Wall St falls, Oil prices climb on supply crunch, QBE rated as overweight: ASX to open lower

Market Reports

by Melissa Darmawan

Mixed market across the globe as energy stocks rallied while inflation remains a concern. Bank of England took a hawkish turn which led to investors betting on an interest rate hike. The local bourse was supported by commodity stocks as tech drags. QBE rated as an overweight.

The Australian sharemarket is set to open lower with the SPI futures pointing to fall of 0.4 per cent.

U.S. stocks retreat on oil rally

U.S. stocks closed in the red after failing to recover from their session highs, with a number of factors weighing on investor’s sentiment.

Today is Columbus Day or Indigenous People’s Day with many offices including the U.S. Treasury department are closed. Bond markets were closed but it did not stop global bond yields climbing.

These bond yields have been closely linked to the recent sell-off, especially in the tech sector as the rising yield erodes the value of future earnings of these growth stocks. The Nasdaq didn’t perform as badly as the Dow this session, however the three major indexes closed at session lows.

Energy prices climbed due to the supply shortages around the world. Oil prices have hit seven year highs, the rally in oil prices have added to inflation concerns ahead of third quarter earnings. Crude oil prices are rising higher than other commodities.

Meanwhile, Goldman Sachs cut its outlook for the U.S. economy for this year and next. Economists said that they expect growth at 5.6 per cent this year, and just 4.0 per cent for next year. They attributed the cut to slower consumer spending.

The week has started on a weaker note after a miss on the September jobs report. Though the third quarter earnings season, set to kickstart on Wednesday, might give investors a stronger footing on how optimistic the growth outlook will be.

Wall St falls as bond markets closed

At the closing bell, the Dow Jones lost 0.7 per cent to 34,496, the S&P 500 fell 0.7 per cent to 4,361 while the Nasdaq closed 0.6 per cent lower at 14,486.

Across the S&P 500, the losses were almost across the board except for two sectors. Real estate added 0.2 per cent while materials edged higher, 0.02 per cent to be exact. Communication services fared the worst, down 1.4 per cent followed by utilities, and financials.

Merck applies for FDA approval while Apple files for appeal

Merck, the pharma giant applied for emergency use authorisation with the FDA for its anti-covid pill. The company fell 0.9 per cent along with the broader market. The early trial data showed that Merck’s anti-viral treatment cuts hospitalizations and deaths by half. The company already started producing the pill and agreed to supply 1.7 million to the U.S. for US$1.2 billion if given the green light. However, we saw when the company did make their initial announcement, the stock did soar and was one of the main contributors as to why the Dow Jones lifted.

Apple closed flat as the tech titan helped to limit losses after they filed for an appeal for a ruling in its trial against Epic Games. Now Apple mainly won the case except for one count. This count is around steering consumers to making a choice that would be in favour for the company directing the move. The tech giant appealed the ruling that they would allow developers to add in-app links to other sites. Apple’s view is that if they make a change to their app store rules, it would upset the balance between developers and customers and lead to a detrimental outcome for the customer and the company.

European markets almost higher lifted by commodity stocks

Across the Atlantic, European markets closed mixed. Paris added 0.2 per cent, Frankfurt fell 0.1 per cent and London’s FTSE closed 0.7 per cent higher.

Rio Tinto and BHP rose over 3 per cent as iron ore and coking coal rose on supply fears. Meanwhile base metals prices jumped on concerns about the price surge of energy and raw materials. BP added 2 per cent while Shell 1.5 per cent tracked oil prices higher.

British banks also helped the FTSE as HSBC, Lloyds and NatWest all gained 2 per cent. It was underpinned by a hawkish turn from Bank of England officials, as traders bet on a November interest rate rise.

Online fashion giant ASOS plummeted 14.7 per cent after its CEO is set to step down. The online clothing store warned that higher costs and supply chain issues could drop profits by as much as 40 per cent.

Asian markets almost higher as tech shares jump

Asian markets closed mixed. Tokyo’s Nikkei added 1.6 per cent as a weakening Yen lifted price appetite for exports. Hong Kong’s Hang Seng gained almost 2 per cent while China’s Shanghai Composite was so close, edging lower by 0.01 per cent lower and why it’s a mixed market.

