Global major indexes closed with a glimmer of green despite concerns about the impact of potential new sanctions on Russia. A deep dive on why tech shares outperformed today. Tesla CEO Elon Musk announced a personal stake in Twitter. Commodities complex rallies. What to keep an eye out for today ahead of the RBA meeting outcome.
Good morning. The RBA to meet today. I’m Melissa Darmawan for Finance News. This is your market outlook.
The Australian sharemarket is set to rally after Wall St’s two straight days of gains.
Tech shares outperforms as Wall St gains for 2nd day
US stocks closed at session highs as technology stocks led the advance. This comes after the tech index underperformed more than 9 per cent last quarter, but as we start a new quarter, tech shares have been on the rise.
Investors have remained focused on the war between Russia and Ukraine and the potential for more sanctions on Russia as well as concerns mounting about economic growth and what further sanctions would mean as EU nations moved to block Russia’s oil and gas supply.
Let’s take a look at the major averages, the Dow Jones added 0.3 per cent to 34,922, the S&P 500 gained 0.8 per cent to 4,583 and the Nasdaq advanced 1.9 per cent to 14,533.
Why did tech shares rally today?
Though there were several drivers for today, there was news from China on progress towards resolving an audit dispute that opened up US-listed Chinese stocks to delist. This also helped bolster the Hang Seng which closed over 2 per cent higher.
Also shares in Twitter soared over 27 per cent after Tesla CEO Elon Musk disclosed plans to take a 9.2 per cent stake worth about US$3 billion in the company. The move comes just about a week after Musk surveyed his nearly 80 million followers asking whether or not they believed Twitter adhered to the principle of free speech. An overwhelming majority said “no” pushing Musk to seriously consider starting his own platform.
The US 10-year yield ticked up and the US 2-year was up 1 point, however even though it’s slightly inverted, there was a flattening of the yield curve. US 10-year yields rose by 4 points to 2.41 per cent, but US 2-year yields fell by 1 point to near 2.42 per cent. A move that puts naysayers aside to say that a recession is two years away for today.
Underpinning all of this, investors know the Fed has been transparent around raising interest rates in a strong economy that can withstand a reduced stimulus economy, and now they’re becoming accustomed to market volatility despite the persistent uncertainties like the war in Ukraine.
However on a positive note, the earnings forecast looks positive, the labour market is tight, PMI data is still strong even though it’s slowing down, and inflation is set to abate if the supply chain disruptions ease with CAPEX spending still going on. So all this does help when it comes to growth names like tech being on the move.
US to announce new sanctions on Russia
Elsewhere, leaders around the world are condemning Russia accusing the country of war crimes in the fight in Ukraine. Russian troops left the Kiev area and the capital, leaving behind what appeared to be mass graves of civilians from the tragic images seen so far. President Biden called Russian President Vladimir Putin a war criminal, adding that he plans to add more sanctions on Russia as a result.
Crude prices rally on global outcry over Russia’s actions
Oil prices were on the rise again as global outcry grew louder over Russia’s actions in Ukraine. Lithuania over the weekend becoming the first country in the European Union to fully ban gas imports from Russia in response to the war, and the possibility of more sanctions is adding to concerns about the global oil supply even after the US and other allies announced plans to tap into oil reserves and after the International Energy Agency said it plans to to release more oil. Oil jumped 4 per cent to settle at a little more than US$103 a barrel after it dipped below that US$100 mark on Friday.
If we look at the S&P 500 sectors, energy eked out a gain of 0.07 per cent, the bottom of the gainers. Consumer discretionary and communication services raise 2.3 per cent each, while info tech added 1.9 per cent. Your defensives closed lower with utilities, down 0.8 per cent, followed by healthcare. The rest closed lower.
Figures around the globe
European markets closed higher. Paris added 0.7 per cent, Frankfurt gained 0.5 per cent while London’s FTSE closed 0.3 per cent higher.
On the London Stock Exchange, Rio lost 1.5 per cent, BP fell 0.4 per cent and Shell dipped 0.2 per cent.
In Asian markets, the exchanges that were open closed higher, Tokyo’s Nikkei added 0.3 per cent, Hong Kong’s Hang Seng gained 2.1 per cent while China’s Shanghai Composite was closed.
ASX Monday wrap
Yesterday, the Australian sharemarket closed 0.3 per cent or 20 points higher at 7,514 after moving within 100 points of its all-time high. Iron ore, lithium, energy and gold players rallied as investors continued to pile into stocks in the resources sector.
Iron ore and metal miners put in a solid effort with BHP (ASX:BHP) up 0.1 per cent to $52.46, Rio Tinto (ASX:RIO) rose 0.3 per cent to $120.66, Fortescue Metals (ASX:FMG) added 3 per cent to $21.70 while Champion Iron (ASX:CIA) closed 3.2 per cent higher.
Lithium miners saw another strong session with Mineral Resources (ASX:MIN) jumped 3.4 per cent to $56.46, Pilbara Minerals (ASX:PLB) soared 5.5 per cent to $3.62 and IGO (ASX:IGO) closed 4.1 per cent higher to $15.
Liontown Resources (ASX:LRT) grew 9 per cent to $2.12, Allkem (ASX:AKE) leapt 7.3 per cent to $13.31, Novonix (ASX:NVX) jumped 8 per cent at $6.92, while Lynas Rare Earths hit a new all time high, closing 2.7 per cent at $11.39.
