Wall St slips on inflation concerns, Nickel Mines, AGL, Origin, Uniti on watch today: ASX to fall

Market Reports

by Melissa Darmawan

Wall St and European markets retreat as oil prices rally. The price of nickel rebounded, hitting its trading limit of 15% as buyers emerged at the London Metal Exchange. 

Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to fall as inflation concerns crept back in.

Wall St retreats on renewed inflation concerns

US stocks extended their losses after the rally on Tuesday, closing at session lows. Stocks fell in tandem by almost the same percentage as investors continue to monitor the war in Ukraine. Oil prices spiked higher, renewing inflation fears as investors search for safety in treasury notes and gold.

Oil surges further supply issues

Oil prices rallied on a shrinking stockpile after energy traders digested the Energy Information Administration report to have noticed that the draw of 2.5 million barrels was in lockstep with the tapping of the strategic petroleum reserve of almost 4.2 million barrels. Traders assessed the impact of drawing down stockpiles on a tight oil market and what this could mean for crude prices if the war drags on.

Talks by Fed on US digital currency

Elsewhere, Fed Chair Jerome Powell was speaking during a virtual panel for the Bank for International Settlements, outlining necessary requirements for a hypothetical US digital currency. Mr Powell said a key focus for the digital dollar would include user privacy and be embraced by the banking system. He also said that it would need to be widely accepted as a means of payment and have an identity verifiable similar to bank accounts.

The Fed warned that crypto assets “have been used to facilitate illicit activity,” which he believes needs to be prevented as it has presented concerns for financial stability.

Russian stock market set to partially reopen

Russia’s stock market is set for a partial reopening on Thursday, almost a month after it closed. The biggest worry for their market is the resumption of trade that could see stocks crater.

Meanwhile, Ukrainians continue to flee that battered city of Mariupol as Russian airstrikes destroy entire neighbourhoods while Russian and Ukrainian forces continue to clash. Russia reportedly is on the verge of taking Mariupol, if this is the case, it would be the first major city to fall under its control. In transit, President Biden is on his way to Europe to attend a meeting with NATO leaders.

Business cycles

Amid this news, if we take things back to the theory of supply and demand and the Fed’s focus on combating inflation, one way of handling this is by raising interest rates to reduce demand. However, if you look more broadly, the inflationary pressures are triggered by factors outside of the central bank’s control such as the supply chain disruptions, the labour market, and higher energy costs exacerbated by the war. Something to keep in mind.

As the Fed uses its tools to suppress inflation, while hoping that the supply side of things loosens up, the medicine of raising rates is what investors will need to take as we move through the business cycle. History shows us the business cycles of expansions and contractions. The longer it gets delayed, the harder the fall.

Figures around the globe

At the closing bell, the Dow Jones lost 1.3 per cent to 34,359, the S&P 500 fell 1.2 per cent to 4,456 and the Nasdaq lost 1.3 per cent to 13,923.

Across the S&P 500 sectors, it was almost a broad sell-off with only energy and utilities as the winners, up 1.7 and 0.2 per cent respectively. Financials felt the pain amid the fall in the bond yield down 1.8 per cent, healthcare also fell 1.8 per cent followed by information tech, down 1.5 per cent.

The yield on the 10-year treasury note fell 9 basis points to 2.29 per cent, gold rose on a weaker greenback.

Across the Atlantic, European markets closed lower. Paris fell 1.2 per cent, Frankfurt lost 1.3 per cent while London’s FTSE dipped 0.2 per cent after UK finance minister Rishi Sunak revealed budget measures to help ease the cost of living. This includes raising the threshold for national insurance contributions and trimming the fuel duty. February inflation also jumped 6.2 per cent over the year to a three decade high, above the 5.2 per cent forecast.

Asian markets closed higher, tracking Wall St’s prior rally. Tokyo’s Nikkei jumped 3 per cent amid a cheaper yen lifting export-reliant sectors such as electronics and car giants. Hong Kong’s Hang Seng gained 1.2 per cent while China’s Shanghai Composite added 0.3 per cent.

ASX wrap up

Yesterday, the Australian sharemarket closed 0.5 per cent higher at 7,378 with an almost broad-based rally led by information tech shares. Materials was the only laggard, marginally closing lower. The local bourse rallied for a fifth time in six days, hitting a fresh two-month high.

Fisher & Paykel Healthcare (ASX:FPH) tumbled 7.9 per cent $23.73 as the manufacturer of respiratory and sleep apnoea devices warned that higher freight costs would hurt earnings margins in financial year 22, while revenue guidance also came in below expectations.

Changes in substantial holding notices have been lodged for Flight Centre (ASX:FLT) Travel’s three founding families, following trades by James Management Services and Gehar, entities associated with founders Bill James and Geoff Harris respectively. Shares closed 0.6 per cent higher at $18.85.

