Wall St rides sleigh for 2nd day, Pilbara Minerals rated as outperform: ASX to rise


Muted performance around the globe ahead of Christmas. US & UK GDP mixed. ASX ekes out gain for 2nd day as M&As dominate headlines, while buy-the-dip players rescued lithium miners. Macquarie rates Pilbara Minerals (ASX:PLS) as Outperform.

The Australian sharemarket is set to rally for a third day after indexes around the globe closed mixed on light volumes.

US Santa rally is underway for 2nd day

Wall St extended its gains for a second day closing at session highs, following a string of losses in a very volatile December. The S&P 500 turned negative for the month and pivoted into the black in Tuesday’s session, and closed solidly in the green today.

Investors digested a slate of fresh economic data showing strength in economic growth, consumer confidence, the housing sector, as well as consumer spending. The 10-year treasury yield ticked a bit lower helping the rally for the tech-heavy Nasdaq, as market participants continue to monitor this pandemic.

Helping boost sentiment were those measures from President Biden yesterday to curb the spread of the new variant.

FDA approves Pfizer anti-viral Covid-19 pill

Let's start with the latest developments on the Covid-19 pandemic. Starting with Pfizer after US regulators approved its antiviral Covid-19 pill. Shares closed over 1 per cent higher. Research from Pfizer found that the pill is nearly 90 per cent effective at preventing hospitalization and death from the virus. It’s the first drug approved to treat the virus that is not an injection, and can be taken at home. However, the initial supply of that pill is very limited, which we’ve been accustomed to hearing throughout this pandemic, a limited supply of vaccines.

However, Bloomberg reported that the FDA is set to give it's tick of approval for Merc’s Covid-19 pill treatment. While that pill was found to be effective, it’s not as effective as Pfizer's. The Whitehouse has already inked a deal to buy millions of these pills from both vaccine makers. Shares in Merc added 0.8 per cent.

US economy in slightly better shape in Q3

On the economic front, US GDP for the third quarter was revised higher. It’s the final reading for the three months from July through to the end of September this year. The economy grew at a rate of 2.3 per cent, just a hair higher than what was expected in an earlier reading of 2.1 per cent according to the Bureau of Economic Analysis. What helped the GDP here in the third quarter was higher consumer spending and companies building up their inventory, so buying up to keep things on the shelves. This has been President Biden’s focus today as he discussed the supply chain, making sure that shelves are fully stocked as we swim through this pandemic.

Homes sold at fastest pace in 10 months

Elsewhere, home sales rose 1.9 per cent last month to nearly six and a half million units. It was the highest pace of home sales since January. Economists said that sales likely rose due to a stronger jobs market as well as concerns about rising borrowing rates for next year, which does make sense given that the lending rate has a lot to do with the Fed, and we just found out what the Fed’s plans are around the hike in interest rates.

Consumer confidence improves despite Omicron

Meanwhile, consumer confidence rose in December and November's numbers were revised higher according to the The Conference Board. Consumer confidence now stands at 115.8, so four points higher from November. Economists say growth prospects improved in the short term and that more consumers are planning to buy homes, cars, major appliances, and take holidays in the next six months. It will be interesting to see if the Omicron variant changes this. Also the recent announcement from the Fed could put a spanner in the works after their plans to ramp up its scale back of its stimulus.

CEO Musk believes he sold 'enough' Tesla shares

Changing gears to some company news. Elon Musk has now hit his target of selling a portion of his shares in Tesla. After selling another US$550 million worth of stock, shares in Tesla closed 7.5 per cent higher. Musk has now sold a total of over US$14 billion worth of Tesla shares since early November, which is about 10 per cent of his stake in the company.

Meanwhile this company is facing more regulatory scrutiny even as Musk purchased more stock due to options being exercised, so there’s some calculations going into this. However, he did admit to higher taxes and to help pay it, he sold off his shares. As for the regulators piece, we know that the National Highway Traffic Safety Administration is now investigating roughly 580,000 Tesla vehicles due to the touchscreen passenger play gaming feature. There are also concerns over possible distracted driving with the investigation covering Tesla models from 2017 to 2022.

Citi boosts Apple’s price target on Metaverse craze

Apple shares also took the limelight, the saying “so goes apple, so goes the market”. Shares rose in tandem with the major indexes after Citi raised its target price to US$200 a share. The broker noted multiple reasons for growth next year with Apple’s new AR VR headset, augmented and virtual reality, which is set to be a strong catalyst for growth i.e. the Metaverse. The broker added that as Apple approaches a US$3 trillion market cap, it is likely to exceed Wall Street estimates in the coming few quarters.

It looks like Wall St is set to close the year strong, and the Santa rally is underway. Investors have shrugged off the concerns about Omicron for now.

Wall St rises, gold dips, weaker USD

At the closing bell, the Dow Jones gained 0.7 per cent to 35,754, the S&P 500 added over 1 per cent to 4,697 while the Nasdaq closed 1.2 per cent higher at 15,522.

Across the S&P 500 sectors, the gains were across the board with consumer discretionary, and information technology leading the way, so that aligns to the Nasdaq being the outperformer out of the major indexes. Industrials, utilities, and financials added the least.

The yield on the 10-year treasury note was in essence steady, dipped 1 basis point to 1.45 per cent, while gold rose on a weaker greenback.

European markets gains on UK GDP slowdown

Across the Atlantic, European markets closed higher amid one of ECB’s board members who said that inflation will remain high for a certain period but will ease through the course of next year.

