Treasury yields flirt higher as Wall St climbs, CBA unveils $2b buyback: ASX to rise


Wall St shrugs off weak start while treasury yields climb to 3 year highs. Aluminium surges to 13-year high. ASX jumps 1.1% to best day in two weeks. Mineral Resources (ASX:MIN), and Temple & Webster (ASX:TPW) plus more ready to unveil trading updates.

The Australian sharemarket is set to rise after a bullish finish on Wall St.

Wall St shrugs off weak start to the week

US stocks closed at session highs as investors snapped up shares while earnings season continued. The Nasdaq was the outperformer despite the yield on the 10-year treasury note rising to its highest level since July 2019.

All this comes ahead of the inflation reading on Friday where we will find out whether or not inflation is starting to peak, after the latest reading showed its highest reading in 40 years. Analysts are expecting a rise of an annualised rate of 7.3 per cent in January from the 7 per cent reading the month before.

The persistent and elevated inflation is putting downward pressure on valuations of your riskier growth style stocks amid the call for the Fed to hike interest rates to curb hot inflation. Right now they are still accommodative as they have continued to buy bonds, so it’s a countdown to the next meeting which is slated for next month.

10-year treasury yield hits highest level since 2019

Bonds were sold-off amid a horizon of aggressive rate hikes by the Fed while stocks saw buyers come back in to push the market higher. The yield on the 10-year treasury note danced near the 1.97 per cent market mid session, heading towards that 2 per cent mark. This helped bank stocks which benefit from higher interest rates which dictate the lending rate they charge consumers.

CEO cycles out of Peloton role

Meanwhile, shares in Peloton Interactive peddled higher by 25.6 per cent at US$37.27 after rising 24 per cent yesterday, coming off its recent low of US$23 a share on news that CEO John Foley is set to step down after a management shake up. The at home fitness giant is replacing the chief with former CFO of Spotify Barry McCarthy. The wheels are turning here with the company filling the top spot with a financial expert amid plans to cost. Barry McCarthy is set to take the spot as both CEO and President.

Aluminium surges to 13-year high

While in the metals market, aluminium surged to a 13-year high amid shrinking inventories and growing concerns over production from China on booming demand. Though oil prices eased on a potential de-escalation with the Ukraine situation and the resuming of nuclear talks with Iran nuclear.

Today’s session comes off a mixed market on Monday, and the best week of the year last week, following four straight weeks of losses. There’s a rotation back into tech stocks, while financials are in favour as global bond yields rise.

Numbers on Wall St

At the closing bell, the Dow Jones gained 1.1 per cent to 35,463, the S&P 500 added 0.8 per cent to 4,522 while the Nasdaq advanced 1.3 per cent to 14,194.

Across the S&P 500 sectors, there were three losers with energy as the worst performer, down 2.1 per cent, followed by real estate and communication services. Materials was the best performer, up 1.6 pre cent followed by consumer discretionary, financials, and information technology.

The yield on the 10-year treasury note rose four basis points to 1.96 per cent, gold rose, so that inflation hedge, on a weaker greenback.

Figures around the globe

Across the Atlantic, European markets closed mixed amid ECB President Christine Lagarde said that there is no need for any dramatic monetary policy tightening, with current price pressures to "subside before becoming entrenched, enabling us to deliver on our 2% target over the medium term" according to her statement for a hearing held by the European Parliament's Committee on Economic and Monetary Affairs

Paris added 0.3 per cent, Frankfurt gained 0.2 per cent and London’s FTSE closed 0.1 per cent lower while Rio gained 1.8 per cent, BP lost 2.4 per cent and Shell dropped 3.2 per cent.

Asian markets closed mixed. Tokyo’s Nikkei added 0.1 per cent, Hong Kong’s Hang Seng lost over 1 per cent and China’s Shanghai Composite gained 0.7 per cent.

ASX eyes best close in 2 weeks

Yesterday, the Australian sharemarket closed 1.1 per cent higher at 7,187 to its highest close in more than two weeks.

The local bourse saw close to a broad-based rally with only the consumer staples and information technology sectors closing lower. Materials clearly led the winners with a spike of 2.2 per cent amid strong iron ore and base metal prices.

BHP group (ASX:BHP) surged 3.7 per cent at $49.15, followed by Fortescue Metals (ASX:FMG) gained 3.3 per cent at $22.23 and Rio Tinto (ASX:RIO) closed 2.2 per cent higher at $117.18.

