Wall St mixed, China bans crypto: Premier is an outperform: ASX to open flat


Mixed market across the globe as major indexes attempt to stride back to record highs after a week of several central banks set to taper their emergency stimulus program. Evergrande woes have faded for now however, investors are looking closely on Beijing's next moves after banning all cryptocurrency transactions. M&A's took the spotlight last week on the local bourse. Why Macquarie rated Premier Investments (ASX:PMV) as an outperform.

The Australian sharemarket is set to open flat, to be precise, the SPI futures are pointing to a gain of 0.03 per cent.

Dow, S&P 500 edges higher for the week on Evergrande woes

Wall St closed mixed on Friday, the Dow and the S&P 500 ended in the black, higher on the week while the Nasdaq ticked fractionally lower after a choppy performance.

The soft session followed a jammed pack week after several central banks kept rates unchanged, while Nike’s profit forecast is set to fall on supply chain issues, sending the stock tumbling over 6 per cent, further adding to inflationary pressures.

Compounded by the moves from China, with property developer Evergrande and their unusual silence around their Thursday payment, while their central bank declared a ban on all crypto transactions. Amid pursuing their carbon goals, tech shares closed lower as they tighten the screws on tokens with a digital Yuan on the horizon.

Global chip shortage & debt ceiling takes focus in Washington

Meanwhile in Washington DC, the Congress pitched a program to the likes of Apple, and Ford Motors for the giants to reveal inventory numbers on their supply chains, in a bid to get a grip on the global chip shortage. The chip crisis has sent prices surging for consumers in industries from auto vehicles to electronics.

Adding to the pressure, the clock is ticking for Congress to reach a deal to raise the debt ceiling, before the government runs out of money to pay its bills which could weigh on risk appetite this week.

Government treasury yields climbed after several central banks flagged that they’re set to taper their emergency stimulus measures.

Elsewhere, investors saw U.S. new home sales rise in August for the second straight month, coming in slightly higher than expectations, with supply being near 13-year highs. The news followed that previously owned homes sales fell in August. Let’s see how the labour market, wage growth, and interest rates will influence this number over time.

Mixed market on Wall St, bond yields rose

At the closing bell, the Dow Jones added 0.1 per cent at 34,798, the S&P 500 gained 0.2 per cent to 4,455 and the Nasdaq fractionally closed 0.03 per cent lower at 15,048.

The yield on the 10-year treasury note added 2 basis points to 1.45 per cent, gold remained steady while greenback bounced slightly higher. Over the week, the yield on the 10-year government bond rose by 9 points.

Across the S&P 500 sectors, cyclical and technology shares rose while rate sensitive sectors ended lower. Energy stocks added 0.8 per cent, communication services rose 0.7 per cent followed by financials, up 0.5 per cent. In the loser’s corner, real estate fell 1.2 per cent followed by utilities, healthcare, and materials.

European markets fall on Puma, Adidas & Evergrande concerns

Across the Atlantic, European markets closed lower despite ECB President Christine Lagarde saying direct exposure to Evergrande was “limited” as Puma and Adidas tumbled after Nike cut its earnings forecast due to supply chain issues, as mentioned earlier.

Paris dropped almost 1 per cent, Frankfurt closed 0.7 per cent lower as business confidence dipped fractionally lower as the election got underway. London’s FTSE fell 0.4 per cent.

In U.K. trade, oil stocks BP rose 0.5 per cent and Shell added 0.1 per cent. Miners BHP fell 1.3 per cent while Rio Tinto tumbled 4 per cent.

Asian markets mixed moves on silence by property giant’s payment

Asian markets closed mixed after investors heard radio silence on Evergrande’s coupon payment. The People’s Bank of China pumped a further $25.5 billion (CNY 120 billion) into the financial system.

Tokyo’s Nikkei jumped 2.1 per cent after playing catch up from their second public holiday last week, Hong Kong’s Hang Seng fell 1.3 per cent, and China’s Shanghai Composite closed 0.8 per cent lower as Evergrande jitters dampened any bullish moves.

ASX 200 falls for 3rd week in a row

On Friday, the Australian share market tripped 0.4 per cent lower at 7,343, notching a fall for the third straight week dragged lower by mining and property stocks. The local bourse recovered from a 15 month low on Monday after the Evergrande saga hit the decks and on clarity on the Fed’s next moves.

China property makes up 5% global GDP

To put this Evergrande situation into a global perspective, real estate and property make up 29 per cent of China’s GDP, of which China contributes 18 per cent of global GDP, therefore the Chinese real estate sector comprises over 5 per cent of global GDP. So if the PBoC takes the stance that they don’t want to support the indebted property giants, that exposes the global economy to some risk and could explain why we saw the market meltdown on Monday last week.

