Wall St lower, Oil falls below US$80, Telstra's rating gets reviewed: ASX to open flat

Market Reports

by Melissa Darmawan

Mixed closed on the major indexes around the globe on inflation concerns. Asian markets felt the tech drag while the local bourse closed lower for the second day. Telstra's rating is an outperform.

After falling for two straight days, the Australian sharemarket is set to open flat with the SPI futures down 0.03 per cent.

U.S stocks pulls back as inflation concerns weigh

Wall St closed at almost session lows as inflation remains front of mind of investors as investors digested strong corporate earnings. Yesterday’s retail earnings weren’t enough of a catalyst to excite the major indexes to rally.

Retail giant Target fell 4.6 per cent after reporting earnings, and predicting that holiday sales are looking to surpass their own expectations for the next quarter. Sales were up 13 per cent in the third quarter helped by back to school shopping, and people getting a headstart to buy holiday gifts. The retail giant saw a 60 per cent jump in same day services, kerbside pick up and home delivery.

A note worth mentioning is that the retail giant is looking to absorb the higher costs seen in this rather high inflationary landscape rather than passing it onto consumers. A move to build loyalty and relationships while taking a short term squeeze to margins. An interesting point.

While Lowes reported strong numbers with the home retailer raising its forecast. They now anticipate US$95 billion in sales. The company has benefitted from a strong housing market and Americans continuing to buy items despite rising prices on homes and raw materials.

Also an interesting move we are seeing is that both Lowes and Home Depot are both focusing on providing professional services to help give homes that uplift while Americans go out and about, it appears that these home retailers are looking at how to be agile amid the reopening play.

Housing starts fall in October

Meanwhile, in fresh economic news, housing starts last month for its second month in a row, missing economists expectations. Building new homes fell 0.7 per cent but a tad higher compared to the same time last year in October as per the Commerce Department. Demand for new homes do remain strong, with building permits up 4.0 per cent from September, but construction is lagging amid the supply chain constraints.

Tesla rises while Rivian reverses

Tesla CEO Elon Musk sold another US$973 million in stocks to cover a tax bill, despite this move, the shares continued to rally for its second day and are now approaching the US$1,100 mark. Over the week, Elon Musk has sold almost US$9 billion of shares, halfway through his pledge to sell 10 per cent stake in Tesla.

Looking at rival EV-maker Rivian, the rally has taken a breather after charging ahead since its debut this time last week. It rose for five straight days but not today. The company has surpassed the market cap of competitors like Ford and GM. One thing to note is that this company has $0 in sales, started deliveries last month mainly to employees, so a lot of this price action is based on confidence and speculation.

Biden taps China to consider releasing oil reserves

Elsewhere, the price of oil fell below US$80 amid the concerted effort between two largest economies to release crude reserves. The Biden administration tapped on China’s shoulder to consider releasing oil reserves. Despite a bullish report from the Energy Information Administration, this doesn’t appear to be enough to help minimize losses in the price of crude. Reserves were down 2.1 million barrels from a week earlier countered the The American Petroleum Institute inventory of 655,000 barrels.

Adding to this is the inflationary pressures we are seeing and the impact to the short term outlook, which could also weigh on demand. If the US and China are able to reach an agreement, we are likely to see oil prices recover above the US$80 mark.

Wall St falls as bond yields rise

At the closing bell, the Dow Jones lost 0.6 per cent to 35,931, the S&P 500 fell 0.3 per cent to 4,689 while the Nasdaq closed 0.3 per cent lower at 15,922.

Across the S&P 500 sectors, there were four winners to seven losers. Starting with the worst performer, energy by no surprise down 1.7 per cent followed by financials and materials. Real estate was the best performer, up 0.7 per cent followed by consumer discretionary.

The yield on the 10-year treasury note rose 4 basis points to 1.59 per cent, gold rose against a stronger greenback.

European markets mixed on inflation concerns

Across the Atlantic, European markets closed mixed. Paris added 0.1 per cent, Frankfurt closed flat and London’s FTSE closed 0.5 per cent lower as inflation concerns weigh due to rising energy prices.

In UK trade, resources moved lower. The standouts were BHP, down 0.5 per cent with both oil giants BP and Shell closing 0.7 per cent lower.

October UK consumer prices jumped 4.2 per cent from 3.1 per cent in September against the expectations of 3.9 per cent. The inflationary pressures was attributed to the surge in the cost of housing and transport.

Asian markets mixed as tech giant drag

Asian markets closed mixed. Tokyo’s Nikkei lost 0.4 per cent after a local media report said Japan’s government and ruling party will consider an increase to the country’s capital gains tax, in efforts to address income disparities according to Reuters.

Hong Kong’s Hang Seng fell 0.3 per cent weighed down by tech players, while China’s Shanghai Composite added 0.4 per cent on the back of plans for property players to resume issuing asset-backed securities.

Meanwhile, according to the sources at China Business News, Evergrande Group Chairman Hui Ka Yan injected more than $1.5 billion (7 billion yuan) in cash to boost the firm's liquidity.

ASX 200 worst fall in 3-weeks

Yesterday, the Australian sharemarket closed lower for the second day, it’s biggest fall in close to three weeks, falling 0.7 per cent at 7,370. The decline was led by a sell-off in Commonwealth Bank shares (ASX:CBA) after its trading update missed expectations.

