Major indexes around the globe tumbled on Friday after a new iteration of Covid-19, omicron discovered in South Africa, spooked investors. The fear that it may have resistance against vaccines triggered a knee jerk sell down with energy, travel, and financial stocks hard hit while defensives were bruised shedding the least. Market participants sought refuge in gold as bond yields fell.
The Australian sharemarket is poised to slump for a second day with the SPI futures pointing to a fall of 1.4 per cent.
S&P 500 worst day since February
Wall St sank on Friday after South Africa raised the alarm on a new iteration of the coronavirus as it starts to spread across the globe. On a shortened trading day, Black Friday turned to a red one after financial markets thought they could take a breather. With a recent bout of central bank talk, expectations of an earlier rate hike amid inflation hitting all time highs, the new variant creeped up and took the bull by its horns.
The newly detected variant saw oil prices and government-bond yields dive, the knee jerk reaction saw traders pivot into safe haven assets and fixed interest whether the variant could reverse months of economic recovery, when they thought it was under control.
Anxiety among market participants mounted on the notion that the potential lockdowns would reduce fuel demand which saw energy lead the losses on the S&P 500, tumbling over 4.0 per cent. Financials crumbled 3.3 per cent amid the shoot down in government bond yields followed by industrials. Defensives attempted to hold up though came away bruised with healthcare shedding the least by 0.5 per cent.
Flight to safety launches stay-at-home stocks
Investors pivoted into stay-at-home and vaccine stocks among the few that closed higher. Moderna galloped 21 per cent, Pfizer jumped 6.0 per cent while Zoom got some love growing 5.7 per cent, after its huge sell-off last week. They warned of a slowdown in revenue which led to brokers slashing its price target. Analysts said that they expected lower growth as lockdown ends, well with this new variant, a different trajectory could be on the cards.
Travel stocks fail to take-off as Bitcoin crumbles
Flight stocks failed to take-off with United down 9.5 per cent while American and Delta Airlines closed over 8.0 per cent lower.
Retailers like Macy’s had the light taken off them, down over 5.0 per cent while tech giants weighed with Amazon closing 2.2 per cent lower.
The comeback of risk aversion even saw Bitcoin get a knock. The digital currency tumbled 8.4 per cent to US$54,179, the sell down went against the idea that it was a safe haven asset on Friday.
Buckle up, volatility here we come
Over the weekend, we found out that the new variant arrived in the country with two cases detected in Sydney. The mystery continues with early indications that it could be more transmissible than delta. The biggest concern is around its resistance to vaccines, and lockdowns when we all thought we were getting closer to a new normal.
Given the history with the virus, we will find out more in the coming weeks on what it all means. Don’t be surprised if we see investors flock to safety like gold while abandoning equities, and commodities. It is likely to get worse before it gets better so buckle up, and get ready for some volatility.
Figures around the globe
At the close, Wall St cratered. Dow Jones dropped 2.5 per cent to 34,899, the S&P 500 lost 2.3 per cent to 4,595 while the Nasdaq closed 2.2 per cent lower at 15,492.
The yield on the 10-year treasury note tumbled 16 basis points to 1.47 per cent as traders believe that central banks are likely to slow down the reduction of their support. Gold shined on a firmer greenback.
European markets tumbled. Paris plunged 4.8 per cent, Frankfurt dived 4.2 per cent, while London’s FTSE lost 3.6 per cent amid the UK government slamming borders shut as travel stocks got hit.
Mining and oil giants sank. BHP fell 2.4 per cent, Rio lost 2.7 per cent, BP dropped 7.9 per cent, Shell fell 5.6 per cent.
Asian markets slumped. Tokyo’s Nikkei fell 2.5 per cent, Hong Kong’s Hang Seng lost 2.7 per cent while China’s Shanghai Composite shed 0.6 per cent in a country that has maintained a zero Covid-19 strategy.
ASX tumbles as new Covid-19 strain spooks
On Friday, the Australian sharemarket closed 1.7 per cent lower at 7,279, its lowest close since 13 October. The index lost 1.6 per cent over the week, but 10.5 per cent higher for the year.
Energy stocks dragged the index by 4.6 per cent with Woodside Petroleum (ASX:WPL), and Oil Search (ASX:OSH) tumbling over 5.0 per cent, followed by information technology stocks, and financials amid a double digit fall in Aussie government bond yields. Consumer staples shed the least by 0.6 per cent.
Macquarie (ASX:MQG) sank 3.2 per cent, Westpac (ASX:WBC) lost 2.5 per cent, National Australia Bank (ASX:NAB) fell 2.4 per cent, Commonwealth Bank (ASX:CBA) dipped 1.0 per cent while ANZ (ASX:ANZ) shed 0.7 per cent despite ASIC revealing its plans to sue over home loan referrals.
Travel stocks felt the pain with stocks falling over 5.0 per cent. Flight Centre (ASX:FLT) sank 7.5 per cent, Qantas (ASX:QAN) dived 5.4 per cent, and Helloworld (ASX:HLO) closed 5.0 per cent lower.
Iron ore miners fell at a slower pace bucking the rally on hopes in China’s construction sector with Fortescue (ASX:FMG) down 3.9 per cent, Rio Tinto (ASX:RIO) lost 2.3 per cent, while BHP (ASX:BHP) closed 1.6 per cent lower.
There were some winners with St Barbara (ASX:SBM) taking home the best performer closing 2.2 per cent higher at $1.42, followed by shares in gold miner Evolution Mining (ASX:EVN), and Silver Lake Resources (ASX:SLR).
