Nasdaq jump as earnings season kicks off, Incitec, Orica, Iluka, NAB on watch: ASX to lift


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Wall St gains as the bond sell off stabilized pushing technology stocks higher despite hotter-than-expected producer price inflation data. European markets also digested Britain’s inflation jumped. 

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

The Australian sharemarket is set to edge higher after a pop on Wall St.

Tech, travel stocks rally as earnings season kicks-off

After several days of selling, the market caught some reprieve with the tech heavy Nasdaq outperforming the major indexes which closed near session highs. Several factors moved the markets, including record print on producer prices and corporate earnings coming in better-than-expected from BlackRock and Delta Airlines, however JP Morgan disappointed.

At the market close, the Dow Jones gained over 1 per cent to 34,565, the S&P 500 added 1.1 per cent to 4,447 and the Nasdaq jumped over 2 per cent to 13,644.

Across the S&P 500 sectors, the rally was almost across the board with consumer discretionary, information tech, and materials leading the way by 2.5 per cent, 1.6 per cent, and 1.5 per cent respectively. Reopening names were strong with restaurants, hotels, cruise lines, travel agencies amid the Delta results, and gaming stocks pushed higher. There were two sectors in the red with utilities and financials down up to 0.2 per cent, a ripple effect after JP Morgan’s results.

As stocks rebound, the bond sell off has stabilised for now with the yield on the 10-year treasury note, down 2 basis points to 2.70 per cent, gold rose and the greenback edged higher.

Producer prices jump to fastest rate on record

The spotlight remains on inflation for the businesses as new data shows producer prices rose at their fastest rate on record. The producer price index (PPI) rose 11.2 per cent from last year in March and 1.4 per cent from the month before. The PPI measures prices paid by wholesalers and is a proxy for inflation as it includes prices of goods and services that customers will pay in the future. Today's data follows the consumer price index after we learned that consumer prices rose to the highest level since 1981 plus figures from China and the UK also showing hot inflation.

Oil prices up despite large US stockpile

Oil prices advanced again after Russia said negotiations with Ukraine were at a ‘dead end’ in the ongoing war, adding to growing concerns about the global oil supply. Russia is a major energy producer across the globe with Europe being a big importer. Meanwhile, OPEC slashed its outlook for global oil demand for the year due to the war in Ukraine along with rising inflation and the fresh outbreak of Covid-19 in China, the biggest importer of oil in the world. Meanwhile, the EIA crude oil inventory report posted the biggest build since March last year. The mixed report showed an increased stockpile which was offset by an improvement in gas and jet fuel demand while US production remained steady.

It’s been quite an interesting week so far with the market certainly telling us something. If you look at today, the gains were almost across the board so the breadth was wide, the measure of volatility called the VIX has calmed down which shows you the appetite of risk - it’s back on the table today and within all this, we could be at peak inflation with signs of used car prices easing along with freight prices slowing down. However, the wild card is the war in Ukraine which continues to impact commodity prices, energy and soft commodities like wheat. Amid this are the other data that we have been following with a tight labour market that is close to pre pandemic levels, wage growth is on the rise, and retail spending is in focus especially in the travel and leisure space, given that consumer discretionary was the outperformer today.

Figures around the globe

European markets closed mixed ahead of a European Central Bank meeting. Paris added 0.1 per cent, Frankfurt lost 0.3 per cent while London’s FTSE rose 0.1 per cent amid three decade high inflation numbers as investors fear grows on potential tighter monetary policy from the Bank of England. Britain’s consumer price index jumped to 7 per cent year over year in March, coming in higher than the 6.7 per cent estimates. On the London Stock Exchange, Rio gained 0.4 per cent, BP also rose 0.4 per cent and Shell gained 0.8 per cent.

Asian markets closed mixed. Tokyo’s Nikkei gained 1.9 per cent, Hong Kong’s Hang Seng added 0.3 per cent while China’s Shanghai Composite lost 0.8 per cent despite an easing in Covid-19 restrictions and exports soaring 15.7 per cent in March while imports were flat due to pandemic related disruptions.

ASX Wednesday wrap

Yesterday, the Australian sharemarket closed 0.3 per cent higher at 7,479 with mining and energy players pulling the rebound.

After a round of inflation from China then the US amid traders placing bets on how the the interest rate will hike in their relevant regions, investors watched the Reserve Bank of New Zealand lift interest rates by a more-than- expected 50 basis points on the view that faster moves now would dampen the risk of hot inflation in the future. The RBNZ has now raised rates by 125 basis points since October as inflation soars to a 32-year high.

Travel stocks took off with Flight Centre Travel (ASX:FLT) up 2.3 per cent at $20.1 and Corporation Travel (ASX:CTD) closing 2.5 per cent higher at $23.69 on the back of Aussies’ ability to travel across the tasman to New Zealand as they reopen its borders to Australian travellers ahead of the Easter long weekend.

Flight Centre (ASX:FLT) has completed its acquisition of an additional 47.5 per interest in travel technology business TP Connects.

Oil and coal prices rebounded more than six per cent amid China easing its lockdowns and a fall in Russian oil and gas production that raised global supply concerns.

Woodside Petroleum (ASX:WPL) closed flat while Santos (ASX:STO) and Beach Energy (ASX:BPT) rose over 1 per cent each while Whitehaven Coal (ASX:WHC) surged 3.2 per cent to $4.54.

Meanwhile, iron ore miners rallied with Rio Tinto (ASX:RIO) leading the circle by 2 per cent at $120.50 while Fortescue Metals Group (ASX:FMG) added 0.8 per cent higher at $21.34 while BHP Group (ASX:BHP) closed 0.1 per cent higher at $51.78.

