Wall St mixed, Tech shares fall, Oil panic buying in U.K., Brambles rated as buy: ASX to fall

Market Reports

by Melissa Darmawan

A mixed market across the globe as investors pivoted to cyclicals and value stocks, leaving tech and growth players behind. Energy stocks continued to power up as oil prices surged on fuel demand. Treasury bulls outpaced last week's performance with financials as beneficiaries of its moves. Citi rated Brambles (ASX:BXB) as a buy.

The Australian sharemarket is set to retreat, with the SPI futures pointing to a fall of 0.6 per cent.

Tech shares fall as value stocks rise

A mixed market was seen on Wall St as surging treasury yields created tailwinds for bank and valued stocks, leaving tech shares behind. Investors are optimistic on the economic recovery while they watch the moves in Washington DC, as lawmakers are working to pass the legislation to fund the government by Thursday to avert a shutdown.

The tech-heavy Nasdaq and the S&P 500, which has a weight to tech shares fell, as bond bulls came out to play, impacting the richly valued tech names which have benefited many during the pandemic.

Fed members Kaplan & Rosengren step down on trading scrutiny

In other news, you might have remembered that the first day of the two day Fed meeting started with a conduct review of two of their members. Today, Robert Kaplan and Eric Rosengren, their more hawkish members are set to retire after increased scrutiny on their trading activity during the pandemic.

In economic news, new U.S. orders for durable goods rose 1.8 per cent in August, above expectations, as business investment and consumer spending accelerated.

Energy concerns on a colder winter in the northern hemisphere

Global energy concerns could see demand for oil rise if Europe and the U.S. have a cold winter. If so, pressure will mount on OPEC+ to accelerate the pace of oil output, after their steep cut at the start of the pandemic, when travel came to a standstill.

The cartel plans to increase production by 400,000 barrels per day, each month but with the recent moves, they may need to pick up the pace. We are starting to see a panic buying frenzy in Europe, which I will cover shortly which shows jitters are growing.

Wall St mixed, bond bulls run as gold firms

At the close, the Dow Jones gained 0.2 per cent to 34,869, the S&P 500 lost 0.3 per cent to 4,443 while the Nasdaq closed 0.5 per cent lower at 14,970.

The yield on the 10-year treasury note rose at a slower pace by 2 basis points at 1.49 per cent.

Across the S&P 500 sectors, it was a mixed performance. Energy surged 3.4 per cent followed by financials, gained 1.3 per cent followed by materials. Healthcare fell 1.4 per cent, followed by real estate at 1.2 per cent and technology closing 1 per cent lower.

European markets gains on election moves & energy surge

Across the Atlantic, European markets closed higher as the Germans voted in their new counsellor.

Paris gained 0.2 per cent, Frankfurt added 0.3 per cent and London’s FTSE closed 0.2 per cent higher lifted by energy and banking shares.

Looking briefly at the Frankfurt, private equity firm EQT, this name might sound familiar as they were the company that had their eyes to acquire wealth and platform provider IRESS (ASX:IRE) after raising their bid three times. Zooplus on the Dax, an online pet retailer is next in line as EQT pivot from the finance space to the pet space, their shares leapt over 4 per cent on their $5.4 billion offer (€3.36b).

Turning our attention to the oil players on the FTSE, they surged with Shell rocketing higher by 4.8 per cent while BP jumped 2.9 per cent.

Their performance followed news that the government is to suspend competition laws to allow fuel companies to focus on deliveries following panic buying at British petrol stations. It followed days of long queues at the pumps after fears of disruption to the fuel supply.

Miners closed mixed with Rio Tinto declined further by 0.6 per cent while BHP bounced 0.5 per cent higher.

Bank stocks enjoyed higher bond yields with Virgin Money UK adding 3.8 per cent, HSBC gained 2.8 per cent, and Barclays closing 2.2 per cent higher.

Asian markets mixed on energy shortage holding back Apple & Tesla

Asian markets closed mixed as coal shortages and environmental caps led regional governments to direct factories to save energy. Apple and Tesla suppliers' production  were held back, lowering investor sentiment, and dragging tech shares on Wall St lower.

Tokyo’s Nikkei closed almost flat, down 0.03 per cent, Hong Kong’s Hang Seng gained 0.1 per cent and China’s Shanghai Composite lost 0.8 per cent.

ASX 200 on track to snap 11-month winning streak

Yesterday, the Australian sharemarket closed 0.6 per cent higher at 7,384 after a chirpy start to the week with energy and bank stocks leading the way.

With only three trading days left in the month, the local bourse is on track to snap their 11-month winning streak. Anything can change between now and then, and if so, we would need to see some solid gains to make up over a 2 per cent loss.

