Major indexes around the globe trade with caution as Omicron fears resurface amid a week of elevated inflation ahead of a busy agenda of central banks meeting.
US stocks decline ahead of Fed meeting
The Australian sharemarket is set to slip ahead of a number of central banks meeting this week. We had a strong weekly performance last week and booked one of our best days this year. Today, US stocks pulled back as concerns over the Omicron variant resurfaces and if it will derail holiday plans, while investors also shift their attention to this week’s big Fed policy decision. The Fed is slated to start its two day meeting where the official outcome will be on Thursday morning for us Aussies.
Energy stocks tumbled and big tech names were all under pressure, even Tesla fell which we don’t see often.
Apple slated to spearhead to US$3t market cap
Starting with Apple closing over 2 per cent lower amid JPMorgan raising its 2022 price target. The broker boosted it to US$210 a share from US$180, a new Wall Street high. Apple could be on its way to becoming the first company to pass that US$3 trillion milestone and is the biggest company in both the Nasdaq and the S&P 500, which are market cap weighted indexes. So there’s a famous saying as “so goes Apple, so goes the market”.
The tech titan is benefiting from growing services revenue and iPhone 13 upgrades even though there will be fewer of these being shipped over the Christmas season. But analysts are looking ahead to the launch of the 5G iPhone, a more budget friendly model and one that clearly would capitalize on 5G. Many have said for a long time that Apple is a growth stock, it is also a value stock with more than $200 billion of cash on its balance sheet, so it has a lot of room to make acquisitions and is set to grow in the future.
Pfizer’s US$6.7b spree catapults Arena shares
Elsewhere, shares in Pfizer closed 5 per cent on planning to buy Arena Pharmaceuticals in a US$6.7 billion deal. Shares in Arena skyrocketed over 80 per cent. Pfizer said that the deal compliments its capability and expertise in inflammation and immunology. The company now plans to accelerate clinical development of a drug for patients with immuno inflammatory diseases.
We are going to see a high level of volatility this week with a number of central bank decisions slated. If we see a hawkish outcome, it could be the trigger that delivers a major pull back that we have been waiting for.
Wall St falls amid buying spree in bonds
At the closing bell, the Dow Jones fell 0.9 per cent to 35,651, the S&P 500 lost 0.9 per cent to 4,669 while the Nasdaq closed 1.4 per cent lower at 15,413.
Across the S&P 500, energy stocks led the decline followed by consumer discretionary, as travel, airline stocks experienced turbulence around a loss of 5 per cent, followed by financials, and industrials. Real estate, and utilities led the session.
The yield on the US treasury note dipped 7 basis points at 1.41 per cent as market participants flee to bonds, while gold firmed on a weaker greenback.
European markets falls on energy dip
European markets closed lower amid the U.K. reporting its first death from Omicron and ECB and Bank of England policy meeting this week.
Paris lost 0.7 per cent, Frankfurt fell by a hairline, down 0.01 per cent, while London’s FTSE closed 0.8 per cent lower.
In UK trade, Omicron-related nerves weighed on energy stocks like BP falling 2.2 per cent, Shell dipped 2.5 per cent, and travel stocks closing 4 to 5 per cent lower. BHP and Rio lost 0.1 per cent.
Vifor Pharma rocketed 18.9 per cent after confirming it is in talks with CSL(ASX:CSL) about a takeover. Shares in CSL closed 0.4 per cent lower.
Asian markets mixed on caution trading
Asian markets closed mixed. Tokyo’s Nikkei added 0.7 per cent, Hong Kong’s Hang Seng fell 0.2 per cent, while China’s Shanghai Composite closed 0.4 per cent higher.
ASX 200 starts week on a firm note
Yesterday, the Australian sharemarket closed 0.4 per cent higher at 7,379. The ASX took their cue from Wall St on Friday to start the week on a firmer note underpinned by a fruitful performance by the resources sector. The local bourse peaked as high as 0.8 per cent then lost its momentum before the closing bell.
Across the resources space, BHP (ASX:BHP) jumped 2.7 per cent, Rio Tinto (ASX:RIO) added 2.3 per cent, Fortescue Metals (ASX:FMG) rose 2 per cent. Woodside Petroleum (ASX:WPL) added 1.3 per cent, while Newcrest Mining closed 0.2 per cent higher.
It was a mixed performance across the major lenders who have been one of the stronger performers over the past week. Commonwealth Bank (ASX:CBA) added 0.1 per cent, while Macquarie (ASX:MQG) added 0.3 per cent outside the majors. While National Australia Bank (ASX:NAB) lost 0.5 per cent, ANZ Bank (ASX:ANZ) fell 0.4 per cent, while Westpac (ASX:WBC) closed 0.1 per cent lower.
