US stocks have rallied to record highs after the Fed Reserve unveiled its tapering plans. European markets are mixed as oil prices fall. The local bourse had its best session in the month as materials charged ahead. Credit Suisse boosts Goodman Group's target price.The Australian sharemarket is set to rise with the SPI futures pointing to a gain of 0.5 per cent.
U.S stocks hit fresh record highsWall St hit fresh record highs after the Federal Reserve unveiled its plans to start tapering its bond purchases program mid this month, keeping rates unchanged.
The central bank will start to remove stimulus through the reduction of its asset purchases program, a move that was expected by market participants. The Fed unanimously voted to keep interest rates unchanged, and it’s not expected to raise borrowing costs till at least next year.
The Fed plans to reduce asset purchases by US$15 billion this month, and US$15 billion each month thereafter. Their wording on inflation did slightly change, however they could be reading inflation a little differently.
In the September statement the Fed said that “inflation is elevated, largely reflecting transitory factors”. While in today’s statement, the Fed said that the “factors (that) are expected to be transitory”.
Given this, transitory now means pricing pressures are likely to ease during the second or third quarter.
For now, it means there is still continued support for the economy and that tends to be good news for the sharemarket.
The tapering of the program could finish by June if the Fed continues at this pace. If so, it means that they could announce a rate hike in July next year. Before the decision today, two rate hikes in 2022 had already been priced into the market, and it appears to stay the same after the conference today.
The Fed also flagged that they are prepared to adjust their monetary policy as needed.
The greenback weakened as market participants thought the Fed was going to shift its view on inflation.
Crude prices didn’t react to the Fed’s taper announcement, but fell on reports that a date has been set to resume talks on the Iran nuclear deal.
Overall the reaction to the news didn’t bring much volatility as most of it was priced in, if anything, stocks enjoyed it.
Wall St gains as bond yields jumpsAt the closing bell, the Dow Jones added 0.3 per cent to 36,158, the S&P 500 gained 0.7 per cent to 4,661 while the Nasdaq closed over 1.0 per cent higher at 15,812.
Across the S&P 500 there were three losers and the rest were winners. Energy was the worst performer, down 0.8 per cent followed by utilities and industrials. Consumer discretionary fared well surged 1.8 per cent followed by materials, up 1.1 per cent and consumer staples
The yield on the 10-year treasury note rose five basis points to 1.60 per cent after the Fed’s announcement, while gold fell on a weaker greenback.
European markets mixed on fall in oil & metal pricesAcross the Atlantic, European markets closed mixed as oil and metal prices fell.
Paris added 0.3 per cent, Frankfurt closed flat and London’s FTSE lost 0.4 per cent as oil giants weighed.
Mining giants rose while oil heavyweights fell. BHP gained 0.8 per cent, Rio eked out a gain of 0.01 per cent while BP lost 2.9 per cent and Shell fell 1.8 per cent as oil prices fell.
Asian markets eyes Hang Seng’s longest losing streakAsian markets closed lower after the government warned households to stockpile essentials, as tightening restrictions loom, while market participants await if Evergrande pays two payments on time this Friday.
Tokyo’s Nikkei was closed for a public holiday, Hong Kong’s Hang Seng lost 0.3 per cent its longest losing streak in nearly four months, while China’s Shanghai Composite closed 0.2 per cent lower.
ASX 200 notches best session for the monthYesterday, the Australian sharemarket rebounded from its tumble this week closing 0.9 per cent higher at 7,393. The local bourse notched its best session this month with gains across the board with information technology as the only outlier. Materials had a strong session adding 1.4 per cent as the best performer as major banks rose to the occasion.
Fortescue Metals
(ASX:FMG) jumped 3.1 per cent while Rio Tinto
(ASX:RIO) added 1.1 per cent as iron ore prices mildly recovered from the declines we have seen.
Shares in BHP
(ASX:BHP) rose 1.2 per cent on talks with Andrew Forrest who controls Fortescue Metals’ Wyloo Metals over its potential support for BHP's bid for the Canadian copper and nickel project.
Commonwealth Bank
(ASX:CBA) is set to offer crypto investing through its banking app. The nation’s largest bank inked a partnership with two parties. One is with US-based exchange Gemini, and the other is with Chainalysis, who works with law enforcement in the US on compliance and monitoring of these transactions. Shares jumped 1.2 per cent on the news.