Paris added 1.2 per cent, Frankfurt added almost 1 per cent and London’s FTSE added 0.6 per cent after UK’s third quarter GDP final estimates final estimates showed a slower than expected expansion over the prior quarter, as investors prepared for the impact of the Omicron variant in the final quarter of the year.

BHP fell 0.5 per cent, Rio lost almost 1 per cent, BP climbed 0.9 per cent, while Shell closed 0.6 per cent higher.

Asian markets mixed-muted show

Asian markets closed mixed on its muted performance. Tokyo’s Nikkei gained 0.2 per cent, Hong Kong’s Hang Seng added 0.6 per cent, while China’s Shanghai Composite closed 0.1 per cent lower.

ASX 200 ekes out gain for 2nd day on M&As

Yesterday the Australian sharemarket eked out a 0.1 per cent gain at 7,365 for its second day with a late afternoon rally tipping its nose over the closing bell. It was a choppy performance with M&A news dominating headlines. Technology, and energy led the gains though property, materials, and consumer staples led the losses, with financials closing flat.

Link Administration (ASX:LNK) surged 15 per cent at $5.51 boosting the tech sector, after software company Dye & Durham unveiled its plans to buy the company valuing it at $3.7 billion. The deal includes Link’s 43 per cent stake in PEXA (ASX:PXA) which surged 6 per cent to a three-week high of $17.23.

Afterpay (ASX:APT) galloped 5.4 per cent, while WiseTech (ASX:WTC) rose almost 3 per cent to an all-time high of $60.22.

Rio Tinto (ASX:RIO) dropped 2 per cent to $99.35 on its $1.1 billion spree on an Argentinian lithium mine. Fortescue Metals (ASX:FMG) fell 2.2 per cent, while BHP (ASX:BHP) closed 0.8 per cent lower.

Buy-the-dip traders came in to rescue lithium miner Pilbara Minerals (ASX:PLB) surged 8.8 percent, while Liontown Resources (ASX:LTR) rose 4 per cent clawing back all the losses from the session prior.

Charter Hall Group (ASX:CHC) tumbled 7.5 per cent to $19.99 after offering $207 million for a 50 per cent stake in Paradice Investment Management, with the option to buy the rest of it 2025. The deal is expected to be completed by December 31.

The best-performing stock in the S&P/ASX 200 was Link Administration Holdings (ASX:LNK) closing 15 per cent higher at $5.51, followed by shares in Pilbara Minerals (ASX:PLS), and Afterpay (ASX:APT).

The worst-performing stock in the S&P/ASX 200 was Falcon Metals (ASX:FAL) closing 37 per cent lower at $0.32, followed by shares in Charter Hall Group (ASX:CHC), and Ansell (ASX:ANN).

Elsewhere, Covid-19 medical players Sonic Healthcare (ASX:SHC), Healius (ASX:HLS), and Australian Clinical Labs (ASX:ACL) hit record highs with their share prices, as testing volumes soared ahead of Christmas across the nation.

Magellan Financial (ASX:MFG) tumbled 3.1 per cent to close at $19.93 as investors continued to punish the share price following the company losing its biggest investment mandate with St James Place, which makes up around 12 per cent of the group’s financial year 2022 group.

However, analysts at MorningStar released a note saying that “these near-term headwinds are bumps in the road, not nails in the coffin. Its investing calibre and upside from growing distribution remain intact”. Shares have fallen by over 32 per cent since the company entered into a trading halt last Friday. The share price year to date has taken a dive by over 64 per cent.

Major banks closed mixed, National Australia Bank (ASX:NAB) lost 0.6 per cent, ANZ (ASX:ANZ) fell 0.3 per cent, Commonwealth Bank (ASX:CBA) dipped 0.2 per cent, while Westpac (ASX:WBC) closed 0.1 per cent lower.

SPI futures

Looking ahead, the SPI futures are pointing to a gain of 0.5 per cent.

Local economic news

The Reserve Bank is set to release the private sector credit data for November.

Broker moves

As we have looked at BHP, and RIO yesterday plus their news to spearhead the lithium sector. Let’s check out another lithium player.

Macquarie rates Pilbara Minerals (ASX:PLS) as outperform with a price target of $3.70. The broker upgraded earnings for Aussie lithium miners expecting strong electric vehicle sales volumes will support a four-year run of record spot lithium prices. The broker increases calendar year 2022 regional lithium prices 3 per cent to 18 per cent, and calendar years 2023 to 2025 prices by 12 per cent to 22 per cent. The broker expects spodumene prices will peak in mid-2022 but increases its peak assumption by a gallop of 100 per cent. Shares in Pilbara Minerals (ASX:PLS) closed 8.8 per cent higher at $2.73.

Dividend-pay

There are two companies set to pay eligible shareholders today, Infratil (ASX:IFT), and Webjet (ASX:WEB)

Annual reports

Collection House (ASX:CLH)

IPOs

There are two companies set to make their debut on the ASX. Keep an eye out for two resources companies. Black Mountain Energy (ASX:BME), and Rubix Resources (ASX:RB6).

Commodities

Iron ore has lost 1 per cent to US$122.60. Its futures point to a 2.5 per cent fall.

Gold gained $16.70 or 0.9 per cent to US$1805.40 an ounce, silver was up $0.32 or 1.4 per cent to US$22.85 an ounce.

Oil added $1.81 or 2.6 per cent to US$72.93 a barrel.

Currencies

One Australian Dollar at 8:15 AM has strengthened since yesterday, buying 72.19 US cents (Tue: 71.54), 54.03 Pence Sterling, 82.38 Yen and 63.69 Euro cents.
 

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