Wall St gains, Casino stocks crash on China crackdown, Pilbara is an outperform: ASX to rise

Major indexes around the globe closed mixed as oil price surges while iron ore falls. European markets were dragged lower by a fall in retail stocks. Asian markets retreat as casino stocks crash on China crackdown. Lithium players enjoyed Pilbara’s auction price. Macquarie retains their broker rating on Pilbara (ASX:PLS) despite this.

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

U.S. stocks rebound as business conditions improve

Wall St saw a flash of green across the board as investors bought the dip to bring the trough back to a peak. The rebound followed an improvement in business conditions overshadowing weak economic data from China. Investors also monitored Beijing’s crackdown on casinos and the collapse of property giant Evergrande and the impact on the real estate market.

Manufacturing index soars as business conditions improve

The Fed’s empire state manufacturing index soared after the figures painted a new story. The index surged 16 points to 34.3 above expectations of 17.2 as business conditions improved. With demand looking optimistic, market participants are looking to weigh this report with other eco news to see if the trend is across the board. However, if a positive pattern is seen, there could be a boost in economic growth forecasts to close off the year. Let’s see what happens next week and if the Fed sticks to their guns next week.

At the close, the Dow Jones gained 0.7 per cent to 34,814, the S&P 500 added 0.9 per cent to 4,481 while the Nasdaq closed 0.8 per cent higher at 15,162.

Bank stocks advanced as the yield on the 10-year treasury note rose at 1.30 per cent from 1.28 per cent while gold fell.

Across the S&P 500 sectors, energy was the clear winner, up 3.8 per cent followed by industrials and materials, both up 1.1 per cent with financials in the rear, up 0.9 per cent. Utilities was the only loser, down 0.6 per cent. The rest of the sectors closed in the black.

Microsoft unveils US$60b buyback offer

Microsoft unveiled plans for its biggest buyback program purchasing US$60 billion of shares. They also raised its quarterly dividend by 11 per cent. This comes after lawmakers are weighing an adding tax on buybacks. Shares in the company rose 1.7 per cent on the news.

Casino stocks came under pressure after the Macau government is set to tighten their grip on the future of the gambling industry. Shares of Wynn Resorts tanked 6.3 per cent.

European markets fall while oil stocks & miners rose

Across the Atlantic, European markets closed lower dragged down by cyclicals. Paris lost over 1 per cent, Frankfurt closed 0.7 per cent lower and London’s FTSE fell 0.3 per cent as U.K.’s inflation climbed to a nine year high in August.

This comes after the biggest monthly jump in the annual rate in at least 24 years. This was attributed to the roll off of last year’s “Eat Out to Help Out” subsidies that pushed down restaurant meal prices.

To offset losses, oil stocks rose with BP adding 3.1 per cent and Shell, up 1.8 per cent while miners BHP added 0.5 per cent and Rio Tinto gained 0.8 per cent.

Asian markets investors book their profits

Investors booked their profits which saw Asian markets closed lower. Tokyo’s Nikkei retreated, giving back 0.5 per cent, though still at three decade highs.

Hong Kong’s Hang Seng dropped 1.8 per cent dragged lower by tech and casino gaming stocks. The moves followed reports that Beijing is looking to firm up their efforts to promote the development of a “civilized” internet.

China’s Shanghai Composite closed 0.2 per cent lower on weak Chinese factory and retail sales.

ASX 200 snaps 3-day winning streak

Yesterday, the Australian sharemarket snapped its three day winning streak to close 0.3 per cent lower at 7,417.

The decline followed a string of data from stateside and in China which dampened investor’s sentiment. Playing on the minds of market participants were worries on the corporate and individual tax hike in the U.S. to fund President Biden’s US$3.5 trillion plan, compounded with economic data from China as mentioned earlier.

