Wall St rises, Cochlear's rating gets upgraded: ASX to rise

[Text only report, see you tomorrow!]

Mixed market across the globe. Investors saw hope on Merck’s Covid-19 pill. European markets sunk on supply chain woes. Aussie shares capped off September in a sea of red as investors abandoned mining stocks. Find out why Citi upgraded Cochlear (ASX:COH) to a neutral from a sell.

The Australian sharemarket is poised to rise with the SPI futures pointing to a gain of 0.7 per cent.

U.S stocks rally for a fast start on Covid-pill

In September, financial markets suffered deep losses on inflation fears as energy prices bucked the trend. The hawkish turn from the Fed amid a surge in treasury yields saw technology stocks come under pressure.

However, the decline pivoted on news of U.S. drugmaker Merck’s Covid-19 pill. A game changer that will poise 2022 to be a buoyant year. Investors' confidence got a boost on an antiviral pill which claims to halve the chances of hospitalisation and cut the risk of death. This was enough for U.S. stocks to claw back some its steep losses.

Consumers spend as inflation stays elevated

On the economic front, U.S. consumer spending rose 0.8 per cent in August as per the Commerce Department. Personal income grew by 0.2 per cent on wage hikes and federal government child tax credits, offset by declines in pandemic related unemployment payments.

However, the ISM manufacturing data showed the constraints of the supply chain. New orders remained fruitful and suggests that once disruptions abate, manufacturing activity will pick up.

Meanwhile, the Fed’s preferred core inflation figures accelerated mildly in August, at an annual rate of 4.3 per cent compared with 4.2 per cent the month before, according to the Bureau of Economic Analysis. This shows that pricing pressures will continue to be in focus for some time.

Oil bulls run as material & industrial stocks likely in focus

On the backdrop, the tug of war in Washington DC distracts investors, while China’s “common prosperity” crackdown and Evergrande saga will linger. Materials and industrial stocks could get a liking once the infrastructure bill is finalized. Rising bond yields will be favoured by financials while tech stocks are likely to have a bumpy ride. As the economy reopens, cyclicals are in favour. Energy stocks are poised to rise on the energy crunch in Asia and Europe, ahead of the OPEC+ meeting this week.

Wall St rise, bond yield steady as gold shines

At the close, the Dow Jones added 1.4 per cent at 34,326, the S&P 500 gained 1.2 per cent to 4,357 and the Nasdaq closed 0.8 per cent higher at 14,567. Over the week the Dow fell 1.4 per cent, the S&P 500 lost 2.2 per cent and the Nasdaq sunk 3.2 per cent.

The yield on the 10-year treasury note closed lower at 1.46 per cent while gold rose on a weaker greenback. Over the week, the yield on the 10-year advanced by 1 point.

Across the S&P 500 sectors, the gains were almost across the board with utilities as the outlier, closing flat or to be precise, fractionally lower at 0.03 per cent. Energy surged 3.3 per cent as the best performer, followed by communication services at 1.7 per cent and materials, adding 1.6 per cent.

European swims in red on supply-chain constraints

Across the Atlantic, European markets bucked the trend closing lower as Eurozone factory activity slowed on supply-chain constraints.

Paris closed flat, down 0.04 per cent, Frankfurt lost 0.7 per cent and London’s FTSE fell 0.8 per cent. Over the week, the Paris CAC notched a weekly loss of 2.2 per cent, Frankfurt lost 2.7 per cent while the FTSE shed 0.8 per cent.

Miners and oil players fell. BHP dropped 2.4 per cent while Rio Tinto closed 2.1 per cent lower. BP shed 0.7 per cent while Shell fractionally closed 0.03 per cent lower.

Asian markets nervous on interest rate ripple

Asian markets closed lower on interest rate worries in stateside.

Tokyo’s Nikkei fell 2.3 per cent, Hong Kong’s Hang Seng lost 0.4 per cent and China’s Shanghai Composite was closed on Friday.

Over the week, the Hang Seng shed 0.4 per cent, the Nikkei fell 4.9 per cent, after gaining 4.8 per cent in September, after a rally on the back of President Suga’s imminent resignation, and the Shanghai composite lost 1.9 per cent.

ASX 200 slumps for its 4th week

On Friday, the Australian sharemarket closed 2 per cent lower at 7,186 after a short-lived surge on Thursday. The local bourse slumped for its fourth week in a row as worries crept back into investors’ minds ahead of the upcoming AGMs. Over the week, it lost 2.2 per cent or 157 points.

Financials was the worst performer as investors became hesitant around mortgage growth, tumbled 2.8 per cent followed by real estate at 2.4 per cent and consumer discretionary at 2.3 per cent. Utilities shed the least, down 0.05 per cent followed by technology closing 1 per cent lower.

Travel stocks took-off on Friday on news that the international borders are slated to reopen in November.

The clean energy focus in China saw iron ore miners as the worst performers in September. Ironically, the energy shortage in China has pushed the dirtier fuels like coal to record highs with Whitehaven Coal (ASX:WHC), closing 4 per cent higher at $3.36 on Friday as the best performing stock in the ASX 200. It was followed by shares in Silver Lake Resources (ASX:SLR) and AMP (ASX:AMP).

The worst-performing stock in the S&P/ASX 200 was Virgin Money UK (ASX:VUK), closing 7.4 per cent lower at $3.74, followed by shares in Mineral Resources (ASX:MIN), and Domino Pizza Enterprises (ASX:DMP).

Local economic news

The focus this week is the Reserve Bank, set to meet with expectations that monetary policy is to remain unchanged.

Today is a public holiday in NSW, ACT, Queensland, and South Australia and no economic news scheduled.

Broker moves

Citi upgrades Cochlear (ASX:COH) to a neutral from a sell with a price target of $220. The upgrade follows its share price movement, down 15 per cent marking a 13 per cent under performance when compared to the quarterly performance of the ASX200. Shares in Cochlear (ASX:COH) closed 0.7 per cent lower at $218.82 on Friday.

AGMs

There are six companies slated to have their AGM’s this week.

Australian Foundation Investment Company (ASX:AFI)
Mirrabooka Investments (ASX:MIR)
Pointsbet Holdings (ASX:PBH)
Meridian Energy (ASX:MEZ)
Djerriwarrh Investments (ASX:DJW)
AMCIL (ASX:AMH)

Ex-dividend

One company set to trade ex-dividend today.

BSA Limited (ASX:BSA) is paying 0.5 cents fully franked.

Dividend-pay

Two companies pencilled in to pay eligible shareholders dividends.

Fleetwood (ASX:FWD)
Ramelius Resources (ASX:RMS)

Commodities

Iron ore fell 2.9 per cent to $US115.79 a tonne. Its futures are pointing to a gain of 5.4 per cent.

Gold added $1.40 or 0.1 per cent to US$1758 an ounce, while silver gained $0.49 or 2.2 per cent US$22.54 an ounce.

Oil has added $0.85 or 1.1 per cent to US$75.88 a barrel on news of Merck’s covid-pill.

Let’s see what OPEC+ says in their meeting, and if they will look to hike supplies above 400,000 barrels per day. If so, the oil price might eye the US$80 to $85 range.

Currencies

One Australian dollar is firmer from Friday buying 72.60 US cents, 53.52 Pence Sterling, 80.58 Yen and 62.57 Euro cents.