Boosting the Hang Seng was Alibaba catapulting 7.9 per cent and Tencent adding 3.0 per cent. China’s State Administration for Market Regulation slapped food delivery giant Meituan with a $725.1 million (3.44 billion yuan) fine for its conduct. They pushed exclusive corporate deals which came with punitive measures if acting otherwise. Despite the fine, it was lower than expected and appeared to give consumers confidence for another penalty for Alibaba and their anti-monopoly moves.

ASX 200 mixed as tech offsets gains in energy

Yesterday, the Australian sharemarket closed 0.3 per cent lower at 7,300 after a mixed day of trade. The local bourse recovered from an intraday low of 1 per cent before picking up pace supported by energy and material stocks in an effort to help limit the losses by tech.

The energy sector extended its rally on further gains for crude oil as Oil Search (ASX:OSH) jumped 2 per cent to $4.60, Beach Energy (ASX:BPT) gained 1.7 per cent to $1.47, Santos (ASX:STO) rose 1.5 per cent to $7.49. Woodside Petroleum (ASX:WPL) gained 0.4 per cent at $25.46.

The iron ore price jumped after China’s week-long holiday which supported miners. Rio Tinto (ASX:RIO) jumped 1.9 per cent while BHP (ASX:BHP) closed 0.9 per cent higher. Investors also showed some excitement over Fortescue Metals (ASX:FMG) after they unveiled their plans for a green energy generation centre in Queensland. They surged 5.3 per cent.

Banks modestly rose with ANZ (ASX:ANZ) leading out of the major four adding 0.5 per cent.

Across the sectors, outside of energy, materials, and financials as the top performers, consumer staples also rose. Technology was the worst performer, sank 2.7 per cent dragged lower by Afterpay (ASX:APT). All the other sectors closed lower.

The best-performing stock in the S&P/ASX 200 was Whitehaven Coal (ASX:WHC) jumped 6.2 per cent higher at $3.43, followed by shares in Fortescue Metals (ASX:FMG) and Champion Iron (ASX:CIA).

The worst-performing stock in the S&P/ASX 200 was Star Entertainment Group (ASX:SGR) plummeted 22.9 per cent lower at $3.30. It was followed by shares in Platinum Asset Management (ASX:PTM) as investors mulled on the news of their outflows, and SkyCity Entertainment Group (ASX:SKC).

In company news, Star Entertainment (ASX:SGR) got a bit of attention following media allegations that the gaming company had failed to report certain transactions, particularly around their high-roller and VIP business to the regulator. In their initial response, Star said it considered a number of assertions in the media reports to be misleading, and that they would address all allegations with the various regulators. This also saw Casino operator SkyCity’s dive as one of the worst performers of the session, as previously mentioned.

The board of fuel retailer Z Energy (ASX:ZEL) unanimously approved a takeover by Ampol (ASX:ALD) through a scheme of arrangement. Shares soared 2.8 per cent.

Local economic news

Today the weekly consumer confidence report from ANZ and Roy Morgan is due. Meanwhile, the National Australia Bank has scheduled their September business survey report.

Broker moves

Morgan Stanley rates QBE (ASX:QBE) as overweight with a price target of $14. The broker expects a modest lift in stock prices by insurance players after a win in the second test case on business interruption, that is the prevention of access. Shares in QBE (ASX:QBE) closed 2.4 per cent lower at $11.94 yesterday.

Ex-dividend

Reece (ASX:REH) is paying 12 cents fully franked

Dividend-pay

Chorus (ASX:CNU)
Imdex (ASX:IMD)

IPOs

There is one company slated to make their debut on the ASX today. Keep an eye out for Minerals 260 (ASX:MI6).

AGMs

There are four AGMs pencilled in today to meet shareholders online held by iSignthis (ASX:ISX), CSL (ASX:CSL), Aurizon Holdings (ASX:AZJ), and Telstra (ASX:TLS).

Commodities

Iron ore has gained 9.4 cent to US$135.03 on expectations that China’s steelmakers is set to l resume operations after hitting production cuts. Its futures point to a 0.97 per cent gain.

Gold has lost $3.50 or 0.2 per cent to US$1754 an ounce, silver was down $0.11 or 0.5 per cent to US$22.59 an ounce.

Oil was up $1.08 or 1.4 per cent to US$80.43 a barrel.

Currencies

One Australian Dollar at 7:20 AM has strengthened from yesterday buying 73.47 US cents 54.07, Pence Sterling, 83.28 Yen and 63.61 Euro cents. 

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