Pendal Group (ASX:PDL) was the best performer after Perpetual lobbed a $2.4 billion takeover bid. Shares soared 18.1 per cent to $5.29 and tapped its highest level since mid-January. Pendal’s board said they are reviewing the offer but suggested that the offer was opportunistic given the current market conditions from the Russian invasion of Ukraine and market volatility lingering from the Covid-19 pandemic.
Perpetual (ASX:PPT) sank 6.6 per cent to $31.97, leaving the indicative offer of one Perpetual share for every 7.5 Pendal shares plus $1.67 cash, valuing Pendal at $5.93 per share, or around $2.27 billion. The offer, implemented via a scheme of arrangement that would require a shareholder vote along with the usual regulatory approvals, would leave Pendal shareholders with 48 per cent of the merged entity.
The deal did lift the shares of other listed asset managers such as Magellan Financial Group (ASX:MFG) jumped 9.7 per cent to $16.84 while Platinum Asset Management (ASX:PTM) rose 2.4 per cent to $2.18.
Meanwhile, Telix Pharmaceuticals (ASX:TLX) soared 10.1 per cent to $4.70 after the biotech said Illuccix, its prostate cancer imaging agent, was commercially available in the US through Cardinal Health, one of the three largest American pharmaceutical wholesalers and distributors.
Taking all of this into the equation, the SPI futures are pointing to a 0.7 per cent gain.
Local economic news
ANZ and Roy Morgan are set to release its weekly consumer sentiment report with the reading at 18 month lows. Today’s report is set to give a glimpse into the outcome from the Federal Budget given its focus on alleviating the cost of living.
The Australian Industry Group has scheduled its construction gauge for March.
However, the key event will be the interest rate outcome from the Reserve Board meeting. Economists expect the cash rate to remain unchanged at the record low of 0.1 per cent. The focus will be on any colour when the decision statement unveils.
The RBA has reinforced several times that it will not raise interest rates until inflation is “sustainably” within the target band. The missing piece is the lift in wages growth which is the data point to keep an eye out on when the jobs report comes out next Thursday.
The Melbourne Institute’s inflation gauge yesterday showed prices rose 0.8 per cent in March. If this translates to our next CPI print showing a rise, a talk about rate hikes won’t be too far away.
What to keep an eye out for
The commodities complex rallied so keep an eye out for resource stocks and if we take a strong lead from Wall St, tech shares could charge up the index.
In broker moves, JPMorgan reinstated Ampol (ASX:ALD) as an overweight with a price target of $36.70, and Viva Energy (ASX:VEA)’s rating was reinstated to an overweight with a price target of $2.70. Credit Suisse hiked its rating for Illuka (ASX:ILU) to neutral with a price target of $13.
Pioneer Flexible Opportunities fund adds BHP (ASX:BHP) and is set to sell Deutsche Telekom.
An IPO, there is one company set to make its debut on the ASX today. Keep an eye out for Microba Life Sciences (ASX:MAP) after raising $30 million at 45 cents per share. A biotech company which measures the human gut microbiome, delivering gut microbiome testing services.
Keep an eye on the Aussie dollar today as it could break above 75.5 cents to the greenback.
Our weekly stock to watch this week is once again Pendal Group (ASX:PDL). Readers who missed the initial write up on the 22 March this year can click on the following link.
David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Pendal as a buy. From a technical angle, Pendal ticks a number of boxes. Since printing a high of $8.96 in September 2021, a sharp 54.81 per cent decline in share price followed. The duration of the fall took five and a half months. Positively, support was respected at the 78.6 per cent Fibonacci retracement of $4.28 as shown by the horizontal green line and orange up arrow on the chart. In addition, bullish divergence is evident.
This occurs when the share price makes a new low (as shown by the downward sloping blue arrow) and the MFI (Money-flow) index ascends higher (refer to the upward sloping blue arrow). These technical signals combined could mark a weakening of the long-term downtrend.
Pendal received a non-binding takeover bid from investment manager Perpetual on Monday, 4th April. This saw Pendal print an intraday high of $5.56, before finishing the session at $5.29, a surge of over 18 per cent.
Should upward traction gather pace over the months ahead, then an eventual move towards a band of resistance seen between $5.74 and $5.92 could potentially be on the cards. This is made up of previous resistance and the 38.2 per cent Fibonacci retracement as highlighted by the light-blue rectangle.
Shares in Pendal (ASX:PDL) closed 18.1 per cent higher to $5.29.
There are 2 companies set to trade without the right to its dividend.
Clime Capital (ASX:CAM) is paying 1.28 cents fully franked
Perpetual Equity (ASX:PIC) is paying 2.8 fully franked
There are 2 companies set to pay eligible shareholders today.
SSR Mining Inc (ASX:SSR)
Iron ore rose 0.6 per cent to US$160.80.
Gold has gained $10.30 or 0.5 per cent to US$1934 an ounce. Silver is down $0.06 or 0.3 per cent to US$24.59 an ounce.
Oil has gained $4.01 or over 4 per cent to US$103.28 a barrel.
One Australian Dollar at 7:30 AM has strengthened from yesterday, buying 75.47 US cents (Mon: 74.93 US cents), 57.53 Pence Sterling, 92.67 Yen and 68.77 Euro cents.
The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Commentators may hold positions in stocks mentioned. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.
Source: Bloomberg, IRESS, TradingView, UBS, Bourse Data, Trading Economics