Wall St gains, ASIC sues ANZ, Evolution Mining gets a rating hike: ASX to dip

Wall St rally continues at a slower pace ahead of the inflation figures this week. European markets retreats on rising Covid-19. ASX gained for the 4th day.

The Australian sharemarket is set to fall with the SPI futures pointing to a dip of 0.4 per cent.

US stocks rally for 3rd day ahead of inflation this week

US stocks consolidated after investors became comfortable about the Omicron variant and hawkish comments from the Fed last week. The third day of gains followed the sell down on Black Friday when Omicron appeared amid talks of a faster pace of the bond buying program by the Fed.

Today was a symptom that market participants were comfortable with this ahead of the inflation figures on Friday. Also helping soothe the market were words from Dr Fauchi from Tuesday, and that hospitalizations and death rates in South Africa are not making headlines at this point.

For now, it’s full steam ahead from an economic perspective. The economy is on a stronger footing and it’s expected to continue into next year. However, we still have inflation at the forefront. The consumer price index figures are due this week with the Fed to meet next week. Inflation is expected to come in around the 6.0 per cent mark, and anything above that could see more volatility. We are seeing the cash balances from the fiscal stimulus come into the economy amid supply chain bottlenecks starting to ease. Today’s marginal gains kept the major indexes in the black, though some trepeditation has crept in following gains of 2.0 to 3.0 per cent from the S&P 500 and the Nasdaq on Wednesday.

Pfizer’s 3rd dose effective against Omicron

Positive news from Pfizer and BioNTech helped boost market sentiment. Shares of these companies closed lower by 0.6 and 4.0 per cent respectively, though we have some good news. This comes as early trials indicate that a third shot or a booster dose from these of this Covid-19 vaccine is more effective against the latest variant than the two dose regimen, so some level of efficacy here. Now, according to these companies, the third dose increases antibodies by 25 times, and recipients who only had two doses are still unlikely to be hospitalised if they do contract this new strain. The company is working on an Omicron specific vaccine to roll out by March next year.

Positive vaccine news helped travel stocks lift-off. The best performers on the S&P 500 are these cruise lines stocks which have been under pressure throughout this pandemic. They’re still well off from their pre-pandemic highs but Carnival Cruise, and Royal Caribbean added in the order of 5.0 per cent. Airlines also saw some big gains, as it is part of the reopening trade as Omicron worries ease with shares of major US carriers United, Delta, and American Airlines all reacting accordingly. United led the way at over 4.0 per cent, American Airlines and Delta Airlines closing around the 2.0 per cent mark.

Job quits slow while job openings leaps

Let’s take a look at the latest on the jobs market amid labour shortages. In economic news, the Labor Department showed that Americans quit their jobs at a lower rate in October than the month before. Though we have a new record of 11 million jobs remaining right now. It shows the negotiating power that workers have currently.

Apple’s market cap nearing size of Germany

In company news, Apple shares extended its gains after hitting an all time high on Tuesday. This tech titan is nearing a US$3 trillion market cap which would make it the size of the world’s fifth biggest economy after Germany. It does come as a report said that Apple is actually likely to miss its initial target for iPhone 13 production this year by about 20 per cent attributed to the chip shortage. Just goes to show you the strength of this company with hundreds of billions of dollars in cash on its balance sheet. You could also see this as an inflation hedge as they have enough dough to eat at the inflation price.

Oil prices rallied amid the news from Pfizer as mentioned earlier putting concerns of lockdowns to bed. Despite the optimism over the vaccine efficacy, travel has taken a hit due to rising Covid-19 cases in Europe. The UK has reported over 51,000 new cases while France posted a surge in hospitalizations. We will see how shares performed in European markets.

Wall St gains as bond yields rose

At the closing bell, the Dow Jones added 0.1 per cent to 35,755, the S&P 500 gained 0.3 per cent to 4,701, while the Nasdaq closed 0.6 per cent higher at 15,787.

Across the S&P 500, there were three losers to eight winners. Financials were the worst performer followed by consumer staples, and utilities. Communication services were the best performer.

The yield on the 10-year treasury note rose 5 basis points to 1.53 per cent. Gold rose on a weaker greenback.

European markets trims on UK mandate

Across the Atlantic, European markets closed lower. Paris fell 0.7 per cent, Frankfurt lost 0.8 per cent and London’s FTSE was flat as positive vaccine news offset talks of Prime Minister Boris Johnson’s mandate to work from home was revived to combat Omicron. A move to allow time for booster shots to be administered. Resources fell with Rio down 1.6 per cent and Shell dipped 0.2 per cent.

Asian markets rally on Wall St hopes

Asian markets closed higher. Tokyo’s Nikkei gained 1.4 per cent, Hong Kong’s Hang Seng added 0.1 per cent, while China’s Shanghai Composite closed 1.2 per cent higher.

ASX 200 gallops for 4th day

Yesterday, the Australian sharemarket jumped 1.3 per cent higher at 7,405 for its fourth day in a row, its highest finish since 25 November and biggest one day percentage gain since 4 October.

All sectors closed higher though the standouts were the resources with materials, and energy rising close to the order of 2.0 per cent as prices for the relative commodities rose offshore. Communication services led the pack, followed by information technology with utilities adding the least at 0.2 per cent.

Fortescue Metals (ASX:FMG) was the outperformer jumping 3.3 per cent, while Rio Tinto (ASX:RIO) jumped 2.2 per cent and BHP (ASX:BHP) closed 1.9 per cent higher. Outside the majors, the rally continued. Mineral Resources (ASX:MIN) surged 5.9 per cent, South32 (ASX:S32) jumped 3.3 per cent, while OZ Minerals (ASX:OZL) closed 2.0 per cent higher.

