U.S. and European markets closed lower on a mixed jobs report while London trade bucked the trend on a lift in oil prices and travel stocks. Asian markets and the ASX rallied after China’s market reopened after a week long break.
The Australian sharemarket is set to retreat with the SPI futures pointing to a dip of 0.1 per cent.
U.S stocks fall after September jobs miss
Wall St dipped on Friday after investors reacted to the mixed jobs report. The tech-heavy Nasdaq was the underperformer, as the yield on the 10-year treasury climbed. The major indexes moved between gains and losses over the session as market participants weighed up the report versus the likelihood of a formal taper announcement in November by the Fed.
In September, 194,000 jobs were created missing estimates of 500,000. A fall for the second straight month as per the Labor department. Under the headline number, the unemployment rate improved at 4.8 per cent, not far from the Fed’s target of 4.0 per cent. It was 5.2 per cent the month before, and September’s results were below market expectations of 5.1 per cent. Average hourly earnings rose by more than expected 0.6 per cent, while the participation rate slipped which helped the unemployment rate.
Fed chair Jerome Powell has said it would take a “reasonably good employment report” to meet the central bank’s threshold to start reducing its massive bond buying program as soon as November.
Over the week, investors had a volatile ride as surging energy prices, and negotiations on the debt ceiling created some jitters. Oil prices traded at seven year highs, as coal and natural gas prices surge. The government bond yields rallied, on the back of factoring in inflation due to the energy crunch in Asia and Europe. If energy prices continue to rise, investors are concerned about the erosion of company profits and the impact on consumer spending, which would push inflation higher. It could weigh on companies from the transportation space to consumer discretionary, as prices creep up when energy does.
News of the debt ceiling deal boosted optimism after it was extended to December. Stocks rebounded after days of uncertainty. Meanwhile, investors bought the dip for the major indexes to notch weekly gains as they fled treasuries. The yield on the 10-year treasury note gained for its seventh straight week while bond prices fell.
The bond market is closed for Columbus Day, while Wall St is open, so tech shares might be in favor when the market opens.
Wall St falls as bond yields surge
At the closing bell, the Dow Jones lost 0.03 per cent to 34,746, the S&P 500 fell 0.2 per cent to 4,391 while the Nasdaq closed 0.5 per cent lower at 14,580.
Over the week, the Dow rose 1.2 per cent, the S&P 500 added 0.8 per cent while the Nasdaq added 0.1 per cent.
The yield on the 10-year treasury note rose 4 basis points to 1.61 per cent as gold fell on a firmer greenback
Across the S&P 500 sectors, energy and financials were the only winners. Energy surged 3.1 per cent while financials, beneficiaries of a rising bond yield rose 0.5 per cent. Real estate was the worst performer, down 1.1 per cent followed by utilities and materials.
European markets saw U.K. close higher
Across the Atlantic, European markets closed mixed. Paris lost 0.6 per cent, Frankfurt fell 0.3 per cent and London’s FTSE closed 0.3 per cent higher lifted oil giants and travel stocks. The U.K. government unveiled their plans to relax Covid-19 quarantine requirements for 47 destinations.
BP surged 2.5 per cent while Royal Dutch Shell closed 2.1 per cent higher. While mining giants were mixed. BHP rose 0.5 per cent while Rio Tinto fell 0.4 per cent.
Asian markets gains after Golden week holiday
Asian markets closed higher after the Golden week holiday. Tokyo’s Nikkei added 1.3 per cent, Hong Kong’s Hang Seng gained 0.6 per cent while China’s Shanghai Composite closed 0.7 per cent higher.
ASX 200 snaps 4-week losing streak
On Friday, the Australian sharemarket closed 0.9 per cent higher at 7,320, snapping their four week losing streak as energy stocks pushed higher amid the shortage.
Iron ore players accelerated after China markets returned to trade. Rio Tinto (ASX:RIO) jumped four per cent. BHP (ASX:BHP) gained three per cent. Fortescue (ASX:FMG) closed 2.4 per cent higher.
Financial Stability Review monitors credit growth
The RBA came back into the spotlight after publishing their semi-annual Financial Stability Review. A standout from the report did highlight the risks due to the surge in house prices and borrowing rates at all time highs. The catalyst was due to the ultra-low interest rates. The central bank warned that the lending standards must be maintained in order to minimize risks to the nation’s financial stability.
This warning wasn’t a surprise given that APRA raised the lenders’ loan serviceability buffer from 2.5 per cent to 3.0 per cent. A step forward to help cool credit growth on a hot property market.
Another way to cool the housing market would be to lift interest rates. However, RBA Governor Philip Lowe has repeatedly said that the Bank does not intend to raise rates prior to 2024. Without this lever, the central bank has fallen back on regulators to squeeze lending rules to minimize a housing bubble which could impede the recovery.
