ASX to rise, S&P 500 lifts on second-term for Powell

view original post

On Wall Street, shares were mixed in early afternoon trade with the Dow and S&P 500 higher.

Financials powered eight of the S&P 500’s 11 industry sectors higher. Techs mostly were lower on the prospect of rising interest rates and expectations that more workers will return to offices in the months ahead.

Today’s agenda

Local: NZ third quarter retail sales volumes

Overseas data: Services and manufacturing November PMIs from Japan (Nikkei), Euro zone (Markit), UK (Markit) and US (Markit); US Richmond Fed index November

Market highlights

Advertisement

ASX futures up 7 points or 0.1 per cent to 7360 near 5.15am AEDT

  • AUD -0.1% to 72.29 US cents
  • Bitcoin on bitstamp.net -4% to $US57,163.68 as of 5.30am AEDT
  • On Wall St Wall St at 1.20pm: Dow +0.6% S&P 500 +0.4% Nasdaq -0.4%
  • In New York: BHP +3.6% Rio +2.3% Atlassian -5%
  • Tesla +3% Apple +2% Amazon -2.5% Netflix -2.7%
  • In Europe: Stoxx 50 -0.4% FTSE +0.4% CAC -0.1% DAX -0.3%
  • Spot gold -2.1% to $US1806.95/oz at 1.04pm New York time
  • Brent crude +0.6% to $US79.32 a barrel
  • US oil +0.6% to $US76.37 a barrel
  • Iron ore +4.3% to $US95.63 a tonne
  • 2-year yield: US 0.58% Australia 0.63%
  • 5-year yield: US 1.30% Australia 1.37%
  • 10-year yield: US 1.60% Australia 1.78% Germany -0.31%
  • US prices as of 1.03pm in New York

From today’s Financial Review

Woodside seals oil, gas mega-deals: Woodside is set to be transformed by a $41 billion merger with BHP Petroleum and a $16.5 billion LNG project as new boss Meg O’Neill secures another 30 years of gas exports.

ASIC’s warning to crypto investors: you’re on your own: ASIC chairman Joe Longo has urged investors to be careful about investing in crypto assets, admitting the regulator is virtually powerless to intervene and consumers are “on their own”.

Advertisement

To review coverage of the Super & Wealth summit, click here.

United States

iPhone-maker Apple’s shares are set for a seventh straight session of gains, bolstered by JPMorgan’s optimistic outlook. The firm said it sees a consistent improvement in lead times for Apple products over the last couple of weeks as indicative of a steady ramp in supply.

Tesla chief executive Elon Musk said in a tweet that the Model S Plaid will “probably” be coming to China, the electric-car maker’s second-largest market, around March.

The company introduced a new Model S Plaid, a 520-mile range sedan that can reach top speeds of up to 200 miles per hour (320 km per hour), in September last year, with deliveries starting in 2021.

Uber will allow users in Ontario, Canada, to place orders for cannabis on its Uber Eats app, marking the ride-hailing giant’s foray into the booming business, a company spokesperson said.

Advertisement

Private-equity firms Hellman & Friedman LLC and Bain Capital agreed to buy Athenahealth for $US17 billion, the latest sign of rising interest in companies powering the healthcare sector’s shift to the cloud.

Europe

European shares ended flat as Germany’s warning of tighter lockdown restrictions overshadowed gains in Telecom Italia following a $US12-billion proposal from KKR to take Italy’s largest phone group private.

The pan-European STOXX 600 index finished flat after falling earlier in the day when German Chancellor Angela Merkel said Europe’s biggest economy needed tighter restrictions to control a wave of COVID-19 inflections.

This came after a surge in COVID-19 cases prompted Austria to go back into lockdown.

Meanwhile, telecom stocks rose 1.8 per cent – their best day since March – fuelled by a 30.3 jump in Telecom Italia (TIM) .

Advertisement

KKR reportedly set an indicative price of 50.5 euro cents for its buyout offer – a 45.7 per cent premium to TIM’s closing price on Friday.

“The premium is very attractive, which is why we’re seeing a big jump in shares, but an interesting thing is going to be the Italian government’s response to the bid, which lays the groundwork for future outside offers – and all the important Italian companies who’ve fallen on tough times,” said Craig Erlam, senior market analyst at OANDA.

Italian mobile tower company Inwit, partly controlled by TIM, gained 4.6 per cent as the KKR approach created speculative appeal for the firm, while TIM’s top investor Vivendi rose 2.0 per cent.