AMP had a buoyant session after the wealth manager is set to complete its exit from the life insurance business. AMP plans to divest its 19.1 per cent stake in Resolution Life Australasia to the UK-based Resolution Life parent company for $525 million.
Lithium miners took the spotlight as the price of the electric vehicle battery element danced near levels almost five times higher from the start of this year, thanks to tight supply and accelerating demand amid the news with BHP. There appears to be a rush in the battery elements as the demand for batteries in electric vehicles grows.
The best-performing stock in the S&P/ASX 200 was AMP
(ASX:AMP) closing 9.3 per cent higher at $1.18, followed by shares in lithium miners Orocobre
(ASX:ORE) and Pilbara Minerals
(ASX:PLS).
The worst-performing stock in the S&P/ASX 200 was Tyro Payments
(ASX:TYR) closing 15 per cent lower at $3.45 after its AGM. It was followed by shares in Redbubble
(ASX:RBL) and Uniti Group
(ASX:UWL).
Local economic newsThe Australian Bureau of Statistics is set to issue the September figures on international trade.
The nation’s trade account has been in surplus for 44 straight months since 2018. The surplus started to grow to $73.0 billion in 2020 thanks to rising commodity prices. In August, the monthly surplus hit a new record high of $15.1 billion.
For September, Westpac group economists expect a pull back to a forecast of $12.4 billion. The reason for this is due to the decline in the iron ore price, which is around 25 per cent lower to US$120 from US$160 for the quarter. Looking at the range from other economists, numbers start from as low as $11.0 billion to $17.5 billion.
Now looking at the forecast for export and imports. Export earnings are expected to fall around 5.0 per cent to $2.5 billion. The thought around this is that the drop in iron ore prices is set to offset the spike in higher coal prices and gains in liquified natural gas export earnings and a pullback in both gold and rural goods prices.
Imports are forecasted to lift by around 0.5 per cent at $200 million due to higher oil prices and some resilience in volumes despite the lockdowns.
Elsewhere, retail sales volumes for the September quarter are also due by the Bureau of Statistics and it’s expected to fall by 4.5 per cent in volumes. This is due to sales volume being hit by lockdowns in NSW, Victoria and the ACT.
Broker movesCredit Suisse rates Goodman Group
(ASX:GMG) as an outperform with a boosted price target of $25.01. The company has upgraded financial year 2022 guidance to earnings growth in excess of 15 per cent. This is driven by higher development activity and better margins. The broker believes the industrial property group’s actual result could yield even more strength in earnings.
Development work keeps growing and is now at $12.7 billion on a higher forecast yield on cost of 6.8 per cent. The outperform rating is maintained though raised the target to $25.01 from $24.04.
Shares in Goodman Group
(ASX:GMG) closed 0.2 per cent higher at $23.53 yesterday.
Ex-dividendThere is one company trading ex-dividend today. Medusa Mining
(ASX:MML) is paying 2 cents unfranked.
Dividend-payThere is one company set to pay eligible shareholders dividends today. Arena REIT No 1
(ASX:ARF).
AGMsThere are nine companies set to meet with shareholders today.
Ashley Services
(ASX:ASH)Aurelia Metals
(ASX:AMI)Credit Corp
(ASX:CCP)Domain Group
(ASX:DHG)Downer EDI
(ASX:DOW)Inghams
(ASX:ING)Myer
(ASX:MYR)NIB
(ASX:NHF)Zip Co
(ASX:Z1P)Annual & interim reportsAura Energy
(ASX:AEE) and Pushpay
(ASX:PPH) are set to release an update today.
IPOThere is one company set to make their debut on the ASX today. Keep an eye out for Vulcan Steel
(ASX:VSL), a company that focuses on steel production.
CommoditiesIron ore has added 3.4 per cent to US$99.70. Its futures point to a 2.4 per cent fall.
Gold lost $16.70 or 0.9 per cent to US$1773 an ounce, silver was up $0.05 or 0.2 per cent to US$23.56 an ounce.
Oil was down $3.92 or 4.7 per cent to US$79.99 a barrel ahead of the OPEC+ meeting and resumed talks as mentioned earlier.
CurrenciesOne Australian Dollar at 7:30 AM has strengthened from yesterday buying 74.51 US cents, 54.45 Pence Sterling, 84.95 Yen and 64.18 Euro cents.
