CYBG shares rose 17.9 per cent to $3.76 after it delivered an upbeat December quarter trading update following the close of trade on Wednesday. The British bank said it experienced greater than expected synergies from it purchase of Virgin Money in October and expected to deliver a minimum of £150 million ($273 million) in savings by the end of its 2021 financial year, beating its initial forecast for £120 million.

Mirvac Group defied investor expectations to deliver a strong first half result on Thursday. The company announced a 59 per cent increase in revenue and a 39 per cent lift in net profit compares to the prior corresponding period. The company’s shares closed 3.3 per cent higher at $2.54.

AGL Energy led the market losses after falling 4.8 per cent to $21.10. Despite recording a bigger-than-expected 10 per cent increase in underlying net profit in the first half, analysts noted the company appeared to be softer in its guidance commentary, suggesting earnings will be weaker in the second half of the year.

Downer EDI closed the session 4.6 per cent lower at $7.21 after its first-half result disappointed market expectations. Analysts noted weaker profit margins in its engineering and utilities divisions as well as a 5 per cent drop in revenues in its Spotless business.

 

Stock watch

Coles Group

Morgan Stanley downgraded its price target on Coles Group on the back of the company’s lower convenience business guidance as a result of its New Alliance agreement with Viva Energy Group. While the broker downgraded its earnings expectations for the company it said the new deal was positive in the long term. “Coles’ deal with Viva, while painful near term, should enable its convenience business to be more competitive and minimise risk of the Coles brand being associated as expensive,” said analyst Thomas Kierath in a note on Wednesday. “Longer term, Coles appears quite leveraged to fuel volume growth and instore food sales, so expect growth off a low base.” Morgan Stanley lowered its price target from $13.00 to $12.50, maintaining its ‘equal-weight’ rating.

What moved the market

Oil stockpiles

US oil stockpiles rose less than expected last week, prompting oil prices to edge higher. The market had been expecting stockpiles to lift by 1.42 million barrels in the week ending February 1 however inventories increased by just 1.26 million barrels. Conditions downstream are also indicating a potential deficit, with US gasoline stockpiles also rising below expectation last week while distillate inventories fell more than forecasters had been predicted. CBA analyst Vivek Dhar said in a note on Thursday he was expecting Brent oil would move into the $US70s by mid-2019.

Iron ore

Iron ore prices are set to soar when Asian markets re-open following the Chinese New Year holiday after Brazilian miner Vale had its licence to operate at its Laranjeiras dam cancelled by regulators. Vale estimates the impact of the licence cancellation could sideline 30 million tonnes per annum of its iron ore production, representing 2 per cent of global seaborne supply. The dam is critical to the operation of its Brucutu iron ore mine and adds another obstacle to the company’s ability to return to normal production. Iron ore prices could spike far longer than originally expected as Vale battles the Brazilian regulators.

New Zealand dollar

The New Zealand dollar dropped by more than 1 per cent against the US dollar on Thursday after the country’s fourth quarter labour force figures fell short of market forecasts. The country’s unemployment rate rose from 4 per cent in the third quarter to 4.3 per cent in the fourth quarter, exceeding analysts expectations of a 4.1 per cent print. The sharp bounce was reflective of weaker jobs growth in the country, with annual employment growth now at its slowest pace in almost three years. Capital Economics say they aren’t expecting the labour market to improve as GDP growth softens.

 

Miners

While the banks and financial sector has been dominating this week’s headlines, there has been some silent success coming from the materials sector. The S&P/300 Metals & Mining Index rose to a near seven-year high on Wednesday and is currently up more than 11 per cent for the year-to-date. Fears surround a supply shortfall in ore from Brazilian miner Vale are boosting interest in Australian miners. Iron ore prices have soared to a near two-year high this week, pushing up the locally listed miners. BHP Group closed Wednesday’s trading at its highest level since August 2011, while Rio Tinto rose to a more than 10-year high.

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