Major indexes around the globe rallied as Evergrande concerns abated for now. U.S. Federal Reserve Chair Powell flagged that tapering will happen “soon”. The ASX rose for a 2nd day while the price of Australian carbon credit units hit a record high. Macquarie rates Westpac Group (ASX:WBC) as a hold after their ESG meeting.
The Australian sharemarket is set to rise with the SPI futures pointing to a gain of 0.2 per cent.
Wall St gains as Fed keeps rates unchanged
Wall St closed in the black, the Dow snapped a four day losing streak as the Fed left interest rates unchanged. The Fed said tapering will happen “soon” if the recovery continues to roll. The major indexes saw strong gains, pricing in the likely official announcement in November, for the taper to start in December, with the view that the Fed is in no rush to raise interest rates soon.
Let’s take a look at Federal Reserve Chair Jerome Powell on why markets rallied, and his view that inflation is transitory.
“Inflation is elevated and will likely remain so in coming months before moderating. As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term. These bottleneck effects have been larger and longer-lasting than anticipated, leading to upward revisions to participants’ inflation projections for this year. While these supply effects are prominent for now, they will abate, and as they do inflation is expected to drop back toward our longer-run goal”.
Existing home sales fell in August
In other economic news, existing home sales fell 2 per cent last month even as prices steadied, the first decline in two months, and the latest indicator that the housing market is starting to slow down.
Inventory fell 1.5 per cent from the month before and sales remain above pre-pandemic levels. The average price of an existing home last month was US$356,700, a 14.9 per cent surge from a year ago and a 23.6 per cent jump in May.
Wall Street has been trying to get their footing on how the economic recovery will influence the Fed’s next moves as delta variant continues to spread. The market has been choppy as worries linger and how Covid-19 could play out on businesses and the impact of inflation.
FedEx tumbles, Netflix surges, bond yield dips as gold gains
At the close, the Dow Jones gained 1 per cent to 34,258, the S&P 500 added almost 1 per cent to 4,396 while the Nasdaq closed over 1 per cent higher at 14,897.
The yield on the 10-year treasury note dipped 2 basis points at 1.31 per cent, gold gained on a softer greenback.
Across the S&P 500 sectors, the rally was almost across the board with only four sectors in the red. Materials tumbled 4 per cent, utilities down 0.1 per cent while real estate and communication services just fractionally skid. Energy surged over 3 per cent as oil prices lifted, financials climbed 1.6 per cent followed by technology at 1.4 per cent.
FedEx tumbled over 9 per cent, one of the biggest drags on the S&P 500 after it reported higher costs even as demand for shipping increased.
Netflix surged over 3 per cent on news that they are set to acquire the works of Roald Dahl, the late British author of children’s books such as “Charlie and the Chocolate Factory.
European markets rebounds as Evergrande concerns abate
European markets saw a rebound closing in the black as Evergande concerns abate.
Paris gained 1.3 per cent, Frankfurt added over 1 per cent and London’s FTSE closed 1.5 per cent higher.
Oil and miners stocks rose. BP added 1.4 per cent and Shell rose 1.8 per cent. Rio Tinto surged 2.8 per cent while BHP rose 2.1 per cent.
Asian markets mixed as China receives liquidity boost
Asian markets closed mixed as sentiment stabilized after much anxiety earlier in the week.
Tokyo’s Nikkei fell 0.7 per cent to a two-week low ahead of their second public holiday this week. The Bank of Japan kept monetary policy unchanged, as expected.
Hong Kong’s Hang Seng was closed while China’s Shanghai Composite rose 0.4 per cent after their 4-day long weekend as banking and consumer stocks led.
ASX 200 climbs for a 2nd day defying global jitters
Yesterday, the Australian sharemarket closed 0.3 per cent higher at 7,297 for the second straight day. Energy stocks charged the local bourse as the index shrugged off global jitters.
Troubled property giant Evergrande eased market doubts after they pledged they would pay the interest due on a $8.5 billion bond on time. Investors took their pledge and bought into energy and material stocks, as these sectors surged and clocked in as the best performers.
Energy soared 2.3 per cent while materials rose 2 per cent followed by property and communication services. Out of the four losers, financials fared the worst down 0.6 per cent on the back of fears that the Evergrande saga might leave them exposed, followed by technology, down 0.3 per cent and industrials.
The best-performing stock in the ASX 200 was metals and electronics recycling provider Sims (ASX:SGM), closing 6.1 per cent higher at $13.66 on major news. It was followed by shares in Worley (ASX:WOR) and Champion Iron (ASX:CIA).
The worst-performing stock was Premier Investments (ASX:PMV), closing 4.5 per cent lower at $26.81, followed by shares in Link Administration (ASX:LNK) and Insurance Australia Group (ASX:IAG).
