Wall St rises, People’s Bank of China boosts cash injection, Alumina is an Underperform: ASX to fall

Global stocks closed mixed ahead of the Fed Reserve virtual meeting at Jackson Hole. People’s Bank of China boosted short term cash to soothe worries on a bumpy recovery. Cyclicals led. 

The Australian sharemarket is set to dip after the momentum we have seen with the SPI futures pointing to a fall of 0.2 per cent.

S&P 500, Nasdaq record close

Wall St closed higher with the S&P 500 and Nasdaq closing at record highs again. Investor confidence continued after the U.S. F.D.A. gave full approval for adult use of the Covid-19 vaccine in the U.S. A step forward in the country’s effort to fight against the coronavirus. Investors also digested July figures for durable goods which came in better than expected.

Moderna has joined the ranks and submitted their paperwork to the F.D.A. for approval. The vaccine was only approved for emergency use until 6-months of data was available to meet the FDA’s approval for submission.

Adding to the momentum are manufacturers and material companies lifting. The House narrowly passed the US$3.5 trillion budget. Stocks helped by the reopening of the economy as well as some other cyclicals helped push the major indexes higher.

A six basis point rise in the US 10-year treasury bond yield to 1.35 per cent saw the banking sector rise. Financials led the rally on the S&P 500 adding 1.2 per cent followed by Energy, up 0.7 per cent then Industrials and Materials. Defensives dived into the red with Healthcare leading, marginally by 0.3 per cent followed by Real Estate and Consumer Staples. Technology just slipped 0.05 per cent.  

A six basis point rise in the US 10-year treasury bond yield to 1.35 per cent saw the banking sector rise. Financials led the rally on the S&P 500 adding 1.2 per cent followed by Energy, up 0.7 per cent then Industrials and Materials. Defensives dived into the red with Healthcare leading, marginally by 0.3 per cent, Real Estate and Consumer Staples. Technology just slipped 0.05 per cent.

At the closing bell, the Dow Jones added 0.1 per cent to 35,406, the S&P 500 gained 0.2 per cent to 4,496 while the Nasdaq closed 0.2 per cent higher at 15,042.

Delta Airlines set to hike health insurance charge for unvaccinated staff

Along the reopening line, Delta Airlines closed 1.9 per cent higher. The airline told their employees who are not vaccinated against Covid-19 by the start of November, that their health insurance premiums will increase by US$200 per month. Unvaccinated employees will also be subject to other restrictions such as wearing masks indoors and regular testing.

The move comes as the airline’s top executive said that it was necessary to put a surcharge. The average hospital stay would cost the airline US$40,000. Bear in mind, the healthcare system in the U.S. is different to how it operates here in Australia.
Looking ahead, we have the Jackson Hole meeting kicking off tomorrow where investors are waiting to see what the Fed Chairman Jerome Powell will say. Particularly what Mr Powell around the taper timeline around the asset purchases program, which has helped with the economic recovery.

European markets continues with caution

Across the Atlantic, European markets closed mixed. Paris gained 0.2 per cent, Frankfurt lost 0.3 per cent while London’s FTSE added 0.3 per cent to a record high thanks to travel and banking stocks. Miners rose with Rio Tinto adding 0.2 per cent while BHP rose 1.4 per cent.

Frankfurt underperformed after the August IFO business survey showed that optimism in the German economy slipped back more than expected. Meanwhile, German data showed that exports to China fell for the first time in over a year.
 
Asian markets mulls on China’s short term cash injection

Asian markets closed mixed. Tokyo’s Nikkei closed flat as Japan mulls on the idea of extending their state of emergency as Covid-19 cases climb. Hong Kong’s Hang Seng fell 0.1 per cent after posting its best day in a month and China’s Shanghai Composite closed 0.7 per cent higher.

The People’s Bank of China increased short term cash injection into the banking sector which lifted investor sentiment. According to sources at Bloomberg, Wall St and Chinese officials are looking to virtually meet for the first time this year to strengthen financial sector ties.
 
ASX 200 enjoys a 3rd day of gains

Yesterday, the Australian share market added 0.4 per cent at 7,532 enjoying its third straight day of gains. The gains came from a mixed bag of companies as earnings season continues.

Communication Services declined the worst, down 1.5 per cent followed by Utilities and property and Consumer Staples which weighed on the market. A 1.9 per cent rally in Technology shares notched the sector as the best performer while Materials, up over 1.4 per cent not far behind.

Corporate earnings saw large pendulum swings.

Logistics software provider Wisetech Global (ASX:WTC) rocketed 28.5 per cent following a rebound in container volumes. The debt free business excluding lease liabilities, grew 18 per cent than the year before to $507.5 million, while their net profit after tax surged 101 per cent at $105.8 million.

