Wall St sell-off triggered by Omicron, Nine inks $650m deal, BHP is bullish: ASX to open flat

Market Reports

by Melissa Darmawan

Global major indexes slumped as Omicron concerns heightened. Senator Joe Manchin dealt a blow to President Biden’s Build Back Better plan leading to Goldman Sachs lowered their forecasts for U.S. GDP in 2022. BHP (ASX:BHP) is bullish for Stockwatch. RBA meeting minutes due today.

US stocks tumble as Omicron fears deepen

The Australian sharemarket is slated to open flat after what has been a red market across the globe. Wall St was solidly in the red as investors eye the surge in Omicron cases, along with concerns about the Fed’s speed up of the wind down of its asset purchases program, and the kick-off on the three potential interest rate hikes next year.

Wall St also kept tabs from Washington DC after Senator Joe Manchin dealt a blow to President Biden’s Build Back Better plan. Economists at Goldman Sachs lowered their forecasts for U.S. GDP in 2022 after Mr. Manchin’s comments, citing that the bill’s apparent demise “has negative implications for near-term consumption.” The price of gold dipped below the US$1,800 mark amid this, while the 10-year treasury bond yield was stable, so market participants didn’t seek shelter there but greenback firmed up.

Militia shuts down Libyan oil production

Oil prices tumbled on demand concerns amid Omicron woes. We’ve been watching the crude oil price surge and slump over the past few weeks, though we knew that this was on the cards. If air travel eases due to mobility restrictions, the demand for fuel reduces. The same with any form of transport, hence this volatility and why Omicron is the wild card. However, market participants also digested the disruption in the Libyan oil production. Petroleum Facilities Guard, a paramilitary force closed their largest oil field ahead of the presidential election on Christmas eve.

Financials leads S&P 500 decline

Across the S&P 500 sectors, the sell down was almost across the board with a flat finish from utilities, and consumer staples. Financials led the declines with Goldman Sachs down 2.7 per cent, while JP Morgan lost 1.8 per cent, followed by materials, and industrials.

In company news, Moderna shares closed 6.3 per cent lower after preliminary results showed that its booster dose of its Covid-19 vaccine provides stronger protection against the Omicron variant. Shares did jump 9 per cent but then fell in tandem with the market.

There was a bright spot with cruise line giant Carnival closing 3.4 per cent higher. The company missed quarterly earnings estimates. Though the CEO expects a profit by the second half of next year.

We are certainly seeing a lot of red ahead of Christmas, when usually it’s a time of cheer. The much hoped Santa Claus rally is waning with Covid-19 uncertainty deepening.

Wall St tumbles as greenback firms

At the closing bell, the Dow Jones lost 1.2 per cent to 34,932, the S&P 500 fell 1.1 per cent to 4,568 while the Nasdaq closed 1.2 per cent lower at 14,981.

The yield on the 10-year treasury note rose 2 basis points to 1.43 per cent, gold dipped on a firmer greenback.

European markets falls on growing Omicron fears

Across the Atlantic, European markets closed lower. Paris fell 0.8 per cent, Frankfurt lost 1.9 per cent and London’s FTSE closed almost 1 per cent lower.

In UK trade, resources tumbled. BHP fell 1.5 per cent, Rio dropped 2.4 per cent, BP lost 3.1 per cent, while Shell closed 1.4 per cent lower.

Asian markets fall despite PBOC move

Asian markets closed lower. Tokyo’s Nikkei tumbled 2.1 per cent as fears of stagflation and an economic slowdown triggered investors. Hong Kong’s Hang Seng sank 1.9 per cent, while China’s Shanghai Composite lost 1.1 per cent despite the People’s Bank of China’s lowering borrowing costs for the first time in 20 months to prop up growth in its economy amid the property crunch.

ASX 200 dips amid Magellan dive

Yesterday the Australian sharemarket closed 0.2 per cent lower at 7,292 after a late afternoon recovery, though not enough to take itself out of the red. The losses were led by energy, financials, and industrials sectors as crude oil prices tumbled while shares in Magellan Financial (ASX:MFG) and CIMIC (ASX:CIM) crashed.