Lithium and gold producers, including AVZ Minerals (ASX:AVZ) surged 11.7 per cent at $1.15, Pilbara Minerals (ASX:PLS) rose 2.1 per to $2.96 while Regis Resources (ASX:RRL) and Northern Star (ASX:NST) both added over 1.5 per cent.

EML Payments (ASX:EML) responded to press speculation regarding a potential takeover by Bain Capital. EML says that “it was in discussions with Bain Capital” earlier in the year “regarding a potential change of control proposal”, but advises that “those discussions have now ceased”.

The best-performing stock was AVZ Minerals (ASX:AVZ), closing 11.7 per cent higher at $1.15. It was followed by shares in EML Payments (ASX:EML) and Paladin Energy (ASX:PDN).

The worst-performing stock was Adbri (ASX:ABC), closing 4.6 per cent lower at $2.88. It was followed by shares in James Hardie Industries (ASX:JHX) and Perpetual (ASX:PPT).

In terms of broker moves, Goldman Sachs reinstated its coverage for Lynas (ASX:LYC) with a neutral rating with a price target of $9.50, while shares fell 1.8 per cent to $9.52. Morningstar bumped Megaport’s (ASX:MP1) rating to a buy from a hold, with shares up 0.8 per cent to $12.01. The analysts at Citi raised Webjet’s (ASX:WEB) rating to a buy with a price target of $6.50, while shares closed 2.5 per cent higher at $5.44.

Iluka Resources (ASX:ILU) closed 1.4 per cent higher at $12.60 following their annual general meeting today. Keep in mind that the company reported net profit after tax for the full year coming in above analysts’ estimates underpinned by strong operating performance and increased demand offsetting supply side challenges. Iluka Resources also announced its plan to demerge its subsidiary Sierra Rutile, in order to focus its capital and attention on its core Australian assets as it heads into the rare earths sector.

Chorus (ASX:CNU) closed 1.9 per cent higher at $6.76 amid news that fibre connections rose to 939,000, with fibre uptake across the completed ultra fast broadband footprint rising to 69 per cent from 67 per cent.

Scrap metals group Sims (ASX:SIM) closed 0.2 per cent higher at $21.89 amid news to take early steps in trying to decarbonise the economy, according to the AFR.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.2 per cent gain.

What to keep an eye out for today

The Australian Bureau of Statistics is set to release its labour force survey results for March which economists expect could see the unemployment rate fall to 3.9 per cent from four per cent, its lowest level since 1974 and 40,000 new jobs added into the economy with the participation rate to come in to 66.5 per cent from 66.4 per to a new record high.

Tech shares could rebound today with Block’s US counterpart closing 0.7 per cent higher.

Barrenjoey rates Incitec (ASX:IPL) as overweight with a price target of $4.50 and Orica (ASX:ORI) as neutral with a price target of $16. Citi lowers Iluka’s (ASX:ILU) rating to a sell while Morningstar has cut National Australia Bank’s (ASX:NAB) rating to a sell from hold while boosting Newcrest Mining’s (ASX:NCM) rating to a buy and South32 (ASX:S32) to a hold vs sell.

Keep an eye out for an earnings update from Alkem (ASX:AKE), Bank of Queensland (ASX:BOQ), Netwealth (ASX:NWL) and SkyCity (ASX:SKC).

IPO

There is one company set to make its debut on the ASX today. Keep an eye out for Narryer Metals (ASX:NYM) after raising $5 million at 20 cents per share.

Ex-dividend

There are three companies set to trade without the right to its dividend.

Diverger (ASX:DVR) is paying 1.5 cents fully franked
New Hope Corporation (ASX:NHC) is paying 30 cents fully franked
Spheria Emerging Companies (ASX:SEC) is paying 2.5 cents fully franked

Dividend-pay

There are 23 companies set to pay eligible shareholders today.

Adairs (ASX:ADH)
Brisbane Broncos (ASX:BBL)
Beacon Minerals (ASX:BCN)
Brambles (ASX:BXB)
Cash Converters International (ASX:CCV)
Cadence Capital (ASX:CDM)
Cadence Opportunities Fund (ASX:CDO)
Cosol (ASX:COS)
Fonterra Shareholders' Fund (ASX:FSF)
Gale Pacific (ASX:GAP)
Garda Property Group (ASX:GDF)
IVE Group (ASX:IGL)
Pacific Current Group (ASX:PAC)
Peet (ASX:PPC)
Pepper Money (ASX:PPM)
Qualitas Real Estate Income Fund (ASX:QRI)
Super Retail Group (ASX:SUL)
Virtus Health (ASX:VRT)
WAM Strategic Value (ASX:WAR)
WAM Research (ASX:WAX)
WAM Alternative Assets (ASX:WMA)
WAM Microcap (ASX:WMI)
WAM Global Growth (ASX:WQG)

Commodities

Iron ore has lost 2.2 per cent to US$151.40. Its futures point to a 1.2 per cent fall.

Gold has gained $8.60 or 0.4 per cent to US$1985 an ounce. Silver is up $0.30 or 1.2 per cent to US$26.03 an ounce.

Oil has jumped $3.65 or 3.6 per cent to US$104.25 a barrel.

Currencies

One Australian Dollar at 7:00 AM has found a level of support from yesterday, buying 74.54 US cents (Wed: 74.56 US cents), 56.86 Pence Sterling, 93.60 Yen and 68.45 Euro cents.

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics

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