Wall St falls after hawkish comments, Amcor, Alumina, Bluescope on watch today: ASX to rise

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Wall St closed mixed as investors took a breather following last week's rally. Ukraine President Zelenskyy refused to surrender Mariupol, sending oil prices soaring. US bond yields spiked after Fed Chair Powell’s hawkish comments. Pendal (ASX:PDL) coverage for Stockwatch

Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.

An optimistic outlook today with the Australian sharemarket set to rally.

Powell’s hawkish tone weigh on stocks

US stocks came off its best two weeks since November 2020 after Fed Chair Jerome Powell said that the central bank may look at more aggressive rate hikes to combat persistent and elevated inflation.

Mr Powell said at the National Association for Business Economics annual conference, that the US central bank may raise interest rates faster than expected, explaining that “inflation is much too high” and adding that the Fed would take the necessary steps to bring it down.

Powell explained that the Fed would be open to taking a more aggressive stance and raising rates by half a percentage point at multiple meetings this year. A move that hasn't taken place since May of 2000 in the midst of the .com bubble. This comes after the US central bank raised interest rates by 25 basis points for the first time in three years as a way to combat soaring inflation, with market participants expecting the Fed to raise rates six more times this year.

“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so….And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

Meanwhile, investors continue to monitor the month-old war between Russia and Ukraine as officials from both sides met for peace talks with no results so far. Ukrainian president Zelenskyy noted that if negotiations fail a third world war is likely to rise. Russian troops gave Ukraine an ultimatum to surrender the city of Mariupol in order for civilians to get out safely which Ukraine denied.

Oil prices are on the rise again as several countries in the European Union said that they may join the US and other Western nations in enacting sanctions on Russian oil. The calls follow an attack on oil facilities in Saudi Arabia over the weekend.

Meanwhile, President Biden is set to meet several EU leaders later this week to discuss the international response to the war as the nation and the world grapples with higher oil and gas prices.

Nickel limit increases to 15%

Elsewhere in the metals space, the London Metal Exchange (LME) widened its trading band to allow prices to fall up to 15 per cent, a move which traders believe the market might find willing buyers.

This is their fourth adjustment in the last week after the LME installed a trading range of 5 per cent last Wednesday, widened it to 8 per cent on Thursday, and then 12 per cent for Friday. Meanwhile, aluminium prices surged after the federal government put a ban on alumina exports to Russia.

The choppy move comes as a week of central bankers are set to talk with reality hitting in with traders that the era of quantitative tightening is here. Concerns are mounting as seen in the bond market as uncertainty still looms.

Figures around the globe

At the closing bell, the Dow Jones lost 0.6 per cent to 34,553, the S&P 500 dipped 0.04 per cent to 4,461 while the Nasdaq fell 0.4 per cent at 13,838.

Across the S&P 500 sectors, energy stocks back in favour amid the soaring underlying commodity price, followed by materials amid the rally in the metals, utilities, industrials, and consumer staples. The rest closed lower with consumer discretionary leading the losses, down 0.8 per cent.

There was a huge sell off in the bond market with the yield on the 10-year treasury note up 16 points to 2.30 per cent, while the 2-year rose by 17 points to near 2.12 per cent, gold rose on a firmer greenback. It’s interesting to see the rate of change and what the bond market is trying to weigh up. Economic slowdown, inflation soaring, future value of growth stocks, so many cross currents.

Across the Atlantic, European markets closed mixed. Paris and Frankfurt both fell 0.6 per cent while London’s FTSE gained 0.5 per cent with the help of the miners and energy players. Rio gained 3.3 per cent, BP jumped over 4 per cent and Shell gained 4.1 per cent.

Other miners in UK trade such as Glencore rose 3.8 per cent and Anglo American surged 6.1 per cent as aluminium prices surged after Australia banned alumina exports to Russia.

Asian markets closed mixed. Tokyo’s Nikkei was closed, Hong Kong’s Hang Seng lost 0.9 per cent while China’s Shanghai Composite added 0.1 per cent amid leaving its loan prime rates unchanged. China Eastern Airlines fell 6.5 per cent after a crash of one of its planes with 132 people aboard.

ASX wrap-up

Yesterday, the Australian sharemarket closed 0.2 per cent lower at 7,279 with tech shares as the best performer, followed by utilities, energy, and consumer discretionary. Industrials led the losses while the rest closed lower.

Afterpay owner Block (ASX:SQ2) surged 9.2 per cent to $184.40, EML Payments (ASX:EML) soared 6.1 per cent to $2.61, Tyro Payments (ASX:TYR) added 2.3 per cent to $1.76, Altium (ASX:ALT) rose 2 per cent to $33.36, while Xero (ASX:XRO) closed 2.4 per cent higher at $101.49.

