Nasdaq jumps as Dow falls, Immutep, Antisense, Pushpay, AGL, Star on watch: ASX poised to open lower

Wall St closed mixed lifted by information tech and M&A biotech news as dip buyers emerge ahead of the next CPI print.  Shanghai stocks bucked the trend after the PBoC vowed to support the economy. NAB trades ex-div today.

Good morning. Buckle up. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is poised to open lower after US stocks swung between gains and losses.

Dow falls for its 4th day as Nasdaq jumps

Wall St closed mixed after three straight days of losses as investors mull on several factors ahead of the upcoming inflation print. Traders reacted to Federal Reserve Bank of Cleveland President Loretta Mester saying, “we don’t rule out 75 (basis points) forever”, renewing recession fears, sending the greenback higher.

At the closing bell, the Dow Jones lost 0.3 per cent to 32,161, the S&P 500 added 0.3 per cent to 4,001 and the Nasdaq jumped almost 1 per cent to 11,738.

Across the S&P 500 sectors, energy continues to rally as the second best performer. Information tech and the communications services, the couple joined the top three winners with healthcare rallying which I will be touching on shortly. The rest closed lower led by real estate, down by 2.3 per cent.

Bond traders are preparing themselves for the inflation data, selling off as the yield on the 10-year treasury note dipped 9 basis points to 2.99 per cent which gave reprieve to growth names like tech, gold weakened on a firmer greenback.

Why the choppiness?

Investors are waking up to the inflation situation while figuring out when the market will bottom out. Why, it then means the market can start to sustainably rally. Until the technicals show this, there will be ongoing volatility due to the uncertainty.

However for now, investors are no longer in denial about inflation, more so after the transitory concept was officially binned. Traders are adapting to inflation being real which is reflected in the higher treasury yields amid financial conditions tightening, and due to that, deleveraging is on the cards, which means selling assets.

As for what they’re selling, there’s been an indiscriminate style of selling however, dip buyers came back in this session to pick up beaten down stocks.

Given that we are up for the next consumer price index (CPI) print, investors appear to be realising that growth concerns now loom. Talk on the street is that inflation could be at its peak and if that is the case, we move from one style of inflation to another.

We have chatted about the differences between monetary versus cyclical inflation, a refresher between CPI and trimmed inflation and today, we are going to talk about sticky inflation.

All this on the backdrop of that Bull and Bear Market chart from BT which shows how the S&P 500 and the Australian all ords’ performance over the last 80 years, highlighting periods of market growth and market decline.

Sticky inflation

Sticky inflation is stubbornly high inflation, stagnant growth in a less than ideal economic situation caused by a rise in inflation, leading to lower spending and economic growth. This is why we follow a raft of economic figures, it’s a litmus test on the economy.

Add to the mix is the supply chain constraints with the world’s second largest economy, China in an extended Covid-19 lockdown and the ongoing war in Ukraine, it’s all a perfect storm for a slowdown in global growth.

Biotech M&A news

In some M&A talk, we saw the biotech sector get some attention on Wall St. Biohaven Pharmaceutical soared 68.4 per cent after inking a deal with Pfizer valued at US$11.6 billion. This is quite an interesting move given that the biotech sector has been beaten down. This could be the start of further M&A activity in this sector which would be measured by deal size and number. Given that Pfizer has made this move, following AstraZeneca’s US$39 billion acquisition of Alexion in 2020, I wouldn’t be surprising if larger biotechs look to buy out other undervalued companies.

Oil prices weaken further on short-term demand crunch

Oil prices are under US$100 as concerns on short-term demand mount amid the higher costs of energy. Forecasts from the EIA flag a slowdown in production, signalling that economic growth concerns loom. Meanwhile, energy traders digested the potential softening around Russian sanctions after learning that the EU may not go all out in banning Russian crude but to at least allow European countries to transport Russian oil.

It appears that there is more downside to the price of crude amid the softening than upside from the original intention to impose a sanction. Despite what is happening in China and all the talks going on, global markets are under supplied with analysts saying that the oil market will get tighter as China starts to ease its lockdowns.

Figures around the globe

Across the Atlantic, European markets closed higher. Paris added 0.5 per cent, Frankfurt gained 1.2 per cent while London’s FTSE rose 0.4 per cent.

On the London Stock Exchange, Rio lost 0.5 per cent, BP added 0.04 per cent and Shell gained 0.4 per cent.

Asian markets closed mixed, Tokyo’s Nikkei fell 0.6 per cent, Hong Kong’s Hang Seng dropped 1.8 per cent and China’s Shanghai Composite added 1.1 per cent.

Yesterday, the Australian sharemarket closed 1 per cent lower at 7,051.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.1 per cent fall.

What to look out for today

On the data front, more sentiment data, this time from the Melbourne Institute.

In earnings, CSR (ASX:CSR), Graincorp (ASX:GNC), and Pushpay (ASX:PPH) are on the docket while GPT Group (ASX:GPT) has its annual meeting scheduled.

Information tech shares could be on the climb today. Keep an eye out for Block (ASX:SQ2).

Amid the biotech M&A news, keep an eye out for Antisense Therapeutics (ASX:ANP), Kazia Therapeutics (ASX:KZA), and Immutep (ASX:IMM).

We have several broker downgrades listed by companies, Altium (ASX:ALU) cut to neutral from positive at Evans & Partners, Healius (ASX:HLS) cut to neutral vs outperform at Credit Suisse, Pendal group (ASX:PDL) cut to neutral vs outperform at Credit Suisse.

AGL Energy’s (ASX:AGL) chief executive Graeme Hunt says its largest investor, Mike Cannon-Brookes, may be plotting a third takeover attempt for the power giant and that shareholders are confused about the billionaire’s intentions, according to The Australian.

Shareholders of the Star Entertainment (ASX:SGR) are understood to have made approaches to prospective suitors of the casino operator, offering up their shares in what some believe is a sign that the company is a takeover target, according to The Australian.

Ex-dividend

There are two companies set to trade without the right to its dividend.

National Australia Bank (ASX:NAB) is paying 73 cents fully franked
ResMed (ASX:RMD) is paying 4.1432 cents unfranked

AGMs

GPT Group (ASX:GPT)
Grange Resources (ASX:GRR)
Smartgroup Corporation (ASX:SIQ)
Unibail-Rodamco-Westfield (ASX:URW)

Commodities

Iron ore has lost 2.5 per cent to US$128.10. Its futures point to a 1.7 per cent gain.

Gold has lost $17.60 or almost 1 per cent to US$1,841 an ounce. Silver was down $0.40 or 1.8 per cent to US$21.42 an ounce.

Oil has lost $3.67 or 3.6 per cent to US$99.42 a barrel.

Currencies

One Australian Dollar at 7:30 AM has weakened from yesterday, buying 69.44 US cents (Tue: 69.60 US cents), 56.39 Pence Sterling, 90.59 Yen and 66.01 Euro cents.

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, The Australian