Charter Hall (ASX:CHC) surged 5.6 per cent at $20.85 after raising its financial year 2022 earnings guidance by 27 per cent to “no less than $1.05 per security”. The property group attributed the boost due to a drive in performance fees from greater funds under management, following its six-monthly portfolio revaluation and acquisition activity. The company expects to have total funds under management of around $61.3 billion by the end of the year, up from around $54 billion at the start of November. Guidance for financial year 2022 distribution per security growth of 6 per cent on financial year 2021 was maintained.
Insurance Australia Group (ASX:IAG) fell 3.6 per cent at $4.24 amid a broker downgrade. UBS dropped its rating to a sell from neutral to reflect the company’s numerous challenges. NRMA is being sued by the regulator for overcharging their customers. The broker’s view is that a significant ‘catch-up’ in claims would more than offset savings made in the September quarter when NSW and Victoria were in lockdown. Management is confident of achieving its $250 million insurance profit target by financial year 2024. In financial year 2022 to date, price increases of 9 per cent are apparently holding without major volume loss. Its target price falls to $4.20 from $5.35.
The worst-performing stock in the S&P/ASX 200 was GUD Holdings (ASX:GUD) closing 4 per cent lower at $11.16, followed by shares in Insurance Australia Group (ASX:IAG), and NIB Holdings (ASX:NHF).
The best-performing stock in the S&P/ASX 200 was Netwealth Group (ASX:NWL) closing 6.2 per cent higher at $16.95, followed by shares in St Barbara (ASX:SBM), and Charter Hall Group (ASX:CHC).
Ramsay Health Care (ASX:RHC) fell 0.9 per cent at $68.85 after the private hospital operator unveiled its plans to buy a UK based mental healthcare provider Elysium Healthcare from private equity firm BC Partners. The deal is valued at $1.4 billion and will be funded by debt and slated to provide mid-single digit earnings per share accretion in financial year 2023.
Domain Holdings (ASX:DHG) jumped 3.5 per cent at $5.62 after the property portal refinanced a debt facility giving them $355 million to fund acquisitions, working capital and general corporate purposes.
Taking all of this into the equation, the SPI futures are pointing to a fall of 0.6 per cent
Local economic news
Today we have a touch point on sentiment both on the consumer and business front. ANZ and Roy Morgan are set to release their weekly consumer report and NAB is also on the cards with its November business survey. Business confidence is near record highs due to the lockdowns easing in NSW and Victoria.
NSW is slated to record over 800 new Covid-19 cases today, keep an eye out for travel stocks today and how the market will react.
Afterpay (ASX:APT) shareholders will have a chance to vote on the Square takeover. Square shares closed 3 per cent on Wall St and in pre open, it’s down 3.6 per cent at time of filming. Shares in Afterpay (ASX:APT) closed 1.3 per cent lower at $94.69.
Ord Minnett rates Santos (ASX:STO) as buy with a target price of $8.45. After incorporating the completed acquisition into the Santos the broker increases its target price to $8.45 from $7.90. While management indicated pre-tax synergies could amount to $126 to $161 million, the analyst excludes this potential from the base-case scenario. Net present value would jump by a further $0.33-0.42 cents per share if included notes the broker. Shares in Santos (ASX:STO) closed 1.9 per cent higher at $6.60 yesterday.
There is one company trading ex-dividend today, Cardno (ASX:CDD) is paying 57 cents unfranked.
There are four companies set to pay eligible shareholders today.
Amcor Plc (ASX:AMC)
Macquarie Group (ASX:MQG)
Washington H Soul Pattinson & Company (ASX:SOL)
SSR Mining Inc (ASX:SSR)
There are seven companies set to meet with shareholders including Afterpay and HUB24.
Health House International (ASX:HHI)
Hot Chili (ASX:HCH)
MC Mining (ASX:MCM)
Minbos Resources (ASX:MNB)
Top Shelf International Holdings (ASX:TSI)
Annual & interim reports
Australian Pharmaceutical Industries (ASX:API)
Jupiter Mines (ASX:JMS)
There is one company set to make its debut on the ASX today. Hydration Pharmaceuticals Company (ASX:HPC) they sell liquid, tablet and powder hydration solutions in North America after raising $17,000,000.
Iron ore has gained 7.4 per cent to US$110.20. Its futures point to a 2.3 per cent gain.
Gold added $3.20 or 0.2 per cent to US$1788 an ounce, silver was up $0.14 or 0.6 per cent to US$22.34 an ounce.
Oil lost $0.48 or 0.7 per cent to US$71.19 a barrel.
One Australian Dollar at 8:15 AM has weakened since yesterday, buying 71.33 US cents (Mon: 71.77), 53.98 Pence Sterling, 81.01 Yen and 63.20 Euro cents.