Wall St mixed, Fed Chair to lead for 2nd term, Link is bullish: ASX to fall

Mixed close around the major indexes around the globe after the Fed Chair was given the nod to continue for a second term. Link Administration (ASX:LNK) rated as a buy for Stockwatch.
Wall St mixed, Fed Chair to lead for 2nd term, Link is bullish: ASX to fall

The Australian sharemarket is poised to open lower with the SPI futures pointing to a fall of 0.2 per cent.

US stocks mixed as Fed Chair gets the nod

Wall St closed mixed after President Biden nominated Fed Chair Jerome Powell to continue to lead the central bank for a second term. He also nominated Lael Brainard to the role of Vice-Chair with the decision ending the game on who would lead the Fed.

Investors felt a level of comfort with the decision at a time where the country is seeing inflation at 30 year highs, removing uncertainty and the potential disruption if the appointment was otherwise. The moves followed the central bank commencing its tapering of its bond-buying program.

The yield on the 10-year treasury note rose as technology shares fell, the Nasdaq was the underperformer hitting session lows after touching a record high. The S&P 500, minutes before the session moved into the red after being in positive territory, while the Dow also saw a sell-off though managed just to keep its gains.

Meanwhile, bank stocks advanced, the beneficiary of a higher yield to charge higher rates, as safe haven gold fell while confidence grew on the outlook.

Apple shares hit a record high amid broker reports that production on the iPhone 13 is set to improve as better conditions point to a ramp up of sales ahead of the Black Friday. Apple recently prioritized chips for the iPhone over other devices, as they look to diversify into the auto industry.

Tesla CEO Elon Musk has outlined a timeline on when customers in China could see the Model S Plaid vehicle, driving shares 1.7 per cent higher. The model is earmarked for March next year.

In fresh economic news, sales of previously occupied US homes ticked higher, their strongest annual pace since January. Existing homes sales rose 0.8 per cent last month from September to a seasonally-adjusted annual rate of 6.34 million units according to the National Association of Realtors.

Meanwhile, oil prices are higher but have been under pressure in recent sessions as leaders of the largest economies discussed a joint release of reserves prior to lockdowns in Europe. Even though further tightening of restrictions isn’t ruled out, this scenario is why OPEC+ defended its position not to raise production despite the price surge. We are seeing prices stabilize and we might see it fall if mobility restrictions do occur.

Wall St mixed as bond yield rise

At the closing bell, the Dow Jones added 0.1 per cent to 35,619, the S&P 500 fell 0.3 per cent to 4,683 while the Nasdaq closed 1.3 per cent lower at 15,855.

Across the S&P 500, energy and financial led the session while communication services and technology dragged.

The yield on the 10-year treasury note rose 9 basis points to 1.63 per cent. Gold fell on a firmer greenback.

European markets mixed on M&A fever

European markets closed mixed. Paris lost 0.1 per cent, Frankfurt fell 0.3 per cent while London’s FTSE added 0.4 per cent. Amid a US$12 billion takeover bid in the telecom sector boosted optimism, despite continued worries of Covid-19 cases on the continent.

Global investment company KKR’s interest in Telecom Italia ignited shares in the sector with British Telecom and Vodafone closing higher.

Commodity players got a boost with miners and oil giants rising. BHP up 3.1 per cent, RIO up 1.9 per cent while BP added 2.4 per cent, Shell up 0.4 per cent.

Asian markets mixed by central bank moves

Asian markets closed mixed. Tokyo’s Nikkei added 0.1 per cent closing at session highs, Hong Kong’s Hang Seng fell 0.4 per cent on talks about risks of “stagflation.”

While China’s Shanghai Composite gained 0.6 per cent as the PBoC signalled possible easing measures to help with the economic recovery.

On Friday, the central bank removed previous phrases to “control the valve on money supply” and vowed not to “flood the economy with stimulus,” signaling a shift in stance toward more supportive measures as per major banks like Sachs. Also, the PBoC maintained its benchmark loan prime rates for the19th consecutive month which was expected.

ASX 200 falls on Covid jitters

Yesterday, the Australian sharemarket closed 0.6 per cent lower at 7,353 pressured lower by major banks, and travel stocks amid the growing concerns of Covid-19 cases hampering the global economic recovery.

Major lenders fell in the order of 1.0 to 2.0 per cent with the sector losing 1.4 per cent after energy and information technology stocks fell weighed down by Afterpay (ASX:APT), fell 2.5 per cent, while materials bucked the trend as the best performer with marginal gains from utilities, and consumer staples.

Travel stocks failed to take-off despite the news around the reopening of borders to skilled workers and some tourists from next month, as restrictions in parts of Europe ahead of the Christmas holiday offset the positive announcement.

Flight Centre (ASX:FLT) tumbled 7.1 per cent to a two-month low of $18.34 while Qantas (ASX:QAN) fell 4.0 per cent to $5.26. Corporate Travel Management (ASX:CTM) dived 6.0 per cent to $23.26 and Helloworld Travel (ASX:HLO) dropped almost 6.0 per cent to $2.25.

