QE could wind up in February: ASX closes 0.4% lower

Market Reports

by Melissa Darmawan

The Australian sharemarket fell for its third day in a row despite a positive lead from Wall St and stronger than expected jobs numbers for November. Market participants also started the session off with two RBA officials speaking online after the Fed Chair unveiled its plan to accelerate its taper plans to combat record high inflation with a likely rate hike in the horizon next year, a move that was expected.

The local bourse was already weighed down by CSL (ASX:CSL) diving 8.3 per cent to $273.00 after the biotech resumed trading. The company raised $6.3 billion to fund its $17.2 billion deal to buy Swiss pharma Vifor at the discount of $273, which was the ballpark of its losses today.

Compounding the pain, the speech from Governor Philip Lowe said the bond purchases program could end in February depending on the situation.

“The first option discussed was to further taper the bond purchases from the current rate of $4 billion a week, with an expectation that the purchases would come to an end in May. The second was to taper further and then review the situation again in May. The third option was to cease bond purchases altogether in February,” he said.

“If better-than-expected progress towards the Board’s goals was made, then the case to cease bond purchases in February would be stronger. Alternatively, if progress is slower than expected, or if the outlook becomes more uncertain, the case for retaining flexibility and reviewing again in May would be stronger,” he said.

“In deciding between these options, the Board will use the same three criteria that it has used since the outset: the actions of other central banks, how the Australian bond market is functioning, and most importantly, the actual and expected progress towards the goals of full employment and inflation consistent with the target”

The employment figures then broke at 11.30am AEST which came in better than expected. The nation’s unemployment declined to 4.6 per cent in November from 5.2 per cent a month earlier as Covid-19 lockdowns eased. The participation rate rose 1.4 points to 66.1 per cent, beating estimates of 65.5. Meanwhile, employment increased 366,100 to a record high of 13.17 million, beating forecasts of a 205,000 gain, with part-time employment increasing by 237,800, and full-time employment lifting by 128,300.

The next RBA board meeting is in February next year and Dr Lowe said that “much will depend upon the news we receive between now and when we meet in February”. The jobs report is a sign that the labour market is moving in the right direction, however it was before Omicron came into the picture.

Nevertheless, the tech bulls were reignited after two days of declines and were the best performer of the session, emulating the outperformance for the Nasdaq on Wall St. WiseTech (ASX:WTC) added 6.9 per cent to $59.38, Xero (ASX:XRO) gained 2.1 per cent to $140.88, while Afterpay (ASX:APT) closed 1.7 per cent higher to $89.50.

On the other spectrum, after healthcare’s drag, energy was the second worst performer, down 1.2 per cent despite a rise in the Nymex crude price. While materials declined after shedding 0.3 per cent. Fortescue Metals (ASX:FMG) rose 0.9 per cent to $18.80 but BHP (ASX:BHP) lost 1 per cent at $40.52 and Rio Tinto (ASX:RIO) closed 0.4 per cent lower at $98.

The major lenders were mixed. ANZ (ASX:ANZ) lost 0.6 per cent to $27.43, Commonwealth Bank (ASX:CBA) shed 0.1 per cent to $96.79, while Westpac (ASX:WBC) also slid 0.1 per cent to $20.96. NAB (ASX:NAB) bucked the trend closing 0.6 per cent higher to $28.75.

In other news, Mesoblast (ASX:MSB) soared 10.9 per cent to $1.48 after saying it would conduct another phase three trial of its rexlemestrocel-L in patients with chronic low back pain after feedback from the FDA.

IGO (ASX:IGO) added 1.4 per cent to $10.78 after confirming its $1.1 billion spending spree to buy Western Areas (ASX:WSA) via a scheme of arrangement. The deal is still subject to a shareholder vote with the board unanimously recommending it. Western Areas shareholder Perpetual (ASX:PPT) said it intended to vote its 14.7 per cent holding in favour of the deal. Western Areas shares rose 5.6 per cent to $3.42. Shares in Western Areas (ASX:WSA) closed 5.5 per cent higher at $3.42.

Asian markets were off on a mixed start as investors  await the European central bank's rate decision at 11.45pm AEST, the Bank of England's, and the Bank of Japan.

The futures on Wall St wasn't enough to lift the local bourse from its lows of 0.7 per cent, however given the circumstance of a lot of economic and monetary talks, the local bourse was weaker, and could have been worst closing 0.4 per cent or 31 points lower at 7,296.

Company news

Join me for Stocks of the Hour here where I cover the headlines from CSL (ASX:CSL), Woodside Petroleum (ASX:WPL), and Sims (ASX:SIM).

Explosives maker Orica (ASX:ORI) anticipates its financial year 2022 earnings before interest and taxes from continuing operations to increase the same period a year ago.

PointsBet (ASX:PBH) has launched its online and mobile sports betting operations in Virginia as the sports better grows its footprint to its eighth state in the US.

Qantas (ASX:QAN) has been able to accelerate the repair of its balance sheet and expects to finish the first half of FY22 with a materially better net debt position than it had prior to the start of Delta variant lockdowns in June.

Shopping centre giant Stockland (ASX:SGP) expects to pay investors pay 12 cents per share for the six months to the end of December.

MA Financial (ASX:MAF) has exchanged contract to buy Hotel Brunswick and an adjacent property for $68 million.

Futures

The Dow Jones futures are pointing to a rise of 44 points.
The S&P 500 futures are pointing to a rise of 9 points.
The Nasdaq futures are pointing to a rise of 39 points.
The SPI futures are pointing to a fall of 6 points when the market next opens.

Best and worst performers

The best-performing sector was Information Technology, up 2.1 per cent. The worst-performing sector was Health Care, down 5.1 per cent.

The best-performing stock in the S&P/ASX 200 was Mesoblast (ASX:MSB), closing 10.9 per cent higher at $1.48. It was followed by shares in WiseTech Global (ASX:WTC) and Lifestyle Communit. (ASX:LIC).

The worst-performing stock in the S&P/ASX 200 was CSL (ASX:CSL), closing 8.2 per cent lower at $273.00. It was followed by shares in Champion
Iron (ASX:CIA) and Life360 Inc. (ASX:360).

Asian markets

Japan's Nikkei has gained 1.9 per cent.
Hong Kong's Hang Seng has lost 0.6 per cent.
China's Shanghai Composite has gained 0.4 per cent.

Commodities and the dollar

Gold is trading at US$1781.36 an ounce.
Iron ore is 1.3 per cent higher at US$109.70 a ton.
Iron ore futures are pointing to a rise of 1.3 per cent.
Light crude is trading $0.69 higher at US$71.35 a barrel.
One Australian dollar is buying 71.53 US cents.

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