Wall St falls, Oil price surges, Newscorp's target price gets a boost: ASX poised to lift

Market Reports

by Melissa Darmawan


Wall St takes a breather after investors digested producer inflation figures. The ASX slipped for its 2nd day. Deep dive on NAB’s results (ASX:NAB) & what investors didn’t like. Macquarie boosted Newscorp’s (ASX:NWS) target price while REA Group, which is 61% owned by Newcorp, got a rating downgrade by UBS.

The Australian sharemarket is poised to rise with the SPI futures pointing to a 0.3 per cent lift.

Wall St pulls back from record highs

US stocks have taken a breather after days of resetting record highs as investors digested new inflation figures. The yield on treasuries rose on delay in the rate hike by the Fed as uncertainty on the central bank board looms.

Market participants are bracing themselves for consumer price index figures which could show prices rising to record levels since 1990 as earnings season starts to wind down. In the near future, the debt ceiling debate will capture some attention after the last minute extension which created a bit of jitters and volatility for the S&P 500. December is not too far away.

The biggest drag on the Dow was Visa falling 3.2 per cent, while on the Nasdaq, Tesla’s decline accelerated.

Tesla shares fell 12 per cent as CEO Elon Musk sought counsel from his followers around selling 10 per cent of his stock. Current and past board members including Musk’s brother sold hundreds of millions of shares prior to the poll. Despite the sell-off, brokers still see potential for growth for the EV-car maker.

Shares in PayPal sank 10.5 per cent, a company that was also co-founded by Elon Musk a couple of decades ago had its worst performance since March last year after reporting a beat in earnings but missed the mark on revenue, lowering guidance as the effect of supply chain constraints weighed on its customers.

Producer prices match record gain in September, crude oil price surges

Meanwhile, producer prices rose 8.6 per cent from October last year in line with expectations. The producer price index matched the annual record gain posted in September. Most of the increases were for final demand goods like petrol. A sign that inflation could persist if supply chain issues continue.

Elsewhere, crude oil prices are lifting as market participants await the next moves from the Biden Administration to tap into their strategic reserves. The Energy Information Administration forecasted a hike in gas prices till the end of the year with a fall in the West Texas Intermediate price to fall under US$78 a barrel in December. The energy group said that they see oil supplies exceed demand throughout next year which is quite a bullish outlook. If the Biden Administration was holding back for a reason to tap into their reserves, they may need to think twice about this.

Wall St retreats, bond yields fall

At the closing bell, the Dow Jones lost 0.3 per cent to 36,320, the S&P 500 fell 0.4 per cent to 4,685 while the Nasdaq closed 0.6 per cent lower at 15,887.

Across the S&P 500 sectors, consumer discretionary was the biggest loser, down 1.4 per cent followed by financials, down 0.6 per cent and information technology. Utilities, materials, and consumer staples added over 0.4 per cent each.

The yield on the 10-year treasury note fell 5 basis points to 1.44 per cent as investors pile back into bonds, as gold rose, against a stronger greenback.

European markets fall ahead of inflation data in the U.S.

Across the Atlantic, European markets closed lower. Paris fell 0.1 per cent, Frankfurt lost 0.04 per cent and London’s FTSE closed 0.4 per cent lower.

Oil and mining giants fell. BHP lost 1.5 per cent, Rio fell 0.8 per cent, BP dipped 0.2 per cent, Shell declined 0.5 per cent.

Asian markets mixed as Softbank soars

Asian markets closed mixed. Tokyo’s Nikkei fell 0.8 per cent on disappointing earnings with tech stocks bucking the trend, with SoftBank soaring over 10 per cent. The company unveiled a $11.9 billion (1 trillion yen) stock buyback.

Hong Kong’s Hang Seng edged higher by 0.2 per cent as healthcare stocks surged while China’s Shanghai Composite also added 0.2 per cent.

ASX 200 slips for 2nd day

Yesterday the Australian sharemarket closed 0.2 per cent lower at 7,432 dragged down by banks. The local bourse fell for its second straight day closing at session lows after what you can see was a choppy session. The moves lacked its strong conviction ahead of the inflation and job figures.

The gains and losses were almost close to offsetting each other with information technology as the best performer followed by materials, and healthcare. Financials, communications sector, and energy fell 1.0 per cent in tandem.

NAB moves jump then falls

Shares in National Australia Bank (ASX:NAB) fell 0.8 per cent after almost doubling its final dividend to 67 cents per share. The nation’s third largest lender posted a rebound in profit in the year ending September 30, as cash earnings grew 76.8 per cent to $6.56 billion.

The bank said that loans and advances grew by 5.9 per cent thanks to a strong performance in the home loans space. The bank had two divisions contributing large cash earnings, the personal banking division posting a 14.4 per cent lift and across the Tasman, its New Zealand arm saw a 18.7 per cent rise.

Though what appeared to be a great outcome, the share price fell after investors focused on the bank’s weaker points and its outlook.

NAB’s biggest division, business and private banking showed a marginal improvement of 0.3 per cent in earnings. This was due to lower credit impairment charges which were offset by higher operating expenses. While, their institutional banking posted a loss in cash earnings of 14.8 per cent.

