Almost a red sea across the globe as jobless claims offset worries of the economic rebound. European markets reacted to ECB’s moves. Asian Markets saw gaming stocks suffer after Chinese regulators summoned the two giants to stop focusing on their top line. The local bourse had a volatile session as rebalancing, commodity prices and stocks trading ex-dividend weigh on the ASX 200.
The Australian sharemarket is set to rebound with the SPI futures pointing to a gain of 0.3 per cent.
Across the board, the major indexes closed in the red on Wall St. The Dow and the S&P 500 fell for their fourth straight session of losses despite the better-than-expected jobless claims. Investors continued to have concerns on the impact of the delta-variant on the economy.
Jobless claims hit a new pandemic low
Jobless claims are moving in the right direction despite some concerns over the impact of Hurricane Ida. Louisiana’s initial claims rose from 2,060 to 9,319.
Collectively, Americans filing for first time fell a new pandemic low at 310,000. It came in better-than-expected compared to the 335,000 that economists expected as per Reuters. The good news comes after the disappointing jobs report from last week which saw 275,000 new jobs added to the economy versus an expected 750,000.
While the news could offset the wall of worries around the slowdown in the pandemic rebound, the labor market data could contribute to the Fed tightening their monetary policy given it’s a key focus for them.
At the close, the Dow Jones lost 0.4 per cent to 34,879, the S&P 500 fell 0.5 per cent to 4,493 while the Nasdaq closed 0.3 per cent lower at 15,248.
The yield on the 10-year treasury note fell to 1.30 per cent from 1.34 per cent.
Across the sectors on the S&P 500, we are seeing three lucky sectors in the green again. However, the gains are marginal. Financials added 0.2 per cent as the best performer while energy and materials added 0.1 per cent. Real estate fell the most, 2.1 per cent followed by health care and utilities. So your defensives there. Technology shed 0.4 per cent.
European markets react to moves from the ECB
Across the Atlantic, European markets closed mixed after investors reacted to the European central bank’s announcement.
Paris added 0.2 per cent, Frankfurt closed 0.1 per cent higher and London’s FTSE fell over 1.0 per cent.
Heavyweight miners fell. Rio Tinto dropped 2.0 per cent while BHP fell 1.7 per cent with iron ore prices. Same was seen with oil companies, BP down 1.2 per cent and Shell closed 1.1 per cent lower as crude oil prices dipped.
The central bank has pivoted to a somewhat hawkish tilt as they tweaked their pandemic bond buying program. They are looking to slow down their pandemic bond program to a moderately lower level with no definite indication of what the pace would be.
The central bank’s upbeat outlook is a sign that they believe the economy can handle less support. The Euro rose slightly following the announcement of the slow down in their pandemic emergency purchasing plan. A similar move we did see when the RBA met.
They raised their growth forecasts from 4.6 per cent to 5.0 per cent and trimmed 2022 GDP from 4.7 per cent to 4.6 per cent.
Inflation forecasts all were bumped higher, but Christine Lagarde has stuck to the tune saying that it will be transitory. Very much like what we have heard from the Federal Reserve.
This year’s inflation forecast is now at 2.2 per cent from 1.9 per cent, currently they are at 1.7 per cent. Next year’s inflation forecast is at 1.7 per cent from 1.5 per cent and 2023’s forecast is set at 1.5 per cent from 1.4 per cent.
Asian markets reacts to political moves also
Asian markets closed mixed on further political moves.
Tokyo’s Nikkei retreated 0.6 per cent after touching its highest point in six months on hope of a stronger economic outlook, Hong Kong’s Hang Seng fell 2.3 per cent and China’s Shanghai Composite closed 0.5 per cent higher after Chinese authorities cracked down on gaming companies.
Shares in Tencent plummeted 8.5 per cent and NetEase tanked 11.0 per cent after they were summoned by Chinese regulators. The watchdog went to remind these giants of the video game time for children under 18. That is three hours only on Friday, Saturday and Sunday and banning play time during the week. Also in the backdrop was news that the regulator has slowed their approvals around new online games.
They were pretty clear with their message. Chinese regulators urged the tech companies “to break from the solitary focus of pursuing profit or attracting players and fans.”
ASX 200 reacts to rebalancing & commodities moves
Yesterday, the Australian share market slid 1.9 per cent lower at 7,370 after investors took their profits.