Sonic Healthcare (ASX:SHL) jumped 1.8 per cent to $35.39 amid a broker upgrade. Credit Suisse believes the market is underestimating the opportunity that remains for the company in Covid-19 testing. Sonic Healthcare's share price has tumbled by 22 per cent year to date. With the shift to rapid antigen tests, the broker believes PCR testing levels have stabilised at 80,000 per day and expects this will normalise to 50,000 tests per day, forecasting a $890 million second half revenue benefit compared to the $1.3 billion achieved in the first half. The rating is upgraded to outperform from neutral with a target price of $40.

Uniti (ASX:UWL) soared 10.7 per cent to $4.67 before entering a trading halt after media reports that Macquarie Asset Management and Canadian pension fund PSP Investments had joined the takeover bid, lobbing a $5.00 a share offer that tops the $4.50 a share bid made by New Zealand asset manager HRL Morrison & Co. on 15 March.

Imugene (ASX:IMU) jumped 9.6 per cent to 28.5 cents after the biotech received the green light from US regulatory approval to run a Phase I clinical trial of its oncolytic virotherapy candidate, VAXINIA, in cancer patients with multiple solid tumours. Oncolytic viruses both selectively kill tumour cells and activate the immune system against cancer cells.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.7 per cent fall.

Local economic news

S&P Global, formerly Markit is set to issue figures around the manufacturing and services sector for March.

What to keep an eye out for

Our Aussie dollar is on the climb now and has a 75 handle, commodity prices in the green overnight. The price of nickel rebounded, hitting its trading limit of 15 per cent as buyers emerged at the LME. This bodes well for our stocks in the resources space.

A couple of broker upgrades worth noting, Barrenjoey has hiked AGL Energy’s (ASX:AGL) price target by 11 per cent from yesterday’s closing price to $8.10. The price target for Origin Energy (ASX:ORG) also got raised by 16 per cent to $7.09 from yesterday’s closing price. These stocks could be on the move today.

Nickel Mines’ (ASX:NIC) share price could be in focus after Moody’s revised its rating outlook to negative from stable, reflecting the increased risk and uncertainty for the company’s ongoing credit profile, given the recent issues facing its sole offtaker, Tsingshan.

Earnings are on deck today from Brickworks (ASX:BKW), Gold Road Resources (ASX:GOR), and Washington H Soul Pattinson (ASX:SOL).

The Uniti Group (ASX:UWL) is likely to return from a trading halt this morning after its share price soared almost 11 per cent.

The rally in bank stocks could be on a breather today amid a falling treasury yield.

Ex-dividend

Australian Pharmaceutical Industries (ASX:API) is paying 3 cents fully franked
Bisalloy Steel (ASX:BIS) is paying 4.5 cents fully franked
Cash Converters (ASX:CCV) is paying 1 cent fully franked
CI Resources (ASX:CII) is paying 2 cents fully franked
COG Financial Services (ASX:COG) is paying 3.5 cents fully franked
Healius (ASX:HLS) is paying 10 cents fully franked
Lindsay Australia (ASX:LAU) is paying 1.4 cents unfranked
Maas Group Holdings (ASX:MGH) is paying 2 cents fully franked
Peet (ASX:PPC) is paying 2.25 cents fully franked
Spark New Zealand (ASX:SPK) is paying 11.6463 cents unfranked

Dividend-pay

There are 14 companies set to pay eligible shareholders today

Australian Finance Group (ASX:AFG)
Bega Cheese (ASX:BGA)
Downer EDI (ASX:DOW)
Healthia (ASX:HLA)
Insurance Australia Group (ASX:IAG)
Imdex (ASX:IMD)
Ingenia Communities Group (ASX:INA)
Kip Mcgrath Education Centres (ASX:KME)
Medibank Private (ASX:MPL)
Netwealth Group (ASX:NWL)
Ooh!Media (ASX:OML)
Resimac Group (ASX:RMC)
Santos (ASX:STO)
Viva Energy Group (ASX:VEA)

Commodities

Iron ore has gained 2.1 per cent to US$146.45. Its futures point to a 2.2 per cent gain.

Gold has gained $25.80 or 1.3 per cent to US$1953 an ounce. Silver is up $0.43 or 1.7 per cent to US$25.34 an ounce.

Oil has jumped $5.40 or 4.9 per cent to US$114.67 a barrel.

Nickel surged 15 per cent reaching its upper trading limit at US$14.7 a pound. Copper rose 1.8 per cent to US$4.74 a pound, aluminium lifted 4.4 per cent to US$1.65 a pound and zinc rose 6.1 per cent to US$1.88 a pound on worries about further suspensions of smelters in Europe due to high power prices.

Currencies

One Australian Dollar at 7:40 AM has strengthened from yesterday, buying 75.01 US cents (Wed: 74.70 US cents), 56.79 Pence Sterling, 90.85 Yen and 68.13 Euro cents.

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