Wall St mixed on tech lift, CSL R&D Day, Worley is bullish: ASX to drop

A mixed closed across the major indexes around the globe as inflation worries continue amid China’s figures pointing to a growth slowdown. M&A’s took the spotlight on the Aussie market boosting investor’s confidence.

The Aussie market is set to retreat with the SPI futures pointing to a fall of 0.3 per cent.

U.S stocks mixed on rising oil prices weighing on inflation woes

Investors remain cautious as inflation concerns persist. Compounded by concerns as oil prices climb, and also after China reported a slowdown in economic growth.

The Nasdaq outperformed despite inflation worries. Usually this causes the tech-heavy index to underperform, it didn’t today.

Investors are gearing for a week of earnings on tap. The likes of Netflix, Tesla, and several airlines will report results this week. Last week, big banks started the season to help bring stocks to near record highs.

Tech titans had a very good day with Microsoft tapping new fresh record highs. Apple shares rose over 1.0 per cent after they unveiled a range of new products. This included the MacBook Pro, and AirPods.

China’s growth sharply slowed down

Despite the stock standouts, China’s economy grew 4.9 per cent in the third quarter from a year before. This is a sharp slowdown from the second quarter rate of 7.9 per cent.

The deceleration had a number of contributing factors which came from the wealth equality crunch.

The country attributed the slowdown to the crackdown on the technology, private-education and real-estate sectors, power shortages and the supply chain issues.

Homebuilder confidence jumps unexpectedly despite supply shortages

In economic news, investors also digested that homebuilder confidence unexpectedly jumped last month.

The sentiment on U.S. single family homebuilders rose the most in nearly a year. The high demand for homes offset rising material costs and shortages.

The index rose four points to 80 as per the National Association of Home Builders/Wells Fargo Housing Market

U.S. industrial output slows on supply chain plague

Elsewhere, U.S. industrial and manufacturing slowed down more than expected in September as per the Bureau of Statistics. Higher commodity prices and the shutdown due to the hurricane season weighed. Adding to the pressure is the global chip shortage.

Despite the short-term issues, the outlook is slated to look bright.

Wall St mixed as bond yields rise

At the closing bell, the Dow Jones lost 0.1 per cent to 35,259, the S&P 500 added 0.3 per cent to 4,486 while the Nasdaq closed 0.8 per cent higher at 15,022.

The yield on the 10-year treasury note rose two basis points to 1.59 per cent, gold softened on a firmer greenback.

Across the S&P 500 sectors, consumer discretionary fared well, up 1.2 per cent followed by technology and communication services. Energy mildly rose at 0.1 per cent. Utilities was the worst performer, down almost 1.0 per cent followed by healthcare. It was a mixed performance on the index.

European markets falls on interest rate hike expectations

Across the Atlantic, European markets closed lower. Paris lost 0.8 per cent, Frankfurt fell 0.7 per cent and London’s FTSE closed 0.4 per cent lower as expectations of interest rate hikes increased.

Playtech soared over 56 per cent after Aussie Aristocrat’s offer to buy the gaming company. I’ll cover it in the ASX.

The mining giants and oil players fell side by side. BHP lost 0.1 per cent, Rio fell 0.7 per cent, BP dropped 0.6 per cent, Shell declined 0.3 per cent.

Asian markets mixed on China’s GDP growth

Asian markets closed mixed on China’s economic growth. Tokyo’s Nikkei lost 0.2 per cent, Hong Kong’s Hang Seng added 0.3 per cent while China’s Shanghai Composite closed 0.1 per cent lower.

ASX lifted higher by M&A deals

Yesterday, the Australian sharemarket closed 0.3 per cent higher at 7,381 for the third straight day, clinching onto its gains. The local bourse dodged a loss after digesting the news from Asia.

It was a mixed bag between best and worst performing stocks. Materials and banks lifted the index, up around the 1.0 per cent mark while technology lagged, down 1.2 per cent weighed down by Zip Co’s (ASX:Z1P) first quarter trading update.

The materials sector was propped up by Fortescue (ASX:FMG), BHP (ASX:BHP) and Rio Tinto (ASX:RIO) rising between 0.9 to almost 2 per cent.

Energy stocks rose in tangent with the rise in the oil price, its highest level in three years. Beach Energy (ASX:BPT) spiked 2.8 per cent, Santos (ASX:STO) rose 1.4 per cent, while Whitehaven Coal (ASX:WHC) jumped 2.2 per cent.

M&A took the spotlight as investors viewed the plate of new deals

Gas producer Senex Energy (ASX:SXY) received a $4.40 per share cash takeover bid from South Korean steelmaker Posco. The offer values Senex at nearly $815 million. Stocks surged 14.9 per cent to $4.39.