The energy players enjoyed the limelight, Woodside Petroleum (ASX:WPL) jumped 2.1 per cent while Santos (ASX:STO) gained 2.3 per cent and Oil Search (ASX:OSH) climbed 2.2 per cent after they received an approval from Papua New Guinea’s competition watchdog (ICCC) on their merger.

Banks were led by National Australia Bank (ASX:NAB) rising 1.0 per cent, ANZ Bank (ASX:ANZ) added 0.7 per cent, Westpac (ASX:WBC) gained 0.6 per cent, while Commonwealth Bank (ASX:CBA) closed 0.3 per cent higher. Macquarie (ASX:MQG) jumped 1.3 per cent.

Platinum Asset Management (ASX:PTM) saw net fund outflows of $183 million in November, while funds under management rose 2.2 per cent to $22.1 billion from $21.6 billion. Shares fell 0.7 per cent at $2.70.

Magellan Financial Group (ASX:MFG) rose after co-founder and executive chairman Hamish Douglass and his wife Alexandra said that they have no plans to sell their shares in the company despite separating some months ago. Magellan remains down 6.2 per cent lower for the week. On the day, shares added 0.3 per cent at $1.74.

Zip Co (ASX:Z1P) was the beneficiary of a broker upgrade after UBS reviewed the company on valuation grounds, despite US growth for the ‘buy now, pay later’ group appearing to slow down. The broker said that the recent share price weakness has improved the company’s risk-reward profile, despite first-half total transaction value tracking below the broker’s expectations. The broker reduces first-half total transaction value forecasts to $4.49 billion from $4.81 billion. The rating was upgraded to neutral from sell, but the target price decreased to $5.20 from $5.50. In a broader context, Zip has recouped Monday’s 10.1 per cent fall after Friday’s tech sell off on the Nasdaq. This saw growth stocks take a hit on that day. The recovery now means that Zip stands 9.5 per cent higher in the week.

The best-performing stock in the S&P/ASX 200 was Zip Co (ASX:Z1P) closing 10.9 per cent higher at $5.29, followed by shares in Mesoblast (ASX:MSB), and Kogan.com (ASX:KGN).

The worst-performing stock in the S&P/ASX 200 was Steadfast Group (ASX:SDF) closing 4.0 per cent lower at $4.79, followed by shares in PolyNovo (ASX:PNV), and Orora (ASX:ORA).

Alliance Aviation (ASX:AQZ) surged 5.6 per cent at $4.18 after the regional carrier and charter operator gave final investment approval for the build of an aircraft maintenance facility at Rockhampton in central Queensland. The new base is slated to be completed in November next year assisted by government grants and loans. This means the maintenance of its 74 Fokker and Embraer planes will be constructed onshore from financial year 2023. This would see an annual saving of around $5 to $7 million on maintenance costs that are currently happening in the UK, Singapore, Slovakia, and Costa Rica.

In M&A news, Trajan (ASX:TRJ) galloped 8.4 per cent after the supplier of consumables for life sciences companies inked a deal to buy US-based LEAP PAL Parts and Consumable $11.8 million (US$7.7 million).

Nickel Mines (ASX:NIC) jumped 1.5 per cent at $1.36 after the miner is set to acquire 70 per cent equity interest in the Oracle Nickel Project with its partner, Shanghai Decent Investments for $516 million (US$371 million).

Local economic news

The Australian Bureau of Statistics is set to release its weekly payroll jobs and wages for the period to 13 November.

The Reserve Bank Governor Lowe is set to make an online speech this morning at 9am (AEDT).

Company news

Australian Securities and Investments Commission has sued ANZ (ASX:ANZ) for failing to provide promised benefits to over 500,000 people. The period covers more than two decades in the latest fallout from the Royal Commission. Shares in ANZ (ASX:ANZ) closed 0.7 per cent higher at $27.66 yesterday.

Broker moves

UBS upgraded Evolution Mining’s (ASX:EVN) rating to neutral from sell with a price target of $3.95. Having bought out Glencore Australia for $1 billion, the gold miner now owns 100 per cent of the Ernest Henry project. The acquisition means that their copper increases to 25 per cent of group revenue, and adds 380,000 ounces of gold equivalent per annum to production. The broker expects weaker near-term cash flow as the miner enters reinvestment committing $600 million capital expenditure to developing Cowal over three years. This follows a two-year cash burn from Red Lake production despite the attractive 11 million ounce resource. Shares in Evolution Mining (ASX:EVN) closed 2.8 per cent higher at $4 yesterday.

Ex-dividend

There is one company trading ex-dividend today. Select Harvests (ASX:SHV) is paying 8 cents fully franked.

Dividend-pay

There are two companies set to pay eligible shareholders today.

Graincorp (ASX:GNC)
NB Global Corporate Income Trust (ASX:NBI)

AGMs

There are seven companies set to meet with shareholders.

BPM Minerals (ASX:BPM)
Firstwave Cloud Technology (ASX:FCT)
Fonterra Shareholders’ Fund (ASX:FSF)
IPB Petroleum (ASX:IPB)
Lion Selection Group (ASX:LSX)
Metgasco (ASX:MEL)
PVW Resources (ASX:PVW)

Commodities

Iron ore has lost 1.4 per cent to US$107.00. Its futures point to a 2.3 per cent fall.

Gold gained $0.70 or 0.04 per cent to US$1785 an ounce, silver was down $0.07 or 0.3 per cent to US$22.46 an ounce.

Oil gained $0.59 or 0.8 per cent to US$72.64 a barrel.

Currencies

One Australian Dollar at 8:15 AM has strengthened since yesterday, buying 71.73 US cents (Wed: 71.20), 54.27 Pence Sterling, 81.55 Yen and 63.21 Euro cents.