Wall St picked up earlier losses to finish the day higher yesterday, which points to a solid start for the ASX this morning.
Here’s what we know as reported by Commsec:
- The Aussie dollar climbed higher from lows near US72.25 cents to session highs near US72.75 cents at the US close.
- Global oil prices retreated from multi-year highs on Wednesday due to an unexpected lift in US crude stockpiles. US crude inventories rose by 2.3 million barrels last week, against expectations for a modest dip of 418,000 barrels, according to the US Energy Department.
- The Brent crude price fell by US$1.48 or 1.8% to US$81.08 a barrel.
- Base metal prices were mostly lower on Wednesday as concerns over China's troubled property sector, higher inflation and global growth outweighed a better-than-expected US jobs report.
- Copper fell by 1.4% with zinc 1% lower, but tin lifted 0.2%.
- The gold futures price rose by US90 cents an ounce or 0.1% to U$1,761.80 an ounce.
- Spot gold was trading near US$1,764 an ounce at the US close.
- Iron ore was unchanged at US$117.80 a tonne with China on holiday from October 1-7.
Australian market
The S&P/ASX200 went from a 0.4% gain to close 0.6% lower, down 41.9 points to 7,206.5 with financials and consumer discretionary dragging the market lower.
However, after Wall Street’s comeback last night, the ASX should start higher.
On the macro news front…
Real estate could get a shock after APRA’s decision to tighten lending criteria yesterday. APRA announced the minimum interest rate buffer on home loan applications will rise to 3% from 2.5%.
The move has been backed by Federal Treasurer Josh Frydenberg who said, “We think it's targeted and prudent and if you do a bit now, you, therefore, have to do less later,” he told Channel 7’s Sunrise.
“And that's the idea, to prevent the emergence of risks across the economy. We have a $10 trillion housing market, we have seen strong growth over the last year of the back of historically low interest rates.
“Other countries are seeing similar growth in the housing market.
“What the regulator has sought to do here is assess loans at an interest rate that is slightly higher than you would otherwise pay and so, therefore, if you have individual circumstances change, there is a bigger buffer there to provide that level of economic support.”
The move has been made to curb soaring house prices with interest rates unlikely to change in the next two years.
Just on the interest rates front, the South Korean central bank raised its base rate by 25 basis points to 0.75%. Their aim is to help curb household debt and house price rises.
The Polish central bank also raised its base rate citing inflationary concerns.
And, as we know, the Reserve Bank of New Zealand was first off the blocks raising its cash rate by 25 basis points to 0.5%, the first such move in seven years.
RBNZ noted rising property prices and inflation as the reasons for the rise.
On the micro news front …
While the housing market shows no signs of slowing down and is far from trouble, A2 Milk Company Ltd has all the trouble in the world.
A class action was brought against A2 Milk after the market closed on Tuesday.
Yesterday shares fell 5.8%.
Lawyers claim the company breached its continuous disclosure obligations when it issued four profit downgrades in nine months.
Watch this space.
Australian indices
- ASX 200 fell 0.58% to 7,206.50.
- ASX24 futures rose 0.5% to 7,210.
- S&P/ASX Small Ordinaries fell 0.86% to 3,373.40.
- All Ordinaries fell 0.53% to 7,496.20.
US markets
There’s a lot going on in the US, but let's focus on oil.
Clearly, California’s worst oil spill in almost 30 years, hasn’t had too much of an impact on the oil sector which continues to drive higher.
However, the bulls could be tempered if expectation for a 800,000-barrel increase is met.
According to Swissquote senior analyst Ipek Ozkardeskaya, “the trend is clearly to the upside, as OPEC plays for higher energy prices, and the natural gas futures continue posting an exponential rise as we start feeling the cold weather (in the northern hemisphere) knocking at the door.
“We knew that fighting against climate change would have a cost, and that cost starts materialising. In this respect, oil bulls will likely continue their journey north, but higher oil prices, combined with the global supply shortages and the bottlenecks can only dampen the earnings expectations for many companies, and weigh on the stock prices into the next earnings season.”
And what’s with Bitcoin?
After China banned cryptocurrencies, the US was next to make its intention clear.
The SEC will not ban digital coins.
In fact, Bitcoin advanced past $50,000 on that news, and news that the Bank of America (NYSE:BAC) has decided to cover the cryptocurrencies as a part of their research, saying the crypto assets are now ‘too large to ignore’.
Not all is well for Bitcoin though.
“Looking at the global energy crunch and the fight for climate, the huge energy consumption of Bitcoin could, at some point, become a burden for Bitcoin and get investors looking for greener versions of Bitcoin,” Ozkardeskaya said.
“As such, the real opportunity is in new digital tokens that will address climate issues. In this respect, energy-light cryptocurrencies will be the future.”
US indices
- Dow Jones rose 0.3% to 34,416.99.
- S&P 500 rose 0.4% to 4,363.55.
- Nasdaq rose 0.5% to 14,501.91.
European markets
The European Bourse was weaker after Poland kicked off interest rate rises.
Meanwhile, Russian Vladamir Putin offered to stabilise gas prices.
Trading in gas futures was wild before Putin’s comments with the contract for November delivery soaring 40% before steadying at a much lower level.
Soaring oil and gas prices intensified concerns inflation will dent economic growth.
Germany's factory orders slumped by 7.7% in August (survey: -2.2%) - the biggest drop in 30 years.
London-listed shares in Rio Tinto (-0.5%) and BHP (-1.4%) were both lower.
European indices
- STOXX 600 fell 1.03% to 451.33.
- German Dax fell 1.5% to 14,973.33.
- UK FTSE fell 1.2% to 6,995.87.