Macquarie group (ASX:MQG) climbed 3.9 per cent to $201.57 after posting a record quarterly result in the three months to December 2021, driven by "exceptionally strong" investment results in its Macquarie Capital arm and strong commodities trading revenue. The investment bank however, did not provide guidance for the financial year 2022, citing uncertain market conditions.

In other banks, ANZ Bank (ASX:ANZ) advanced 1.5 per cent to $26.96, Westpac Banking Corporation (ASX:WBC) added 1.4 per cent to $21.85, National Australia Bank (ASX:NAB) lifted 0.6 per cent to $27.73 and Commonwealth Bank of Australia (ASX:CBA) closed 0.3 per cent higher at $94.30.

The best-performing stock was dominated by travel stocks, taking-off for the second day after the federal government unveiled its plans to reopen international borders to double-vaccinated visa holders and tourists from Monday, 21 February.

Webjet (ASX:WEB), closing 7.4 per cent higher at $5.92. It was followed by shares in Magellan Financial Group (ASX:MFG) and Flight Centre Travel Group (ASX:FLT).

The worst-performer was Appen (ASX:APX), closing 7.4 per cent lower at $8.25. It was followed by shares in Block (ASX:SQ2) and Nanosonics (ASX:NAN).

Meanwhile, Suncorp catapulted 5.5 per cent higher at $12.08 despite many news stories highlighting the company’s interim dividend cut to 23 cents. The insurer and banking giant posted a first-half financial year 2022 cash profit ahead market consensus.

The owner of AAMI and Apia reported a 29.1 per cent fall to $361 million after much higher claim costs weighed on its bottom line. The financial conglomerate said its natural hazard claims costs for the six months to December came in at $695 million, $205 million more than what was expected in the first half of the financial year. Despite a blow to its bottom line, the result of $361 million net profit after tax was better than the $287 million that was expected. In its banking arm, its net interest margin came in at 1.97 per cent versus 2.09 per cent from the prior corresponding period. A fall was expected given what we have seen with the other banks.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.3 per cent gain.

Local economic news

Westpac and the Melbourne Institute are set to release the February consumer sentiment report.

Consumer sentiment fell 2 per cent in January, “a surprisingly resilient result”, said Westpac economists, given the rapid spread of the Omicron variant and associated disruptions around the turn of the year.

The fall compares to a 5.2 per cent drop seen in the first month of the delta outbreak in NSW, or a 6.1 per cent drop heading into Victoria’s ‘second wave’ outbreak in 2020, and the 17.7 per cent collapse when the pandemic first hit in early 2020.

The February survey is slated to see resilience tested again, in particular around the virus, cases and hospitalisations amid the outlook for interest rates.

Company news

Commonwealth Bank (ASX:CBA) posted a 21 per cent surge in after tax profit to $5.87 billion and unveiled its plans for an on market share buyback of up to $2 billion dollars. The bank posted its net interest margin of 1.92 per cent for the half-year ending December 31, down 17 basis points on the second half of last year and 14 basis points lower than the first half in 2021. Keep an eye out for more news. Shares in Commonwealth Bank closed 0.3 per cent higher at $94.30 yesterday.

Ex-dividend

There are four companies trading ex-dividend today

Australian Foundation Investment Co (ASX:AFI) is paying 10 cents fully franked
Euroz Hartleys Group (ASX:EZL) is paying 2.5 cents fully franked
Flagship Investments (ASX:FSI) is paying 4.5 cents fully franked
ResMed Inc (ASX:RMD) is paying 4.1514 cents unfranked

Dividend-pay

There are three companies set to pay eligible shareholders today

Centuria Capital Group (ASXC:CNI)
NB Global Corporate Income Trust (ASX:NBI)
Thorn Group (ASX:TGA)

Reporting season

Bailador Technology Investments (ASX:BTI)
Bapcor (ASX:BAP)
BWP Trust (ASX:BWP)
Centuria Capital (ASX:CNI)
Commonwealth Bank Of Australia (ASX:CBA)
Computershare (ASX:CPU)
Mineral Resources (ASX:MIN)
Pharmaxis (ASX:PXS)
Temple & Webster Group (ASX:TPW)

Commodities

Iron ore has gained 0.4 per cent to US$149.95. Its futures point to a 3.0 per cent fall.

Gold has gained $6.20 or 0.3 per cent to US$1828 an ounce. Silver is up $0.14 or 0.6 per cent to US$23.22 an ounce.

Oil has lost $1.69 or 1.9 per cent to US$89.63 a barrel.

Currencies

One Australian Dollar at 8:20 AM has strengthened since Tuesday (71.25 US cents), buying 71.45 US cents, 52.75 Pence Sterling, 82.55 Yen and 62.58 Euro cents.

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