Insurance companies under pressure while Zip Co rises
Now Suncorp (ASX:SUN) lost 2.1 per cent to $12.17 as they fell in tangent with IAG (ASX:IAG), after Victoria was shaken by an 5.9 magnitude earthquake which put insurance companies under pressure.
Buy-now pay-later Zip Co (Z1P) jumped 4.3 per cent as they are slated to expand their presence in India with a US$50 million investment in ZestMoney. Their Indian counterpart has around 11 million users.
Aussie carbon credit units high record high
With talks around climate change, investors also digested news that demand from companies and governments looking to offset their carbon emissions are on the rise.
The price of Australian carbon credit units, or ACCUs hit a record high in the week ending last Friday. The spot price surged to $26 per tons of carbon dioxide equivalent compared to $16 from the start of this year and all of 2020 according to Demand Manager.
Local economic news
Today IHS Markit business conditions purchasing managers indexes for September are expected to see a slight uplift on the reopening play that is released today.
The Australian Bureau of Statistics is set to release payroll jobs for week ending 28 August and June quarter household wealth data.
Sealink travel group (ASX:SLK) has inked a deal with London’s transit operator, RATP Dev UK to form a joint venture.
The joint venture is set to employ over 4,000 staff, operate 1,250 buses on 115 routes from 10 garages in Western London. There is an anticipated turnover in the region of $517 million (£275 million) per annum.
The plans are for Sealink’s London bus services to work with RATP to create a new company where Sealink has a 12.5 per cent stake. The transaction is set to complete by the end of this year.
Shares in Sealink Travel Group’s (ASX:SLK) closed 1.7 per cent higher at $8.89 yesterday.
Macquarie rates Westpac (ASX:WBC) as neutral with a price target of $26.50. Australia’s oldest bank hosted an ESG briefing in which the bank has elevated climate change as a key priority. The bank has reiterated their pledge to exiting all thermal coal exposure in their lending portfolio by 2030.
In oil and gas, the bank will lend only to new customers that have Paris-aligned goals. The broker notes the bank is also seeking to maintain women in leadership positions at 50 per cent ahead of their financial year 2021 results on the first of November this year.
Shares in Westpac (ASX:WBC) closed 1.1 per cent lower at $24.91.
We have two companies set to make their debut on the ASX today.
Keep an eye out for Iris Metals (ASX:IR1), and Revolver Resources (ASX:RRR).
Eagers Automotive (ASX:APE) is paying 28.4 cents fully franked.
Centrepoint Alliance (ASX:CAF) is paying 1 cent fully franked.
Capitol Health (ASX:CAJ) is paying 0.5 cents fully franked.
Cash Converters (ASX:CCV) is paying 1 cent fully franked.
Cochlear Limited (ASX:COH) is paying 140 cents unfranked.
Countplus Limited (ASX:CUP) is paying 1.5 cents fully franked.
Embelton Limited (ASX:EMB) is paying 20 cents fully franked.
Genesis Energy Ltd (ASX:GNE) is paying 8.2077 cents unfranked.
Lindsay Australia (ASX:LAU) is paying 0.5 cents unfranked.
Lycopodium Limited (ASX:LYL) is paying 15 cents fully franked.
Mastermyne Group Ltd (ASX:MYE) is paying 2.25 cents fully franked.
NRW Holdings Limited (ASX:NWH) is paying 5 cents fully franked.
Shine Justice Ltd (ASX:SHJ) is paying 3.25 cents unfranked.
Swick Mining (ASX:SWK) is paying 1 cents fully franked.
Vita Life Sciences (ASX:VLS) is paying 2.75 cents fully franked.
Today, we have several companies slated to pay eligible shareholders a dividend which include Rio Tinto (ASX:RIO), Resmed (ASX:RMD), Ingenia Communities (ASX:INA), Magellan Financial Group (ASX:MFG), Class (ASX:CL1), Downer EDI (ASX:DOW), Telstra (ASX:TLS), Australian United Investment (ASX:AUI), Diversified United Investment (ASX:DUI), Ampol (ASX:ALD), Excelsior Capital (ASX:ECL), McPherson’s (ASX:MCP), Australian Finance Group (ASX:AFG), Viva Energy Group (ASX:VEA), IGO (ASX:IGO), Adairs (ASX:ADH), AVJennings (ASX:AVJ), Kip McGrath (ASX:KME), and Shaver Shop Group (ASX:SSG).
Iron ore has jumped 17 per cent to US$108.70. Their futures are pointing to 5.6 per cent gain.
Gold has added $0.60 to US$1779 an ounce while silver has gained $0.30 to US$22.91 an ounce.
Oil was up $1.74 to US$72.23 a barrel as inventories fell last week to the lowest since October 2018, according to the U.S. Energy Information Administration.
One Australian Dollar at 7:15 AM has strengthened from yesterday, buying 72.41 US cents, 53.18 Pence Sterling, 79.51 Yen and 61.98 Euro cents.