The overall profit got a boost after a $217 million reversal in Covid-19 related provisions was factored in, as loan losses were lower than anticipated.

Looking forward, NAB is looking to finalize the deal to acquire Citibank’s consumer business and sale of BNZ Life next year. Amid this, the bank sees competition in the home loans space impacting on growth with net interest margin to stay on the softer side due to the low rate environment as support from the RBA is scaled back.

The best-performing stock in the S&P/ASX 200 was Chalice Mining (ASX:CHN) closing 28.5 per cent higher at $8.70 after the miner said that they discovered the largest nickel sulphide in over 20 years. It was followed by shares in Lynas Rare Earths (ASX:LYC) and PointsBet Holdings (ASX:PBH).

The worst-performing stock in the S&P/ASX 200 was Inghams Group (ASX:ING), closing 4.5 per cent lower at $3.39. It was followed by shares in CSR (ASX:CSR) and AGL Energy (ASX:AGL).

Local economic news

Melbourne Institute and Westpac are set to release the November confidence report. In October we saw a pullback in sentiment as lockdown weighed in Sydney and Melbourne. Despite this, rising vaccination rates have boosted consumer optimism amid an easing in restrictions and return to a ‘new normal’.

Looking at earlier lockdowns, consumer sentiment rose after which supports the notion that a bounce in consumer spending paves the way for a positive economic recovery. However, last week we did see the Reserve Bank shift gears around the yield curve control program which might flag concerns of an earlier rate hike which could have rattled a few consumers.

Elsewhere, the Australian Bureau of Statistics has slated the monthly business turnover report as well as the weekly payroll jobs and wages report.

Broker moves

Macquarie rates Newscorp (ASX:NWS) as outperform with a boosted price target of $46. The media giant’s first quarter results were ahead of forecasts. The risk and compliance growth rate in Factiva and Newswires was better than expected at 26 per cent and consistent with Macquarie's belief that consensus is underestimating the industry. The company has flagged that licensing deals with Google and Meta (Facebook) are likely to increase, based on the number of products that are being launched. Target price is raised to $46 from $45. Shares in Newscorp (ASX:NWS) closed 2.0 per cent lower at $32.37 yesterday.

Looking at REA Group where Newscorp owns a 61 per cent stake.

UBS downgraded REA Group (ASX:REA) to sell from neutral with a lifted price target of $170 after an "outstanding" first quarter result. While the broker upgraded its financial year 2022 and financial year 2023 EPS forecasts by 8.0 per cent and 9.0 per cent respectively, the rating gets downgraded based on valuation. While the group recorded 16 per cent listing volume growth in October, the analyst feels volumes will remain volatile for the remainder of financial year 2022. Share in REA Group (ASX:REA) closed 1.5 per cent lower at $168.97

Ex-dividend

There are three companies set to trade ex-dividend.

NAOS Ex-50 Opportunities Company (ASX:NAC) is paying 1.6 cents fully franked
NAOS Small Cap Opportunities Company (ASX:NSC) is paying 1.25 cents fully franked
ResMed Inc (ASX:RMD) is paying 3.9148 cents unfranked

Dividend-pay

There are three companies set to pay eligible shareholders today.

Centrepoint Alliance (ASX:CAF)
Elanor Commercial Property Fund (ASX:ECF)
Red Hill Iron (ASX:RHI)

AGMs

There are nine companies set to meet with shareholders today.

Beach Energy (ASX:BPT)
Clinuvel Pharmaceuticals (ASX:CUV)
Coles Group (ASX:COL)
Contact Energy (ASX:CEN)
E&P Financial Group (ASX:EP1)
Newcrest Mining (ASX:NCM)
Shaver Shop Group (ASX:SSG)
Sims Metal Management (ASX:SGM)
Vicinity Centres (ASX:VCX)

Report

Ausnet Services (ASX:AST) is due to release an annual report today.

IPOs

There are two companies set to make their debut on the ASX today. Keep an eye out for Dundas Minerals (ASX:DUN) and Green Technology Metals (ASX:GT1).

Commodities

Iron ore has lost 1.5 per cent to US$92.45. Its futures point to a 6.1 per cent fall.

Gold gained $6.20 or 0.3 per cent to US$1834 an ounce, silver was down $0.16 or 0.7 per cent to US$24.38 an ounce.

Oil was up $2.44 or almost 3.0 per cent to US$84.37 a barrel.

Currencies

The Aussie dollar has taken a hit after yesterday now under the 74 cents mark. which was anticipated amid the NAB business confidence results yesterday. Let’s see if it can rebound today ahead when we receive the consumer confidence results.

One Australian Dollar at 8:10 AM has weakened from yesterday, buying 73.79 US cents (yesterday’s price 74.26), 54.43 Pence Sterling, 83.33 Yen and 63.65 Euro cents

Investor event

The last event for the year is coming up on Tuesday 16 of November with four companies presenting from financial services, wireless technology to pharmaceutical companies. Make your way to fnn.com.au to reserve your free online spot.

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