Dr Lowe has faced backlash for leaving rates on hold, but he said that he wants to see stronger inflation and wage growth before they rise.
Meanwhile, investors felt optimistic ahead of New South Wales easing restrictions today for the fully vaccinated, giving hope for stocks linked to the reopening trade.
Materials were the best performer, up 1.8 per cent, followed by information technology, with energy and communication services both adding 1 per cent. All the sectors closed in the black with property adding the least, at 0.1 per cent.
The best-performing stock in the S&P/ASX 200 was Chalice Mining (ASX:CHN), closing 7.4 per cent higher at $6.27 followed by shares in HUB24 (ASX:HUB), and Magellan Financial Group (ASX:MFG).
The worst-performing stock was EML Payments (ASX:EML) closing 14.6 per cent lower at $3.16, followed by shares in Clinuvel Pharmaceuticals (ASX:CUV), and Whitehaven Coal (ASX:WHC).
Energy crisis sends commodity stocks higher
Given the global energy crisis, the crunch created tailwinds for oil, coal, and gas prices sending commodity stocks higher.
Over the week, Woodside Petroleum (ASX:WPL) surged 5.4 per cent to $25.35, Santos (ASX:STO) leapt 4 per cent to $7.38, Origin Energy (ASX:ORG) jumped 5.4 per cent to $5.07 while Oil Search (ASX:OSH) added 3 per cent to $4.51. AGL Energy (ASX:AGL) skyrocketed at 7.1 per cent to $6.25 while Worley (ASX:WOR) closed 8 per cent higher at $10.67.
Local economic news
One of the events to keep an eye out for this week is a speech from Reserve Bank deputy governor Guy Debelle on climate risks and the Australian Financial System.
Also on the agenda this week locally are the September jobs numbers along with business and consumer sentiment reports.
Annual general meetings are starting to heat up with Commonwealth Bank (ASX:CBA), CSL (ASX:CSL), and Telstra (ASX:TLS) shareholders slated to meet online.
Looking overseas, inflation is set to make headlines in China and in the U.S.
We will also see the minutes from the U.S. Fed meeting, job vacancies, retail sales, and manufacturing numbers.
Meanwhile, September quarter corporate earnings is set to start mid this week with the big banks slated to release numbers including JP Morgan Chase.
Elsewhere, $835 million worth of dividends to be paid out this week according to CommSec, we might see that back into the market.
Platinum Asset Management (ASX:PTM) unveiled net outflows of approximately $292 million in September. This included net outflows from the Platinum Trust Funds of approximately $210 million which included a $99 million redemption from one institutional client. The investment manager finished the month with $22.8 billion under management versus $23.2 billion as at August 31. Shares in Platinum Asset Management (ASX:PTM) closed flat at $3.39 on Friday.
Macquarie rates BHP (ASX:BHP) as an outperform with a price target of $56. The broker points out that rising coking coal prices will allow the miner to maintain earnings upgrade momentum, despite the volatility in the iron ore price. The broker also believes that the high coal prices could provide a lift to the sale prices for non-core assets. The company is currently trading on a financial year 22 free cash flow yield of 20 per cent. Shares in BHP (ASX:BHP) closed 3 per cent higher to $37.74 on Friday.
There are five companies set to trade ex-dividend today.
Desane Group Holdings (ASX:DGH) is paying 2.25 cents unfranked
Future Generation Global Investment Co (ASX:FGG) is paying 3 cents fully franked
WAM Research Ltd (ASX:WAX) is paying 4.95 cents fully franked
WAM Alternative (ASX:WMA) is paying 2 cents fully franked
WAM Microcap Limited (ASX:WMI) is paying 8 cents fully franked
There are seven companies slated to pay eligible shareholders their dividends today.
AUB Group (ASX:AUB)
Gryphon Capital Income Trust (ASX:GCI)
NB Global Corporate Income Trust (ASX:NBI)
Sequoia Financial Group (ASX:SEQ)
Saunders International Ltd (ASX:SND)
Today Viva Energy Group (ASX:VEA) has pencilled in their AGM today.
There is one company slated to make its debut on the ASX today. Keep an eye out for Recharge Metals (ASX:REC).
Iron ore jumped 5.4 per cent at US$123.38 a tonne. Its futures point to a 1.3 per cent gain.
Gold has lost $1.80 or 0.1 per cent to US$1757 an ounce while silver was up $0.05 or 0.2 per cent to US$22.71 an ounce.
Oil was up $1.05 or 1.3 per cent to US$79.35 a barrel.
One Australian Dollar at 7:20 AM has weakened from Friday buying 73.10 US cents, 53.60 Pence Sterling, 81.99 Yen and 63.17 Euro cents.