ASX Futures were down 27 points or 0.4% to 7,237 at 7am this morning, with Australian shares expected to open lower.
The slow start this morning comes on the back of Wall Street’s losses overnight.
While the US markets started strongly, losses in afternoon trading erased the modest gains.
The Evergrande crisis continues, with the property giant reported to have missed a US$150 million coupon payment yesterday.
According to Joseph Palmer & Sons director Alex Moffatt, “Two series of Evergrande bonds, a 9.5% 2022 issue and a 10% 2023 were due to pay coupons yesterday but have 30 days in which to do so in order to avoid a default.
"Investors who had bought this junk were clearly lured by the yield and probably did not do enough due diligence on the capacity of the borrower to not only meet coupon payments but to repay the capital at maturity.”
In the midst of market downturns yesterday, oil continued to surge. As we have noted previously, the widening global power crisis is continuing to increase demand for oil ahead of winter in the Northern Hemisphere. This has led investors to factor in inflationary pressures which could derail economies.
Here’s what we know:
- The Aussie dollar rose from lows near US73.15 cents to highs near US73.72 cents and was near US73.45 cents at the US close.
- Global oil prices lifted by 1.5% on Monday, fuelled by the rebound in global demand that has also contributed to power and gas shortages in key economies like China.
- The Brent crude price rose by US$1.26 or 1.5% to US$83.65 a barrel after touching the highest level since October 2018.
- Aluminium was up 3.3% to the highest price since 2008 as a deepening power crisis squeezes supplies of the energy-intensive material.
- Zinc rose 2.6%.
- Copper rose 2.3%.
- Nickel fell by 0.5%.
- The gold futures price fell by US$1.70 an ounce or 0.1% to U$1,755.70 an ounce.
- Spot gold was trading near US$1,753 an ounce at the US close.
- Iron ore surged US$11.90 or 9.5% to US$136.95 a tonne. The expectations for iron ore look better with some Chinese steelmakers expected to resume operations after achieving deeper-than-expected production cuts.
Australian market
While the market may be down this morning, there are good news stories for investors in Telstra Corporation Ltd (ASX:TLS) and CSL.
Telstra will announce a return to full-year growth at its AGM today.
Confidence comes from a strong performance in its mobile business, discipline in its cost reduction targets, green shoots in growth businesses and a lessening impact from the NBN.
The T22 turnaround plan delivered cost reductions of $2.3 billion, with Telstra on track to deliver its productivity target of $2.7 billion.
Telstra lost over $6 billion in profit over the last decade, with the NBN having a major impact, along with a drop in voice revenues, SMS revenues, global roaming and general economic pressures.
These issues have put pressure on earnings, dividends and Telstra’s share price which is currently sitting at $3.85. Five years ago, it was just over $5 and has dropped 25% in that time. Its lowest ebb was 2010, when it was trading at just $2.85.
Seems there is now a light at the end of the tunnel.
Another to watch is Aussie biotech CSL, which has reaffirmed its full-year guidance to the end of June.
CSL has reported that revenues are expected to grow between 2-5%, with net profit after tax landing between $2.15 billion and 2.25 billion.
"CSL is a growth company,” CEO Paul Perreault said.
"Although the impact of COVID on plasma collections puts FY22 behind this year’s profit number, we will continue to invest in the business and look forward to returning to the growth all of you expect from CSL."
Australian indices
- ASX 200 fell 0.19% to 7,284.70.
- ASX24 futures fell 0.2% to 7,226.
- S&P/ASX Small Ordinaries fell 0.26% to 3,440.50.
- All Ordinaries fell 0.21% to 7,585.00.
US market
It was a partial holiday in the US for Columbus Day yesterday and Bond markets were closed, which may, in part, explain why Wall St was lower.
As we know, there are other factors at play.
Equities traded lower by around 0.7%.
According to Moffatt, “Bond dealers are keeping an eye on the Chinese high yield market with another couple of developers, Modern Land and Sinic, joining the slow-moving train wreck. President Xi is exercising his control by launching inspections of financial institutions to see of the likes of the property developers are too close to state-owned banks and investment houses, and even regulators.”
In other words, traders are assessing news reports that China is expanding its crackdown to include banks.
On the shares front, JPMorgan Chase fell by 2.1% ahead of its third-quarter earnings report on Wednesday. Southwest Airlines (NYSE:LUV) shares slipped 4.2% after data from flightaware.com showed that it cancelled at least 30% of its scheduled flights on Sunday.
US indices
- Dow Jones fell 0.7% to 34,496.06.
- S&P 500 dropped 0.7% to 4,361.19.
- Nasdaq fell 0.6% to 14,486.20.
European markets
British and European bourses were mixed with London up 0.7%, Paris up 0.2% and Milan and Frankfurt down by 0.5% and 0.05% respectively. Amongst Asian bourses only the Shanghai Composite eased … by a whisker.
Mad Cow may also be rearing its ugly head again, with a case discovered last month.
This has led the Chinese to react by banning all imports of beef under 30 months of age.
Generally, the markets were mixed.
Travel and leisure shares were down 0.9%, while basic resources shares gained 3%.
Shares of British banks HSBC, Lloyds and NatWest all rose over 2% after 'hawkish' comments from Bank of England officials drove more bets on a November interest rate hike.
In London trade shares in Rio Tinto rose 3.5%) and BHP was up 3.2%.
European indices
- STOXX 600 rose 0.52% to 457.53.
- German Dax fell 0.1% to 15,199.14.
- UK FTSE rose 0.7% to 7,146.85.