Wealth platform HUB24 (ASX:HUB) is set to acquire Class after entering into a scheme of arrangement with the accounting software provider. Class will receive 1 ordinary HUB24 share for every 11 ordinary Class shares plus $0.10 a share. The deal is valued at $386 million. Shares in Class catapulted 61 per cent to $2.92 while shares in Hub24 (ASX:HUB) closed 0.9 per cent lower at $32.77 yesterday.

Ramelius Resources (ASX:RMS) is slated to buy Apollo Consolidater (ASX:AOP) after making a $128 million takeover deal for the gold explorer. Shares in Ramelius dropped 2.5 per cent to $1.58, but Apollo Consolidated skyrocketed 14.3 per cent to $0.52.

Tasmanian whisky maker Lark Distilling (ASX:LRK) intends to raise $53 million to fund the $40 million acquisition of Pontville Distillery and Estate in Tasmania. Shares in Lark Distiling (ASX:LRK) are in a trading halt, last traded at $5.06.

Aristocrat Leisure (ASX:ALL) offered $3.9 billion (£2.1 billion) for U.K. online gambling software Playtech. The board collectively has recommended the bid to shareholders. Aristocrat are in a trading halt till Thursday.

The best-performing stock in the S&P/ASX 200 was Nickel Mines (ASX:NIC), closing 5.1 per cent higher at $1.03. It was followed by shares in Orocobre (ASX:ORE) and Lynas Rare Earths (ASX:LYC).

The worst-performing stock in the S&P/ASX 200 was Kogan.com (ASX:KGN), closing 4.6 per cent lower at $10.69. It was followed by shares in EML Payments (ASX:EML) and Domino Pizza Enterprises (ASX:DMP).

Despite the gain, the Aussie dollar dipped ahead of the RBA taking the spotlight today.

Local economic news

The Reserve Bank is set to release the minutes from the October policy meeting.

Investors aren’t expecting any surprises as the tune was pretty much the same from September.

RBA Governor Philip Lowe has been transparent about the central bank’s view around the Delta outbreak.

This includes acknowledging that Covid-19 had put a handbrake on the GDP. The GDP in the third quarter is expected to have “declined materially”.

Dr Lowe noted that inflation remains slightly below the central bank’s target of 2.0 per cent. This is a different story to what we are seeing in the Federal Reserve and the Bank of England. At this stage, the RBA is not under pressure to raise rates in an effort to put a lid on hot inflation.

Keep an eye out for the weekly consumer confidence from ANZ and Roy Morgan.

Stock watch

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

Since printing a high of $14.01 in November 2020, the bears have controlled the share price action over the past ten months. Positively, a zone of support located between $9.09 and $9.32 has resulted in the bulls to have stepped up to the plate in September, as marked by the orange rectangle and arrow. This foundation of support is made up of the 50 and 78.6 per cent Fibonacci retracement levels respectively.

Upward momentum has risen over the course of October, which is an early sign that an interim low is in place. Should this favourable scenario unfold, then further gains are likely over the broader horizon.

Shares in Worley (ASX:WOR) closed 1.6 per cent higher at $10.67 yesterday.

AGMs

A big day on the AGM front with 10 companies set to see their shareholders virtually. Keep an eye out for these stocks today.

Bapcor (ASX:BAP)
Brambles (ASX:BXB)
Charter Hall Social Infrastructure REIT (ASX:CQE)
Cochlear (ASX:COH)
Dexus (ASX:DXS)
EBOS Group (ASX:EBO)
Fletcher Building (ASX:FBU)
IDP Education (ASX:IEL)
Stockland Corporation (ASX:SGP)
Tabcorp Holdings (ASX:TAH)

CSL to unveil new products for R&D day

CSL (ASX:CSL) has their research and development day. The biotech giant is set to provide an update on its current developments. Investors are also anticipating an unveiling of a new product line they have been working on.

Quarterly Report

There are three companies slated to provide a quarterly update.

BHP Group (ASX:BHP)
Northern Star Resources (ASX:NST)
Stockland Corporation (ASX:SGP)

Ex-dividend

There are two companies trading ex-dividend today.

Katana Capital (ASX:KAT) is paying 0.5 cents fully franked
Sandon Capital Ltd (ASX:SNC) is paying 2.75 cents fully franked

Dividend-pay

There is a company set to pay eligible shareholders their dividends today.

Australian Unity Office Fund (ASX:AOF)

Commodities

Iron ore has lost 0.7 cent to US$124.32. Its futures point to a 1.4 per cent fall.

Gold lost $3.60 or 0.2 per cent to US$1765 an ounce, silver was down $0.11 or 0.5 per cent to US$23.24 an ounce.

Oil was up $0.02 or 0.02 per cent to US$82.30 a barrel.

Currencies

One Australian Dollar at 7:30 AM has weakened from yesterday, buying 74.11 US cents, 54.02 Pence Sterling, 84.77 Yen and 63.86 Euro cents.

Investor event

Please join us for our next online investor event on Tuesday 26 October with six companies presenting. From lithium explorers to marketing service providers. Make your way to fnn.com.au to reserve your free online spot.

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.