Magellan (ASX:MFG) confirmed the loss of its biggest investment mandate with St James Place which makes up around 12 per cent of Magellan’s financial year 2022 group revenue.

Cimic (ASX:CIM) responded to an AFR article to claim it had no further Middle East financial exposure amid claims of unpaid staff.

Both these stocks notched as the worst performers of the session with Magellan Financial (ASX:MFG) closing 32.9 per cent lower at $19.70, followed by shares in Cimic Group (ASX:CIM), and Nanosonics (ASX:NAN).

On the brighter note, the best-performing stock was BlueScope Steel (ASX:BSL) closing 4.1 per cent higher at $21.91, followed by shares in Viva Energy (ASX:VEA), and Clinuvel Pharmaceuticals (ASX:CUV).

In other news with Viva Energy (ASX:VEA) its share price climb of 3.7 per cent to $2.23 came after a jump in its income forecast. The fuel provider to Coles Express expects earnings in calendar 2021 to double from last year despite third-quarter lockdowns in Victoria and NSW, and border closures that have impacted aviation sales. Viva said it had had strong fuel sales growth across both its retail and commercial segments. Its total sales volumes are expected to rise 5 per cent for the year ending December 31.

Iron ore miners were mixed as Rio Tinto (ASX:RIO) finished flat, Fortescue Metals (ASX:FMG) jumped 2.6 per cent, and BHP (ASX:BHP) closed 0.8 per cent lower.

SPI futures

Switching gears, if you look to the SPI futures, it is pointing to a 0.1 per cent gain or a flat start.

Local economic news

Today the Reserve Bank meeting minutes from the December meeting on the 7th.

Company news

Nine Entertainment (ASX:NEC) has inked a $650 million five year deal with the NRL to broadcast its 2023 to 2027 seasons. Nine will pay $115 million cash a year, with a further $15 million in contra and other services. Shares in Nine Entertainment closed 1.1 per cent lower at $2.73 yesterday.

Stockwatch

Our weekly stock to watch this week is BHP Group (ASX:BHP). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates BHP Group as a buy. From a technical angle, BHP Group is bullish for a number of reasons.

Since printing a high of $54.55 in July, a sharp sell-off in share price followed, which resulted in the circa 35 per cent decline over a three and a half month period. Positively, support was respected at the 61.8 per cent Fibonacci retracement of $35.70 as shown by the green horizontal line and orange arrow. In addition, a double bottom formation completed, which is a positive signal.

Should buyers remain in control over the weeks ahead, then a broader advance towards resistance sighted at the 61.8 per cent Fibonacci retracement of $47.30 could potentially be on the horizon.

Shares in BHP Group (ASX:BHP) closed 0.7 per cent lower at $41.10 yesterday.



Ex-dividend

There are two companies trading ex-dividend today.

Metcash (ASX:MTS) is paying 10.5 cents fully franked
RAM Essential Services Property Fund (ASX:REP) is paying 1.09 cents unfranked

Dividend-pay

There is one company set to pay eligible shareholders today. Westpac Banking Corp (ASX:WBC)

AGMs

There are seven companies set to meet with shareholders including Alto Metals and Webcentral Group.

Aura Energy (ASX:AEE)
Alto Metals (ASX:AME)
Havilah Resources (ASX:HAV)
Pioneer Credit (ASX:PNC)
Quickfee (ASX:QFE)
Webcentral Group (ASX:WCG)
Weststar Industrial (ASX:WSI)

Reports

Alterra (ASX:1AG)
Ora Gold (ASX:OAU)
Aspermont (ASX:ASP)

Commodities

Iron ore has gained 4.2 per cent to US$123.20. Its futures point to a 0.9 per cent gain.

Gold lost $15.40 or 0.9 per cent to US$1790 an ounce, silver was down $0.28 or 1.2 per cent to US$22.26 an ounce.

Oil lost $2.63 or 3.7 per cent to US$68.23 a barrel.

Currencies

One Australian Dollar at 8:15 AM has weakened since yesterday, buying 71.10 US cents (Mon: 71.41), 53.83 Pence Sterling, 80.82 Yen and 63.08 Euro cents.

Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Commentators may hold positions in stocks mentioned. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.

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