunities by investing in international assets – this was enough to outshine the negative sentiment from Packer exiting the company’s register.
Magellan didn’t share the same fate as Seek, closing on Thursday down 9.2 per cent for the day. The shares clawed back some of the losses today, closing at $10.92, up 3 per cent for the day. Magellan shares are up 329 per cent over the past 12 months and offered an opportune time for Packer to cash out with a tidy profit.
Emerging markets whacked
With currency markets as good as convinced the Federal Reserve will taper, emerging markets have suffered the full force of the impending reality.
Both the Brazilian real and Indian rupee have lost significant ground against the US dollar over the past month. The real is down 1.9 per cent and the rupee 3.3 per cent. Weaker currencies threaten to boost domestic inflation to even higher levels, potentially destabilising both economies.
Brazil has taken the extreme measure to anchor its currency by announcing a $60 billion currency intervention program, starting immediately.
Unfortunately Australia is not immune to the volatility circling emerging markets. The Aussie dollar could tumble below 90 cents as it is often used as a proxy for Asian currencies as it is more actively traded.
Back to basics for Fortescue
Fortescue Metals Group look to be finally turning things around and had a blistering week, gaining 10.4 per cent since Monday morning. Reporting on Thursday, investors were more than pleased with a 12 per cent jump in net profit and sent the stock up 4.1 per cent for the day.
The report confirmed there is no immediate rush for Fortescue to sell a minority stake in The Pilbara Infrastructure, their 240km of rail line to shore up their balance sheet. Consequently the main focus for Fortescue remains the iron ore price and the company’s debt levels. But with the lower Australian dollar being supportive to earnings, it is a more promising outlook.