Across the sectors, there were four losers to seven winners. Starting with the best performers, energy again rose 1.8 per cent followed by financials, up 1.5 per cent and consumer discretionary. While healthcare fell 1 per cent, followed by technology, down 0.7 per cent, then utilities and consumer staples.

The best-performing stock in the ASX 200 was Redbubble (ASX:RBL) closing 7.6 per cent higher at $4.69, this stock has been quite jumpy as of late. It was followed by shares in Flight Centre Travel Group (ASX:FLT) and Webjet (ASX:WEB), taking off on the coattails of Qantas bringing forward the reopening date for travel between NSW and Victoria by almost a month.

The worst-performing stock was Nextdc (ASX:NXT) closing 3.6 per cent lower at $13.09 on no major news, followed by shares in Megaport (ASX:MP1) and Whitehaven Coal (ASX:WHC).

In some company news, there is a takeover tug-of-war for the company behind Priceline owner and Soul Pattinson, API Pharmaceuticals (ASX:API). Now, the owner of Bunnings and Officeworks, Wesfarmers (ASX:WES) put in a $760 million bid, but Sigma Healthcare (ASX:SIG), who are behind the Amcal and Guardian brands, made a $773.5 million bid. Shares in API surged 3 per cent, while Wesfarmers rose 0.2 per cent and Sigma gained 1.7 per cent.

Synlait Milk (ASX:SM1) leapt over 7 per cent despite posting a $28.5 million loss, their biggest annual tumble ever, as demand sunk due to the Covid-19 disruption and problems with the China market.

Local economic news

Today the weekly consumer sentiment from ANZ-Roy Morgan is due along with the August retail trade figures from the Australian Bureau of Statistics.

A recap of the restrictions around the nation for August. We saw NSW tighten, in Victoria we saw a reopening and then back into lockdown, along with ACT, and Queensland which then eased from week three.

Westpac group economists expect a fall of 1.5 per cent after a loss of 2.7 per cent in July, extending a losing streak of a fall of 1.8 per cent in June as seen in the purple circle, with the lockdowns weighing on retail spending.

Company news

Australian oil and gas producer Beach Energy (ASX:BPT) has inked a five-year deal to supply liquefied natural gas (LNG) to BP Singapore. A move which is set to turn the energy producer into the nation’s latest LNG exporter.

BP Singapore has committed to buy all 3.75 million tonnes of Beach’s expected LNG volumes from the project under a five year agreement. The $2.81 billion producer said that the first tranche is slated to be shipped in the second half of 2023 from its Waitsia onshore gas project in Western Australia.

The announcement comes ahead of their investor day today and a month after their annual results. The Kerry Stokes-backed company slashed its production guidance following its steep downgrade of its Western Flank fields in the Cooper basin.

Shares in Beach Energy (ASX:BPT) closed 4.2 per cent higher at $1.23 yesterday.

Broker moves

Citi rates supply chain logistics company Brambles (ASX:BXB) as a buy with a price target of $13.35.

The broker was disappointed by a large transformational investment program and profit guidance which raised more uncertainties than answers. The former is thought to have slowed the underlying momentum emerging in the business. However, the broker sees attractive growth due to potential returns from automation and digitisation.

The broker retains its buy rating and lowers its target price to $13.35 from $13.58. Shares in Brambles (ASX:BXB) closed 0.5 per cent lower at $10.88 yesterday.

IPOs

There are three companies set to make their debut today on the ASX. Keep an eye out for Dalaroo Metals (ASX:DAL), Koonenberry Gold (ASX:KNB), and Li-S Energy (ASX:LIS) which is a lithium-sulphur battery technology developer.

Ex-dividend

Kirkland Lake Gold (ASX:KLA) is paying 21.25 cents unfranked.
Perpetual Equity Ltd (ASX:PIC) is paying 2.8 cents fully franked.

Dividend-pay

There are eight companies slated to pay dividends to eligible shareholders including Altium (ASX:ALU), Evolution Mining (ASX:EVN), Eureka Group (ASX:EGH), Amcor (ASX:AMC), Regis Resources (ASX:RRL), Engenco (ASX:EGN), Coles Group (ASX:COL), and Mader (ASX:MAD).

Commodities

Iron ore has gained 7.2 cent to US$119.31. Its futures are pointing to 0.7 per cent fall.

Gold has added $0.30 or 0.02 per cent to US$1752 an ounce while silver has gained $0.27 or 1.2 per cent to US$22.69 an ounce.

Oil was up $1.47 or almost 2 per cent to US$75.45 a barrel, near three year highs.

Currencies

One Australian Dollar at 7:20 AM has strengthened from yesterday, buying 72.86 US cents, 53.19 Pence Sterling, 80.89 Yen and 62.31 Euro cents.

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