Asia

China stocks closed higher on Monday, with semiconductors and new-energy shares leading the gains, as investors cheered the central bank’s attempt to strike a balance between economic growth and risk controls.

The blue-chip CSI300 index ended up 0.5 per cent at 4912.40, while the Shanghai Composite Index gained 0.6 per cent to 3582.08 points.

Advertisement

China’s central bank said on Friday it would keep its prudent monetary policy “flexible and targeted”.

Noumra said some changes in the wording of the People’s Bank of China’s (PBOC) third-quarter monetary policy implementation report represented an official change to the central bank’s policy stance and set the stage for more decisive monetary and credit easing.

“We expect the chance for an RRR cut to rapidly rise in the next couple of months, but we still view the likelihood of a policy rate cut as quite small,” Nomura said in a note.

Hong Kong shares finished down on Monday as tech giants weighed, with Meituan dragging down the benchmark index ahead of its earnings later this week.

The Hang Seng Index fell 0.4 per cent, to 24,951.34, while the China Enterprises Index lost 0.5 per cent, to 8929.78 points.

Food delivery giant Meituan dropped 2.4 per cent ahead of its third-quarter earnings results to be released this Friday, dragging the Hang Seng Index down 57 points.

Advertisement

Investors have become more wary of results from tech giants, with Alibaba Group slumping more than 10 per cent last week on their disappointing earnings, heightening worries about Beijing’s broad regulatory crackdown.

Separately, China’s market regulator on Saturday said it was fining companies including Alibaba, Baidu and JD.com for failing to declare 43 deals that date as far back as 2012 to authorities, saying that they violated anti-monopoly legislation.

Currencies

Rate rises threaten ‘remarkable’ period of super returns: Rising interest rates are set to disrupt the success of Australia’s superannuation system, according to Deloitte Access Economics.

Morgan Stanley’s view on the Fed: ”The announcement of Powell’s renomination ensures continuity in the stance on policy, and together with Brainard as vice chair provides like-minded leadership over the next four years. Looking ahead, the administration has indicated Biden’s intention to announce nominees for the three other vacant Board seats, including VC for Supervision, in early December.

“Turnover at the Board of Governors will also be matched with a reshuffling of FOMC voters and regional Fed presidents, such as with the incoming leadership replacements at the Dallas and Boston Fed. This shuffling takes place at the January FOMC meeting as part of its annual “housekeeping”. The changes will be most felt in the March 2022 Summary of Economic Projections (SEP), the first one to incorporate the forecasts of new members/participants. In all, we expect FOMC voters to skew more dovish in 2022.

Advertisement

“Chairman Powell can now rest easier going into the December 14-15 FOMC meeting in which we expect the Committee to keep the current pace of tapering asset purchases by $US10 billion UST and $US5 billion MBS per month while chairman Powell highlights the Committee’s discussion to ramp up the pace if needed.”

Commodities

Energy crunch drives carbon to record as Europe burns coal: Power plants in the UK are burning the most coal since the beginning of March to keep the lights on amid cooler-than-normal weather.

Steel futures prices in China jumped on Monday, with hot-rolled coils and construction rebar climbing more than 4 per cent in intraday trade to narrow the gap with spot prices, as traders cheered a marginal improvement in consumption of industrial metals.

Apparent demand for five main steel products in China, including rebar, wire rod and hot-rolled coils, gained for two consecutive weeks and was up 4.2 per cent last week from early-November, data from Mysteel consultancy showed.

“In the short term, the property-related policy is expected to see improvement, which could probably lift market sentiment,” Galaxy Futures wrote in a note, warning that the spot market still faced risk of lower costs and consumption.

Advertisement

Spot prices of rebar and hot-rolled coils were about 400 yuan and 200 yuan higher, respectively, than the currently most-traded January futures contracts.

Analysts with GF Futures noted that possible marginal easing of real estate financing situation was not likely to reverse steel demand of January deliveries.

Greenland said on Monday it has stripped a Chinese mining company of its licence to an iron ore deposit near the capital Nuuk, dealing a blow to attempts by Chinese companies to gain a foothold on the resource-rich Arctic island.

Australian sharemarket

Virus redux claims travel sector, ASX falls 0.6pc: The S&P/ASX 200 Index fell 0.6 per cent on Monday to 7353.1 points. Flight Centre tumbled 7.1 per cent and Unibail-Rodamco-Westfield 5.1 per cent.

Advertisement

Spark shareholders approve $5.2 billion takeover: Spark Infrastructure shareholders have voted to approve a $5.2 billion takeover of the power grid operator by a consortium led by private equity giant KKR.

Street Talk