October 20, 2021

tacere

Beauty Made Perfect

ASX to fall, techs power Nasdaq higher

“There’s more fear of missing out (FOMO) than the fear of losing money here right now and tech stocks have a lot of FOMO,” Dennis Dick, a proprietary trader at Bright Trading, told Reuters.

With the S&P 500 up almost 14 per cent as the first half of 2021 draws to a close, activity in some areas of the market indicates concern over potential volatility, with some investors suggesting the market may be overdue for a significant pullback.

Iron ore prices rose 1 per cent on Monday to $US218.62 a tonne, according to Fastmarkets MB, supported by a steady decline in portside stockpiles of the steel making ingredient in China.

Imported iron ore stocked at Chinese ports dropped for a fourth straight week to 123.95 million tonnes, as of Friday, hitting the lowest level since early October, data from SteelHome consultancy showed.

In its latest quarterly review, the Department of Industry, Science, Energy and Resources sees iron ore prices drifting lower as 2021 progresses:

“Prices are forecast to average around $US150 a tonne in 2021, before falling to below $US100 a tonne by the end of 2022, as Brazilian supply recovers and Chinese steel production softens.”

Today’s agenda

No local data

Overseas data: Euro zone consumer, economic and industrial confidence June; US FHFA house prices, S&P CoreLogic CS house prices April, Consumer confidence index June

Market highlights

ASX futures down 15 points or 0.2 per cent to 7190 near 6.15am AEST

  • AUD -0.3% to 75.66 US cents
  • Bitcoin on bitstamp.net +5.3% to $US34,524.36 as of 6.30am AEST
  • On Wall St: Dow -0.4% S&P 500 +0.2% Nasdaq +1%
  • In New York: BHP -0.6% Rio -0.7% Atlassian -0.6%
  • Tesla +2.5% Facebook +4.2% Microsoft +1.4% Apple +1.3%
  • In Europe: Stoxx 50 -0.8% FTSE -0.9% CAC -1% DAX -0.3%
  • Spot gold -0.2% to $US1778.77/oz at 3pm New York time
  • Brent crude -2.2% to $US74.54 a barrel
  • US oil -1.7% to $US72.79 a barrel
  • Iron ore +1% to $US218.62 a tonne
  • 2-year yield: US 0.25% Australia 0.6%
  • 5-year yield: US 0.90% Australia 0.85%
  • 10-year yield: US 1.48% Australia 1.58% Germany -0.19%
  • US prices as of 4.27pm in New York

From today’s Financial Review

Perth plunged into snap lockdown with miners told to stay home: The mining industry told to keep workers on site or at home as the WA government moves to restrict the spread of delta variant by locking down Perth until at least Saturday.

For more Financial Review coverage of the nation’s battle against COVID-19, click here.

Frydenberg’s account of the future is a whitewash: With an election around the corner, nobody in government wants a genuine debate about difficult things such as spending priorities, who should pay the necessary taxes, or structural reform.

Skills crisis pushes up tech wages by a third: Workers with skills in security, data and the cloud are 30 per cent more expensive now than they were a year ago.

Major banks weigh up how to return excess capital: The bean counters at the big banks have to work out how they are going to return nearly $40 billion of excess capital to shareholders.

United States

The White House is working on an antitrust executive order that aims to push government agencies to consider how their decisions will impact competition in an industry, according to two sources familiar with the matter.

The drive to release such an order comes as House lawmakers are moving forward with sweeping antitrust legislation aimed at restraining the power of Big Tech companies such as Facebook, Alphabet’s Google, Amazon and Apple and staving off corporate consolidation.

United Airlines is poised to place an aeroplane order potentially worth $US30 billion at list values for up to 270 narrow body jets in a bid to secure a pandemic recovery at favourable prices, industry sources said.

The order could include up to 200 Boeing 737 MAX and some 70 Airbus A321neo which competes with the top end of the MAX family for single-aisle trips needing the most range.

JPMorgan acquired a 40 per cent stake in Brazilian digital bank C6 Bank, the companies said, marking the debut in retail of the US bank in Latin America’s biggest economy.

Cyber security firm SentinelOne Inc, backed by billionaire investor Daniel Loeb’s hedge fund Third Point, has boosted the price range for its IPO and is now looking to raise about $US1.02 billion, a regulatory filing showed.