Financials recovered for the second straight day, adding 0.7 per cent after taking a dive on Evergrande fears, while energy was the best performer, up 1.4 per cent. Consumer staples also advanced. All the other sectors closed in the red.

The best-performing stock in the ASX 200 was Computershare (ASX:CPU) closing 5.7 per cent higher at $17.90, followed by shares in Premier Investments (ASX:PMV), and Washington H. Soul Pattinson (ASX:SOL).

The worst-performing stock was Ramelius Resources (ASX:RMS) closing 6.1 per cent lower at $1.31 followed by shares in Centuria Industrial REIT (ASX:CIP) and Perseus Mining (ASX:PRU).

Over the week, the worst performing stock was Nickel Mines (ASX:NIC), down 12.8 per cent on reports that Indonesian officials are considering charging a levy on nickel products while the best performing stock was AusNet (ASX:AST) climbed 28.8 per cent after receiving two takeover offers while

Wrap up of M&A

A big week on the mergers and acquisitions front which I wanted to touch on aside from the news from AusNet.

There was also Sandfire (ASX:SFR) set to acquire Minas De Aguas Tenidas (MATSA) for $2.57 billion (US$1.86 billion) positioning the company to be one of the largest copper producers.

Transurban (ASX:TCL) raised $2.9 billion through their institutional placement to acquire the balance of WestConnex.

Westpac (ASX:WBC) and Kina Securities (ASX:KSL) confirmed the termination of the transaction to sell Westpac pacific businesses.

Healthia (ASX:HLA) is set to raise $60 million to acquire $88 million worth of physio clinics, around 64 of them.

Charter Hall (ASX:CHC) is set to acquire ALE Property through its listed Charter Hall Long WALE REIT and with Hostplus, which already jointly owns pubs with Charter Hall, in a spending spree of $1.7 billion.

Voice data company Dubber (ASX:DUB) offered $6.6 million to buy artificial intelligence company Notiv.

Local & international economic news

This week we walk into the final quarter of the year with retail trade, and job openings expected to fall, while home prices are forecasted to lift. Consumer confidence is slated for tomorrow amid climbing vaccination rates and easing of restrictions in sight.

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen are set to testify at a Senate hearing on the CARES Act, and lawmakers will try to pass a funding plan to avoid a government shutdown in October.

The Evergrande saga will continue to linger to find out if the property giant made the bond interest payment.

The online two days ECB Forum on central banking will take some attention to more clues on the monetary policy outlook, while market participants will monitor the outcome from the German federal election.

Finally, global manufacturing PMIs for September are slated for Friday to give us a glimpse on the economic recovery.

Broker moves

Macquarie rates Premier Investments (ASX:PMV) as an outperform with a price target of $33.

The apparel conglomerate reported an 88 per cent year-on-year increase in earnings, driven by increased sales and gross margins on a "favourable" cost of doing business.
Given rent and other concessions in the financial year 2021, the broker sees margins normalising from here.

While Smiggle offshore is benefiting from "back to school" in the financial year 2022, the lockdowns in Australia and New Zealand are weighing. However, the broker supports the company's decision to yet again invest in inventory ahead of anticipated pent-up demand ahead of a “cracker Christmas”.

The outperform rating is retained and the target price rises to $33 from $31. Shares in Premier Investments (ASX:PMV) closed 5.5 per cent higher at $29.15 on Friday.

IPOs

There is one company going ex dividend today. Pacific Edge (ASX:PEB), they specialise in technology to diagnose cancer.

Ex-dividend

Gold Road Resources (ASX:GOR) is paying 0.5 cents fully franked.
Imdex (ASX:IMD) is paying 1.8 cents fully franked.

Dividend-pay

This week we have an avalanche of companies slated to pay dividends to eligible shareholders this week. This slide just shows a few of them.

It kicks off today with Prime Media (ASX:PRT) set to pay with Coles (ASX:COL) tomorrow, Commonwealth Bank (ASX:CBA) on Wednesday, with over 25 companies on Thursday including Fortescue Metals (ASX:FMG) and Origin Energy (ASX:ORG) on Friday.

Commodities

Iron ore has added 2.4 per cent to US$111.33. Its futures point to a 3.4 per cent gain.

Gold added $1.90 or 0.1 per cent to US$1752 an ounce while silver fell $0.25 or 1.1 per cent US$22.43 an ounce.

Oil has added $0.68 or 0.9 per cent to US$73.98 a barrel.

Currencies

One Australian Dollar at 7:20 AM has weakened from Friday buying 72.65 US cents , 53.18 Pence Sterling, 80.36 Yen and 62.03 Euro cents.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.