Seven Group Holdings (ASX:SVW) dived 7.6 per cent after providing disappointing guidance. Also news broke that billionaire Kerry Stokes handed down his retirement. After 11 years as the executive chairman, Mr Stokes will step down following an AGM in November. The conglomerate also revealed a 7 per cent lift to their full-year net profit to $504.6 million.

Tech darling Afterpay (ASX:APT) fell 1.1 per cent after the spending spree on staff and marketing efforts weighed on their full-year earnings. Their loss expanded aggressively to $159.4 million from $22.9 million loss the year before, that’s a 597 per cent tumble. However, their annual results were somewhat in line with their guidance around 3 weeks ago.

Wealth platform provider Hub24 (ASX:HUB) jumped 8.5 per cent after reporting a 34.4 per cent jump in revenue to $110 million and a 47 per cent spike in EBITDA to $58.6 million. Their net profit after tax came in at $9.8 million, up 20 per cent thanks to a 141 per cent lift in platform funds under administration to $41.4 billion.

Plumbing group Reece (ASX:REH) dropped 10.8 per cent a day after posting an uncertain FY22 outlook despite their net profit after tax coming in higher by 25 per cent at $286 million.

Local economic news

Today the Australian Bureau of Statistics is set to issue the June quarter figures on business investment along with the weekly payroll jobs and wage data from the fortnight ending 31 July.

Westpac group economists expect that business investment will rise by 0.8 per cent.

Broker moves

Macquarie rates Alumina (ASX:AWC) as underperform with a price target of $1.30. The miner’s first half results were a mixed bag, with earnings coming in at a miss by 6 per cent according to the broker. However, their interim dividend of US3.4 cents beat the broker’s forecast by 3 per cent.

The company also reported a 4 per cent beat on both revenue and underlying earnings, but aluminium production guidance has decreased by 4 per cent. Given mixed results, Macquarie has reduced earnings per share forecasts by 9 per cent for the year. The underperform rating is retained and the target price fell to $1.30 from $1.40.

Shares in Alumina (ASX:AWC) closed 0.6 per cent lower at $1.67.

Reporting season

There are over 20 companies reporting today. On the docket are a few names like A2 Milk (ASX:A2M), Blackmores (ASX:BKL), Flight Centre (ASX:FLT), Jumbo Interactive (ASX:JIN), Qantas (ASX:QAN) and Woolworths (ASX:WOW) penciled in today to release earnings.

Other companies joining are AP Eagers (ASX:APE), Appen (ASX:APX), Ardent Leisure (ASX:ALG), Atlas Arteria (ASX:ALX), Best & Less (ASX:BST), City Chic ASX:CCX), Cromwell (ASX:CMW), Endeavour Group (ASX:EDV), IOOF (ASX:IFL), Jumbo Interactive (ASX:JIN), Link (ASX:LNK), PolyNovo (ASX:PNV), Qube (ASX:QUB), Ramsay Healthcare (ASX:RHC), St Barbara (ASX:SBM), Tyro (ASX:TYR) and Whitehaven Coal (ASX:WHC)

Ex-Dividends:

AngloGold Ashanti (ASX:AGG) is paying 1.2873 cents unfranked.
Baby Bunting Group Ltd (ASX:BBN) is paying 8.3 cents fully franked.
Contact Energy Ltd (ASX:CEN) is paying 19.0399 cents unfranked.
Coles Group (ASX:COL) is paying 28 cents fully franked.
Fletcher Building (ASX:FBU) is paying 14.5423 cents unfranked.
JB Hi-Fi Limited (ASX:JBH) is paying 107 cents fully franked.
Microequities Asset Management Group Ltd (ASX:MAM) is paying 5 cents fully franked.
McGrath Ltd (ASX:MEA) is paying 1 cents fully franked.
Newcrest Mining (ASX:NCM) is paying 55.104 cents fully franked.
Netwealth Group (ASX:NWL) is paying 9.5 cents fully franked.
Platinum Asia Ltd (ASX:PAI) is paying 6 cents fully franked.
Pact Group Holdings Ltd (ASX:PGH) is paying 6 cents 65 per cent franked.
Platinum Capital Ltd (ASX:PMC) is paying 4 cents fully franked.
REA Group (ASX:REA) is paying 72 cents fully franked.
VGI Partners Global Investments (ASX:VG1) is paying 5.5 cents fully franked.

Commodities

Iron ore has gained 1.7 per cent to US$148.66 on the additional stimulus in China that I mentioned earlier. This has buoyed the steel demand outlook. Their futures are pointing to 2.6 per cent gain.

Precious metals have dropped. Gold slid US$17.50 or 0.97 per cent to US$1791 an ounce while silver shed $0.11 or 0.48 per cent to US$23.82 an ounce.

Oil rallied for a third session, up $0.82 or 1.21 per cent to US$68.36 a barrel.

Currencies

One Australian Dollar at 7:35 AM has strengthened from yesterday buying 72.77 US cents, 52.89 Pence Sterling, 80.04 Yen and 61.80 Euro cents.
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