CSL (ASX:CSL) fell 1.5 per cent to $266.97, largest single drag on the local bourse with fellow healthcare names such as Sonic Healthcare (ASX:SHC), Resmed (ASX:RMD), and Mesoblast (ASX:MSB) also falling in tandem.

Iron ore and base metals miners advanced along with energy players, providing a positive offset with Fortescue Metals Group (ASX:FMG) leading the circle, up 0.8 per cent to $18.71, while Santos (ASX:STO) rose 1.1 per cent to $7.62.

Amid news around Australia's help to ship coal to Ukraine, Whitehaven Coal (ASX:WHC) rose 0.9 per cent at $4.02, recovering from session lows amid iron ore topping, $US150 per tonne.

Magellan Financial (ASX:MFG) sank 4.3 per cent to $15.14 after co-founder Hamish Douglass stepped down from the board following his medical leave of absence.

Qube Holdings (ASX:QUB) climbed 1.3 per cent to $3.06 after the logistics operator launched a share buyback of up to $400 million.

AGL Energy (ASX:AGL) added 0.8 per cent to $7.27 after the giant received the green light from the state government to build a 500 megawatt battery on a coal-fired plant in NSW, three times the size of Tesla’s battery in South Australia.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 1.1 per cent gain.

Local economic news

ANZ and Roy Morgan are set to release its weekly consumer confidence figures which are currently sitting at October 2020 lows. Investor sentiment is weighed down by the war, the pandemic, record petrol prices and the outlook for interest rate rises.

Stockwatch

Our weekly stock to watch this week is Pendal Group (ASX:PDL). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Pendal as a buy. From a technical angle, Pendal ticks a number of boxes.

Since printing a high of $8.96 in September 2021, a sharp 54.81 per cent decline in share price followed. The duration of the fall took five and a half months.

Positively, support was respected at the 78.6 per cent Fibonacci retracement of $4.28 as shown by the horizontal green line and orange up arrow on the chart. In addition, bullish divergence is evident. This occurs when the share price makes a new low (as shown by the downward sloping blue arrow) and the MFI (money-flow) index ascends higher (refer to the upward sloping blue arrow). These technical signals combined could mark a weakening of the long-term downtrend.

Though, it is still early days, should upward traction gather pace over the months ahead, then an eventual move towards a band of resistance seen between $5.74 and $5.92 could potentially be on the cards. This is made up of previous resistance and the 38.2 per cent Fibonacci retracement as highlighted by the light-blue rectangle.

Shares in Pendal Group (ASX:PDL) closed 1.9 per cent lower at $4.69.



What to keep an eye out for

After a choppy session, keep an eye out as resources stocks leading the local bourse, after tech’s heavy lifting yesterday.

With companies continuing to exit from business dealings with Russia, keep an eye out for Amcor (ASX:AMC) amid news that the have suspended new projects and investments in Russia, Bluescope (ASX:BSL) after Moody’s optimistic rating and Alumina (ASX:AWC) following the federal government's ban on aluminium and it’s potential upside to the metal price.
 
IPO

There is one company set to make its debut on the ASX today. Keep an eye out for company Norfolk Metals (ASX:NFL) after raising $5.5 million amount at 20 cents per share.

Ex-dividend

There are six companies set to trade without the rights to its dividend.

Atlas Arteria (ASX:ALX) is paying 20.5 cents unfranked
Brisbane Broncos (ASX:BBL) is paying 1 cent fully franked
Blackmores (ASX:BKL) is paying 63 cents fully franked
Clime Investment (ASX:CIW) is paying 1 cent fully franked
Emeco Holdings (ASX:EHL) is paying 1.25 cents fully franked
Kelly Partners Group (ASX:KPG) is paying 0.363 cents fully franked

Dividend-pay

There are four companies set to pay eligible shareholders today

Altium (ASX:ALU)
Challenger (ASX:CGF)
Infomedia (ASX:IFM)
REA Group (ASX:REA)

Commodities

Iron ore has lost 2.3 per cent to US$147.90. Its futures point to a 0.7 per cent fall.

Gold has gained $6.10 or 0.3 per cent to US$1940 an ounce. Silver is up $0.32 or 1.3 per cent to US$25.41 an ounce.

Oil has gained $7.83 or 7.5 per cent to US$112.53 a barrel.

Currencies

One Australian Dollar at 7:20 AM has weakened from yesterday, buying 73.98 US cents (Mon: 74.10 US cents), 56.21 Pence Sterling, 88.39 Yen and 67.15 Euro cents.

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.