The rise in the iron ore price was a bright spot pushing the materials sector.

A highlight was Nickel Mines (ASX:NIC) surged almost 8.0 per cent to $ 1.28. The miner signed a memorandum of understanding with Shanghai Decent Investment. The partnership was described as a framework for future development projects. The miner will also seek shareholder approval to buy 70 per cent in the Oracle nickel project in Indonesia in a meeting next year.

The best-performing stock in the S&P/ASX 200 was Nickel Mines (ASX:NIC), closing almost 8 per cent higher at $1.28. It was followed by shares in Pilbara Minerals (ASX:PLS) and Orocobre (ASX:ORE).

The worst-performing stock in the S&P/ASX 200 was Flight Centre Travel Group (ASX:FLT), closing 7.1 per cent lower at $18.34. It was followed by shares in Corporate Travel Management (ASX:CTD) and Unibail-Rodamco-Westfield (ASX:URW).

On the M&A front, Silver Lake Resources (ASX:SLR) fell 4.3 per cent to $1.78 on news that the gold miner is set to acquire credit facilities in forbearance that were provided to Toronto-listed Harte Gold from BNP Paribas that belong to a gold mine in Ontario. The loaned money is secured by a first lien on all the present and future assets, property and undertaking of Harte Gold.

In other news, AMP (ASX:AMP) rose 2.6 per cent to $1.16 after they said it will retain control of a $7 billion unlisted office fund, the AMP Capital Wholesale Office Fund after an independent committee recommended against rival proposals to move to Mirvac or GPT.

Local economic news

IHS Markit is set to release November’s purchasing managers indexes while RBA Head of Domestic Markets, Marion Kohler is set to deliver a speech “securities markets through the pandemic” at Australian Securitisation Forum Virtual Conference. Also RBA Deputy Head Domestic Markets is set to participate in a panel discussion with the theme “transition to risk free rates – the future of BBSW” at the same conference.

Stockwatch

Our weekly stock to watch this week is Link Administration (ASX:LNK). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Link Administration as a buy. From a technical angle, Link Administration is bullish for a number of reasons.

Since printing a high of $5.68 in December 2020, the bears took charge which resulted in almost a 26 per cent fall in the share price over the last 10 months. Positively, a zone of support between $4.10 and $4.16 was just shy of being tested in October, as marked by the orange rectangle and arrow. Consequently, a bullish rotation has ensued. Should this follow through to the upside, then a broader advance towards a band of resistance indicated between $5.68 (December 2020 high) and $5.85 (50 per cent Fibonacci retracement) could likely be on the cards.

Lastly, the MFI ‘money flow index’, which measures the inflow and outflow of money into an asset over a certain time period, by taking into account both price and volume. This oscillator has risen from oversold territory (purple line on the lower pane) signalling momentum to have shifted in favour of buyers.

Shares in Link Administration (ASX:LNK) closed 0.8 per cent lower at $4.90 yesterday.

Ex-dividend

There is one company trading ex-dividend today
Amcor PLC (ASX:AMC) is paying 16.01 cents unfranked

AGMs

Big day with 21 companies set to meet with shareholders today.

Atomos (ASX:AMS)
Auswide Bank (ASX:ABA)
Brickworks (ASX:BKW)
Ci Resources (ASX:CII)
Dexus Industria (ASX:ADI)
Elmo Software (ASX:ELO)
Galilee Energy (ASX:GLL)
Helix Resources (ASX:HLX)
Joyce Corporation (ASX:JYC)
Link Administration Holdings (ASX:LNK)
Mayne Pharma Group (ASX:MYX)
Monadelphous Group (ASX:MND)
Pro Medicus (ASX:PME)
Pro-Pac Packaging (ASX:PPG)
Queensland Pacific Metals (ASX:QPM)
Rafaella Resources (ASX:RFR)
Readcloud (ASX:RCL)
Ryder Capital (ASX:RYD)
Sihayo Gold (ASX:SIH)
Titanium Sands (ASX:TSL)
Zeta Resources (ASX:ZER)

Reports

Keep an eye out for PayGroup (ASX:PYG), and TechnologyOne (ASX:TNE) to release results today.

IPO

There is one company set to make their debut on the ASX today. Keep an eye out for RAS Technology Holdings (ASX:RTH) after raising $29 million. Racing and Sports Technology is a data provider for the betting industry providing feeds to the likes of Tabcorp, and BlueBet.

Commodities

Iron ore has gained 3.7 per cent to US$94.70. Its futures point to a 5.7 per cent gain.

Gold is lower for a third straight session after a rally at the start of this month. The safe haven dropped $45.60 or 2.5 per cent to US$1,809 an ounce, silver was down $0.58 or 2.4 per cent to US$24.26 an ounce.

Oil was up $0.36 or 0.5 per cent to US$76.30 a barrel.

Currencies

One Australian Dollar at 8:15 AM is weaker from yesterday, buying 72.26 US cents, 53.95 Pence Sterling, 82.98 Yen and 64.30 Euro cents.

Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Commentators may hold positions in stocks mentioned. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.