Europe

European shares ended lower on Monday, with travel stocks leading losses on concerns over bans on British tourists, while a spike in Asian COVID-19 infections hit crude prices and energy stocks tumbled.

The pan-European STOXX 600 ended 0.6% lower, with the travel and leisure index down 4.4 per cent to a one-month low.

The Times reported that Germany was considering a ban on British travellers to the European Union, regardless of their vaccination status, because of the highly contagious, widespread Delta variant of the coronavirus.

Hong Kong also announced a ban on all passenger flights from the UK, starting this week, due to similar concerns.

International Consolidated Airlines, Easyjet , Wizz Air and Ryanair fell between 4 per cent and 6 per cent.

“Despite a number of popular tourist spots now being on offer to British holiday makers thanks to the government’s updated green list, it is precarious and it won’t mean a great deal if Germany gets its way and UK tourists are banned entry to the whole EU because of a concern over the Delta variant,” said Danni Hewson, financial analyst at AJ Bell.

Germany’s DAX index ended 0.3 per cent lower, while British blue-chip stocks shed 0.9 per cent.

Burberry Group’s shares tumbled 8.7 per cent to the bottom of the STOXX 600 as CEO Marco Gobbetti resigned to take the top job at Italian luxury group Salvatore Ferragamo. Ferragamo shares fell 2.7 per cent.

Asia

China’s blue-chip index ended higher on Monday, underpinned by tech gains, as investors hoped for continued policy support.

The blue-chip CSI300 index rose 0.2 per cent, to 5251.76, while the Shanghai Composite index was unchanged at 3606.37

Heavyweight financial firms fell, with the CSI300 financials index closing down 1.6 per cent, snapping a four-day winning streak

Tech stocks outperformed on Monday. Shenzhen’s tech-heavy start-up board rose 1.9 per cent, and Shanghai’s tech-focused STAR50 index climbed 1.8 per cent.

Beijing will not change or could even step up its support for the country’s technology sector, which is the biggest good news for related stocks in the A-share market, brokerage Orient Securities said in a report.

In Hong Kong, the Hang Seng index closed 19.92 points or 0.1 per cent lower at 29,268.30. The Hang Seng China Enterprises index fell 0.1 per cent to 10,863.57.

Currencies

Fed digital dollar poses risks with unclear benefit: A US a central bank digital currency “could pose significant and concrete risks”, the bank’s top supervisor Randal Quarles said.

Germany’s Jens Weidmann and Austria’s Robert Holzmann became the first ECB rate-setters to openly debate the prospect of winding down its €1.85 trillion Pandemic Emergency Purchase Programme (PEPP) as the economy improves. Both central bank governors are outspoken “hawks” who favour tighter monetary policy to keep inflation in check.

“In my opinion, (2022) would no longer be a year of crisis if the assumptions about the course of the pandemic and the expectations about its economic effects are essentially confirmed,” Weidmann said via video link at a German banking event.

“In order not to have to end the PEPP suddenly … the net purchases could be reduced step by step in advance.”

Here’s a PDF of the latest economic outlook for Australia from the Department of Industry, Science, Energy and Resources quarterly outlook, in case you missed it:

The Swiss National Bank “is not anywhere close” to starting a normalisation of its expansive monetary policy based on the world’s lowest interest rate and currency interventions, governing board member Andrea Maechler said.

The central bank has not started to reduce its vast balance sheet, Maechler told a UBS economics event, adding the SNB did not have a settled sequence of actions it would take when it eventually decided to change course.

Commodities

Iron ore stokes $310b mine export boom: Resources revenues are expected to rise in 2021-22, in contrast to the forecast three months ago.

Here’s a PDF of the latest iron ore sector view from the Department of Industry, Science, Energy and Resources, in case you missed it:

Recovering coal sector scans for labour squeeze: More workers should be needed as coal prices lift from recent lows, but the industry has to battle iron ore – and even the construction sector.

Australian sharemarket

ASX ends little changed as travel stocks punished in lockdown: Australian shares were little changed on Monday as new COVID-19 cases and heightened restrictions across the country weighed heavily on travel stocks.

Temple & Webster shines in return to lockdown: The ASX was flat on Monday but Temple & Webster stormed back with a 10 per cent rally. Redbubble, Kogan and Dan Murphy’s owner Endeavour were also in front.

Street Talk