The miners triggered the race after reports that China was stepping up their steel output production. Along with reducing the order for mills, the curb for steel was to cut emissions, before the Glascow climate summit and ahead of the Winter Olympics in Beijing.
This saw materials fall 2.1 per cent however technology lost the most, down 3.2 per cent followed by communication services. Consumer staples shed the least, down 0.7 per cent. Not one sector saw a glimmer of green by the closing bell.
The news was weighed down by the weekly payrolls data indicating a fall of 1.8 per cent compared to the fortnight before as per the ABS pressured lower to the lockdowns in NSW and Victoria.
Despite the red across the board, there were some green shoots.
Resmed (ASX:RMD) was the best performer in the ASX 200 closing 1.8 per cent higher at $40.30 as the medical equipment maker climbed to the top 50. With no company news, it appears rebalancing was in action by fund managers and ETF providers. It was followed by shares in Whitehaven Coal (ASX:WHC) as coal prices continue to stay firm and Elders (ASX:ELD).
The worst-performing stock in the was Virgin Money UK (ASX:VUK), closing 7.9 per cent lower at $3.60 followed by shares in Orocobre (ASX:ORE) and EML Payments (ASX:EML).
September has traditionally been a weaker month in the calendar year so muted or even volatile moves isn’t a surprise. As you can see in this graph, it’s been a mixed market for the month so far. Yesterday’s performance was quite pronounced.
Yesterday, Macquarie Group (ASX:MQG) got a bit of attention from a few brokers around their recent trading update. Let’s take a look at what was said.
Citi retained their sell rating for the investment bank as a sell with a raised price target of $153 from $140. They said that the company has guided their first half net profit to be slightly lower than the prior half which implies a range of $1.8 to 2.0 billion. Citi expects earnings will moderate in the second half of FY22.
Credit Suisse had a similar tune, keeping their neutral rating and raised their target price to $175 from $150.
Ord Minnett also kept their rating of accumulate and raised their target price to $190 from $172. Their reasoning was around their confidence in the company’s medium to long-term growth prospects and does not consider the price to earnings ratio multiple stretched versus the ASX 200 Industrials.
Meanwhile, Morgans downgraded their rating to a hold but raised their target price to $181.10 from $172.30.
The broker upgraded their FY22 and FY23 estimates for earnings per share by 8 per cent and 3 per cent respectively, to reflect Macquarie Group’s more positive outlook.
Their reason for downgrading their rating is due to the stock’s performance trading 20x FY22 price to earnings ratio, so a different view to Ords and therefore, believes it is close to fair value and hence the move.
Shares in Macquarie Group (ASX:MQG) closed 2.1 per cent lower at $175.34 yesterday.
Argo Global Ltd (ASX:ALI) is paying 4.5 cents fully franked
Ariadne Australia (ASX:ARA) is paying 0.5 cents 40 per cent franked
Base Res Limited (ASX:BSE) is paying 4 cents unfranked
Cleanaway Waste Ltd (ASX:CWY) is paying 2.35 cents fully franked
Sequoia Fin Grp Ltd (ASX:SEQ) is paying 0.6 cents fully franked
Wisetech Global Ltd (ASX:WTC) is paying 3.85 cents fully franked
There are four companies set to make their debut on the ASX today. These are subject to change. Keep an eye out for Culpeo Minerals (ASX:CPO), Mt Malcolm Mines NL (ASX:M2M), X2M Connect (ASX:X2M) and Zoom2u (ASX:Z2U).
Iron ore has lost 1.5 per cent to US$130.26. Their futures are pointing to 0.4 per cent gain.
Gold has gained $6.50 or 0.4 per cent to US$1800 an ounce. Silver has added $0.12 or 0.5 per cent to US$24.18 an ounce.
Oil was down $1.16 or 1.7 per cent to US$68.14 a barrel on China’s plan to release state oil reserves and reduce pressure on domestic refiners.
I know I don’t touch on metals but it’s worth nothing for today. Nickel jumped 2.5 per cent to their highest level in seven years with aluminium adding 1.9 per cent touching a 13-year record high.
One Australian Dollar at 7:40 AM is steady from yesterday buying 73.69 US cents, 53.28 Pence Sterling, 80.88 Yen and 62.33 Euro cents.
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