Bucking the trend, was a 2 per cent jump in consumer sentiment from the Melbourne Institute and Westpac, but not enough to offset the worries amid a decline in iron ore prices

Losses were dragged down by the energy sector tumbling 2.2 per cent, followed by utilities declining 1.8 per cent and materials, down 1.4 per cent. On the brighter side, your defensive stocks advanced with healthcare adding 1.2 per cent, followed by property at 1.1 per cent then some growth, with technology adding 1 per cent.

The best performing stock across the ASX 200 were Pilbara Minerals (ASX:PLS) surging 8.4 per cent at $2.45, after its raw material used to make lithium batteries was auctioned off at quite an attractive price.

The auction price represented an increase at 550 per cent surge year-on-year. A sign on how much buyers are willing to pay for lithium and an indicator of the availability of this raw material. This performance was followed by Elders (ASX:ELD) adding 4.7 per cent and Perseus Mining (ASX:PRU).

The worst performing stock was AGL (ASX:AGL) tumbling to a 20 year low of 7.4 per cent at $5.85. The energy producer has had a poor run and was tapped off the ASX 50 at the start of this month. This follows a terrible run in their full-year results attributed to a “challenging year”. This was followed by Worley (ASX:WOR) down 4.3 per cent and Pointsbet (ASX:PBH).

Local economic news

The Australian Bureau of Statistics is set to release its August jobs report.

It is expected that job losses will rise along with a fall in hours worked. Westpac group economists expect employment to fall by 150,000 in August. To note, there is some uncertainty with forecasts ranging up to 300,000.

They have forecast the unemployment rate to climb to 5 per cent from a 12-year low of 4.6 per cent in July and the participation rate to fall to 65.5 per cent from 66 per cent.
 
Broker moves

Macquarie rates Pilbara (ASX:PLS) as an outperform, so a buy with a price target of $2.70.

The miner’s second spodumene sale has been completed at a 130 per cent premium to Macquarie’s forecast realised price for the company’s spod shipments in FY22.

The broker observes spod price momentum is a key share price driver for the company, and while the spod sales have accounted for around 5 per cent of total FY22 volumes, Macquarie believes the realised price suggests positive price momentum is most likely to continue.

The broker’s earnings forecasts for the company are 46 per cent higher than consensus averages for FY22 and 38 per cent higher for FY23. The broker retains an outperform rating and their $2.70 target.

Shares in Pilbara Minerals (ASX:PLS) closed 8.4 per cent higher at $2.45 yesterday.

IPO

There is one company set to make their debut on their ASX. Keep an eye out on Pearl Gull Iron (ASX:PLG).

Ex-dividend

Apiam Animal Health (ASX:AHX) is paying 1.2 cents fully franked
DDH1 (ASX:DDH) is paying 2.18 cents fully franked
Peet Limited (ASX:PPC) is paying 2.5 cents fully franked
PWR Holdings Limited (ASX:PWH) is paying 6 cents fully franked
SKYCITY Entertainment Group Ltd (ASX:SKC) is paying 6.6922 cents unfranked
Supply Network (ASX:SNL) is paying 12 cents fully franked
Spark New Zealand (ASX:SPK) is paying 11.881 cents unfranked
Seven Group Holdings (ASX:SVW) is paying 23 cents fully franked
WCM Global Growth (ASX:WQG) is paying 2.5 cents fully franked

Commodities

??Iron ore has lost 4.1 per cent to US$116.65 as China’s steel production tanked to the lowest level in 17 months. Their futures are pointing to 3 per cent fall.

Gold has lost $12.30 or 0.7 per cent to US$1795 an ounce while silver has fallen $0.08 or 0.4 per cent to US$23.80 an ounce.

Oil jumped $2.15 or 3.1 per cent to US$72.61 a barrel after the Energy Information Administration reported that U.S.’ crude oil inventories fell.

Currencies

One Australian Dollar at 7:10 AM has strengthened from yesterday buying 73.36 US cents, 53.02 Pence Sterling, 80.24 Yen and 62.07 Euro cents.

Investor event

Please join us at our next online investor event on Tuesday 21 September at 12.30pm (AEST) with six CEOs presenting. Make your way to fnn.com.au to reserve your free spot.
 

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