The worst-performer was Appen (ASX:APX) crashed 18.8 per cent lower at $9.45 amid a broker downgrade which I’ll cover in broker moves. It was followed by shares in Flight Centre Travel (ASX:FLT), and Corporate Travel Mgmt (ASX:CTD).
In other news, AMP (ASX:AMP) tumbled 4.3 per cent after the wealth manager unveiled a further $325 million of impairment charges to be taken in its 2021 full year results. The new charges followed an earlier-announced provision of $110 million to cover a number of asset impairments and write downs. The moves came after a review of its balance sheet and ahead of the planned spin-off of its AMP Capital private markets business.
What’s ahead in economic news
All eyes are on Wednesday when the Australian Bureau of Statistics unveil the September quarter GDP figures which are expected to show a decline reflecting the hit from the NSW, Victorian and ACT lockdowns.
It is expected to fall by 2.5 per cent but upon reading economic insights, the range is quite broad ranging from a decline of 2.5 to 4.5 per cent. Aside from the developing news we are likely to hear around the new Covid-19 strain, this report will also take a bit of attention and could add further moves to the local bourse.
Also on the docket are business indicators, consumer confidence, purchasing managers, lending, retail trade, and home value index.
Overseas, Eurozone November inflation data on Tuesday is expected to rise at 2.2 per year over year.
The US November jobs data on Friday is expected to show a 500,000 gain and unemployment rate to fall to 4.5 per cent. The participation rate will be key to watch to see if it moves higher.
The Organisation of Petroleum Exporting Countries are due to meet this week and it was expected that they will add another 400,000 barrels a day in January as they gradually lift output to pre pandemic levels.
For today, the Bureau of Statistics is set to release the business indicators figures for the September quarter.
Macquarie downgraded Appen (ASX:APX) to an underperform from neutral with a price target of $9.50. Macquarie observed a trend where some big-tech names are looking to directly crowdsource for annotation. This meant that companies are less likely to use Appen’s data services. The broker revised revenue estimates over the financial year 2021 to 2023 to be 7.0 to 10.0 per cent below consensus forecasts. The target price is lowered to $9.50 from $11.80. Shares in Appen (ASX:APX) closed 18.8 per cent lower at $9.45 as mentioned earlier.
Citi rates Suncorp (ASX:SUN) as a buy with a price target of $12.80. The broker believes the strongest favourable impact from the pandemic for the insurer is from lower claims during the lockdowns in NSW and Victoria. This followed the group flagging $60 million of net covid benefits in the first quarter of this year. Citi feels the current share price represents an attractive entry point for investors and keeps its buy rating. Shares in Suncorp (ASX:SUN) closed 2.5 per cent lower at $10.80.
There are eight companies trading ex-dividend today
Gryphon Capital (ASX:GCI) is paying 0.74 cents unfranked
KKR Credit Income Fund (ASX:KKC) is paying 1 cent unfranked
Kathmandu Hold Ltd (ASX:KMD) is paying 2.475 cents fully franked
Liberty Financial Group (ASX:LFG) is paying 21 cents unfranked
Morphic Ethical Equities Fund Ltd (ASX:MEC) is paying 3 cents fully franked
Perpetual Credit Income Trust (ASX:PCI) is paying 0.306 cents unfranked
Qualitas Real Estate Income Fund (ASX:QRI) is paying 0.6706 cents unfranked
360 Capital Enhanced Income Fund (ASX:TCF) is paying 3 cents unfranked
There is one company set to pay eligible shareholders today. Acorn Capital Investment Fund (ASX:ACQ)
There are 19 companies set to meet with shareholders today including Mesoblast, Pact Groupand Mesoblast.
Anax Metals (ASX:ANX)
Australian Gold And Copper (ASX:AGC)
Avira Resources (ASX:AVW)
Booktopia Group (ASX:BKG)
COG Financial Services (ASX:COG)
Global Oil & Gas (ASX:GLV)
Lynas Rare Earths (ASX:LYC)
Pact Group Holdings (ASX:PGH)
Raiden Resources (ASX:RDN)
Rey Resources (ASX:REY)
Santana Minerals (ASX:SMI)
Silver City Minerals (ASX:SCI)
Twenty Seven Co. (ASX:TSC)
Vanadium Resources (ASX:VR8)
Vintage Energy (ASX:VEN)
VRX Silica (ASX:VRX)
Annual & interim reports
Freedom Foods Group (ASX:FNP)
Select Harvests (ASX:SHV)
9 Spokes International (ASX:9SP)
FinTech Chain (ASX:FTC)
Halo Food (ASX:HLF)
Macarthur Minerals (ASX:MIO)
Merchant House International (ASX:MHI)
TTA Holdings (ASX:TTA)
Viagold Rare Earth Resources (ASX:VIA)
There is one company set to make their debut on the ASX. Keep an eye out for Alloggio Group (ASX:ALO) after raising $16.5 million. They provide short term rental accommodation with a portfolio of over 879 holiday properties and 13 mid-market hotels.
Iron ore has lost 5.5 per cent to US$96.67. Its futures point to a 0.3 per cent gain.
Gold gained $1.20 or 0.1 per cent to US$1,788 an ounce, silver was down $0.40 or 1.7 per cent to US$23.14 an ounce.
Oil plummeted $10.24 or 13.1 per cent to US$68.15 a barrel.
One Australian Dollar at 7.35 AM weakened from Friday, buying 71.49 US cents, 53.64 Pence Sterling, 81.33 Yen and 63.25 Euro cents.