Buffett backs oil, another exit at Magellan and Zip cuts back: What we learned this week
Japan rocked by attack on former Prime Minister while on campaign trail.
Former Japanese Prime Minister shot
Former Prime Minister of Japan, Shinzo Abe is in critical condition after being shot twice on Friday. The 67-year-old was giving an election campaign speech in Nara when he collapsed and was transported to hospital with gunshot wounds. He is reported to be in critical condition. The 41-year-old shooter was tackled on the scene and taken into police custody. The suspect told police that he intended to kill the former prime minister, national broadcaster NHK said. Hours later, Japanese prime minister Fumio Kishida told reporters Mr. Abe was in a “very grave condition.” He described the act as “barbaric and malicious”.
Buffett bullish on oil
The oracle of Omaha purchased US$698 million worth of Occidental Petroleum Corp shares this week, taking Berkshire Hathaway’s stake in the American oil company to 18.7%. It follows a US$582 million purchase last week. Some speculate Berkshire plans to buy the US oil company, in its entirety. Occidental’s share price is up 98% since the start of the year amid rising oil prices triggered by the war in Ukraine.
Floods no worry for the RBA
Massive floods in NSW sparked fears this week that higher produce prices could put additional pressure on the RBA to hike rates more aggressively. But that isn’t the case, says Shane Oliver chief economist at AMP Capital. Rate hikes are already slowing the economy and floods are unlikely to move the dial. “There is already a lot of anecdotal evidence that these hikes are starting to have an impact. Consumer confidence is around levels normally associated with recession,” he says. “The question is, [is the RBA] likely to step up the pace of monetary tightening further? I think probably not, I think they’ll probably stick to the 0.5 for the next meeting.”
Another exit at Magellan
Magellan's sales wizard is on the way out. Frank Casarotti, head of sales and distribution, will retire in December 2023. Magellan’s share price fell sharply at Monday's open, and ended the week down 8.8%. Joining the fund manager a year after its founding, Casarotti oversaw its growth into a $114 billion stalwart of the ASX200. How things change. Today, the company is out of the top 200 and funds under management are down to $61 billion. Magic is sorely needed.
Bo-Jo gone
Boris Johnson is resigning after three years as Prime Minister but will stay on as caretaker until a new leader is chosen. Pressure mounted on the PM this week following the exit of two senior cabinet ministers and tens of other officials. Equity markets shrugged. The benchmark FTSE 100 rose 1.4% overnight, the broader FTSE 250 advanced 1.6%. Johnson’s government had been embroiled in multiple scandals. Leaked Whatsapp messages last year revealed Johnson asking Conservative Party donors for funds to renovate his Downing Street residence, landing the party a fine. Nice one Boris. More recently, his failure to abide by covid lockdown laws landed him in hot water after CCTV footage showed him at a party last year.
Zip can’t catch a break
Aussie buy now-pay later company Zip is slimming down amid the share price bloodbath. As of 1 September, Zip Business Trade will close and no further applications for the small business lending product will be accepted. The segment was the company’s smallest by revenue, earning a gross profit of $4.5 million versus $75 million for Zip AU. The company will also close Pocketbook, a budget planning app acquired for $7.5 million in 2016. Zip’s share price remains in the doldrums, down 86% since January this year.
Russia shunned at G20
Russian Foreign Minister Sergei Lavrov was face-to-face with Western counterparts for the first time in months at the G20 Foreign Ministers meeting this week. His colleagues did not mince words. US Secretary of State Anthony Blinken blamed Russia for the global energy crisis. Penny Wong said she “will be making very clear, collectively, our views about Russia’s position and Russia’s behaviour.” Many refused to attend the welcome dinner on Thursday where Lavrov was present.
ASX ends week higher: Market recap with AAP
The Australian share market gained ground for a fourth day in five sessions, although its early gains ebbed in the afternoon.
The benchmark S&P/ASX200 index closed on Friday up 0.45% and finished the week 2.1% higher. It was the best week's performance since March. The index remains down 10.3% for the year.
The energy sector led the market on Friday, climbing 2.1% after oil prices rebounded from a two-day sharp decline.
After being up more than 2.0% in the morning, the materials sector closed Friday up 1.2%, with BHP adding 0.7%, Rio Tinto up 0.3% and Fortescue Metals up 0.6%.
Pilbara Minerals added 6.8% and Allkem advanced by 5.2% as the lithium space showed signs of life.
Magellan Financial Group dipped 3.0% after the wealth manager reported $5.2 billion in net outflows during the June quarter, leaving it with $61.3 billion in funds under management.
Looking ahead, traders will be watching the release of US non-farm payroll figures on Friday (Saturday AEST), as well as US consumer price index figures for June next week.
Blue chip movers
- Magellan Financial Group ↓ 8.8%
- Telstra ↓ 0.5%
- AGL ↓ 1.4%
- Supermarkets: Woolworths ↑ 2.1% / Coles ↑ 1.3%
- Resources: Rio Tinto ↓ 4.0% / BHP ↓ 1.3% / Fortescue metals ↑ 1.0%
- Big banks: NAB ↑ 0.3% / Westpac ↑ 1.1% / CBA ↑ 0.8% / ANZ ↑ 2.1%
What we’re watching next week
- Tuesday: US reporting season kicks off in earnest with PepsiCo (Wednesday AEST). JPMorgan Chase, Delta Air Line and BlackRock will also report next week.
- Wednesday: US inflation for June. Watch for signs of deceleration (Thursday AEST)
- Thursday: Australian unemployment rate for June; and Rio Tinto reports second quarter operations.
One good read
If fifty bankers show up at your office, it’s their problem not yours