CBA’s fall saw a ripple in the financial sector with the other major banks closing in the red. Materials saw some weakness while technology stocks led the gains.

ANZ Bank (ASX:ANZ) fell 2 per cent, Westpac (ASX:WBC) dropped 1.7 per cent while National Australia Bank (ASX:NAB) closed 1.1 per cent lower.

The nation’s largest bank saw its steepest one-day fall since March 2020 after missing market expectations on nearly every major metric in its trading update.

The metric in particular that took attention was the net interest margin. This has been a concern with the other major banks, so it wasn’t really a surprise. The compression was blamed on the margin crunch in the home loan price competition. Same tune we heard with the other majors. However, when interest rates rise, this does give banks some wiggle room for these lenders to maintain interest margins.

In other results, Uniti (ASX:UWL) surged after the telco infrastructure provider said that revenue, earnings and cash flow were ahead of expectations in the financial year 2022 to date.

Nickel mines (ASX:NIC) jumped after reporting that the first nickel pig iron from its project in Indonesia is ahead of the contracted delivery date.

The best-performing stock in the S&P/ASX 200 was Uniti Group (ASX:UWL) closing 8.3 per cent higher at $4.18. It was followed by shares in Nickel Mines (ASX:NIC), and Appen (ASX:APX).

The worst-performing stock in the S&P/ASX 200 was Nufarm (ASX:NUF) closing 8.6 per cent lower at $4.59. It was followed by shares in Commonwealth Bank (ASX:CBA) and Chalice Mining (ASX:CHN).

Local economic news

Today we have a few speeches today from the RBA officials. Tony Richards, Head of Payments Policy delivers an online speech to the Australian Corporate Treasury Association, and Luci Ellis Assistant Governor (Economic) slated to speak at the Committee for Economic Development of Australia event in Perth.

Broker moves

Telstra had their investor briefing the other day, so let’s take a look at what Credit Suisse has to say about the telecommunications giant.

Credit Suisse rates Telstra (ASX:TLS) as an outperform with a price target of $4.40, and makes no changes to its rating and target price. The reason for this is that the broker analyst said that the focus was largely upon the mobile network quality. Management affirmed a target of 95 per cent 5G population coverage and more than 80 per cent of network traffic to be on 5G by 2025. Shares in Telstra (ASX:TLS) closed over 1 per cent higher at $3.99 yesterday.

Ex-dividend

There are seven companies trading ex-dividend today.

Acorn Cap Inv Fund (ASX:ACQ) is paying 8 cents fully franked
Cobram Estate Olives (ASX:CBO) is paying 3.3 cents 20 per cent franked
Irongate Group (ASX:IAP) is paying 4.5286 cents unfranked
James Hardie Indust (ASX:JHX) is paying 40.5 cents unfranked
1300 Smiles (ASX:ONT) is paying 100 cents fully franked
Vita Group (ASX:VTG) is paying 39 cents fully franked
Z Energy (ASX:ZEL) is paying 6.7153 cents unfranked

Dividend-pay

There are two companies set to pay eligible shareholders today.

Aventus Group (ASX:AVN)
Bank of Queensland (ASX:BOQ)

AGMs

There are 25 companies to meet with shareholders today.

Altium (ASX:ALU)
AMA Group (ASX:AMA)
Applyflow (ASX:AFW)
Audeara (ASX:AUA)
BlueScope Steel (ASX:BSL)
Carly Holdings (ASX:CL8)
Cettire (ASX:CTT)
Clime Investment Management (ASX:CIW)
Cosol (ASX:COS)
ECP Emerging Growth (ASX:ECP)
Freedom Foods Group (ASX:FNP)
Goodman Group (ASX:GMG)
IGO (ASX:IGO)
Invex Therapeutics (ASX:IXC)
L1 Long Short Fund (ASX:LSF)
Medibank Private (ASX:MPL)
Mineral Resources (ASX:MIN)
New Hope Corporation (ASX:NHC)
Northern Star Resources (ASX:NST)
Oventus Medical (ASX:OVN)
RAIZ Invest (ASX:RZI)
Sonic Healthcare (ASX:SHL)
Sunshine Gold (ASX:SHN)
Virtus Health (ASX:VRT)
Western Areas (ASX:WSA)

Reports

There are five companies slated to release a report today.

Incitec Pivot (ASX:IPL)
Nufarm (ASX:NUF)
AFT Pharmaceuticals (ASX:AFP)
Australian Agricultural Company (ASX:AAC)
Vortiv (ASX:VOR)

IPO

There is one company set to make their debut on the ASX today. Keep an eye out for Tissue Repair (ASX:TRP) after raising $22 million. A biopharmaceutical company focusing on technology to heal wounds that are chronic or from cosmetic procedures.

Commodities

Iron ore has lost 0.5 per cent to US$89.95. Its futures point to a 1.4 per cent fall.

Gold rose triggered by inflation data we talked about in Europe amid the Fed’s move. The precious metal rose $14.40 or 0.8 per cent to US$1,869 an ounce, silver was up $0.18 or 0.7 per cent to US$25.18 an ounce.

Oil was down $2.36 or 2.9 per cent to US$78.40 a barrel.

Currencies

One Australian Dollar at 8:15 AM has weakened from yesterday, buying 72.66 US cents, 53.88 Pence Sterling, 82.93 Yen and 64.21 Euro cents.


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