The ASX could open higher for the first time this week, despite a weakness in US stocks brought on by inflation worries ahead of the third quarter earnings season to get underway today.
Investors seem concerned that companies will report that supply chain issues have chipped away at profits.
“Many companies that move or make things have been warning of profit pressures owing to rising input costs and supply chain related production shortfalls. This is reflected in prudent analyst consensus earnings per share estimates for the third quarter,” said David Bianco, chief investment officer for the Americas at DWS.
Here’s what we know:
- The Aussie dollar rose from lows near US73.45 cents to highs near US73.85 cents and was near US73.50 cents at the US close.
- The Brent crude price fell by US23 cents or 0.3% to US$83.42 a barrel.
- Lead, copper and nickel fell as much as 1.2% with other metals up by as much as 1.1%.
- The gold futures price rose by US$3.60 an ounce or 0.2% to U$1,759.30 an ounce.
- Spot gold was trading near US$1,760 an ounce at the US close.
- Iron ore fell by US$8.45 or 6.2% to US$128.50 a tonne.
Australian market
The ASX closed 0.3% lower on Tuesday, stung by Westpac’s $3.1 billion writedown, a move that offset gains made in the mining sector.
Miners enjoyed a day out on the back of rising commodity prices, however, Westpac closed 1.7% lower, followed by ANZ which was down 0.7%.
Westpac CEO Peter King said of the writedown, “While 2021 has been a better year for us than 2020, we are still dealing to a number of historical issues.
“Over the last year we have simplified and reduced risk in WIB through exiting energy trading, consolidating our Asian offices and reducing our correspondent banking relationships.
“While these actions have reduced risk in WIB, they have also reduced revenue.”
The Evergrande crisis, central bank tapering/tightening, supply chain disruption and the global energy crisis are all having an impact on the markets, including our own.
What may help is NSW hitting its 80% double jab target this week, which will no doubt improve business and consumer confidence.
A consideration to open national borders from November 1 this year, could also improve conditions.
A Star comes undone
Allegations this week of impropriety by Star Entertainment Group Ltd has seen its value crash by more than $1 billion in the last four days.
Shares have crashed 30% to $3.20 after reaching a calendar year high just last Wednesday.
Star is accused of ignoring red flags on money laundering, fraud and foreign interference, though the board released a statement on Monday refuting all allegations against it, claiming they were “misleading”.
The NSW Independent Liquor and Gaming Authority will investigate the allegations, with Gaming Authority chairman Philip Crawford saying investigations will be held privately – a stark contrast to the Royal Commission into Crown.
However, a Royal Commission is not yet out of the question.
In response, Star stated: “We are subject to thorough and ongoing regulatory oversight including compliance checks and reviews across the company’s operations in NSW and Queensland.
“The Star also notes the recommendations of the Bergin inquiry [into Crown Resorts], which were supported by the NSW Government on August 18, 2021. These recommendations will impact the regulation of casinos in NSW and are supported by The Star.”
Star shareholder and gambling-reform activist Stephen Mayne was disappointed with the response.
“[Star] has emulated the failed Crown Resorts strategy of broadly claiming the 60 Minutes story is misleading, without getting into the detail. It seemed compelling what the program presented with the help of whistleblowers, so there are questions about its licence to operate,” Mayne said.
The allegations have affected Star’s offer to acquire Crown Group, with any offer now unlikely to receive regulatory approval until the probe into Star’s behaviour is completed in 2022.
This puts Crown shareholder Blackstone in the box seat.
Blackstone holds 10% of Crown and is approaching the end of its probity process.
If it passes regulatory approval, it is likely Blackstone will make another offer.
Whatever happens within the gaming issue, it will have to clean up its act to keep shareholders happy.
Australian indices
- ASX 200 fell 0.26% to 7,280.70.
- ASX24 futures rose 0.2% to 7,261.
- S&P/ASX Small Ordinaries fell 0.57% to 3,429.80.
- All Ordinaries fell 0.34% to 7,575.60.
US markets
Quarterly reporting season will begin at the start of US trade, with investors on edge about profit losses.
The American inflation report is also due out this evening, with investors are focused on both inflation and unemployment: the two planks the Fed, and other central banks, are walking in their trek towards normalising interest rates.
According to Joseph Palmer & Sons director Alex Moffatt, “The Fed chairman has made it abundantly clear that he and his board see the current spike in inflation as “transitory”, hence the importance in the outcome this evening.
“On the employment plank data shows that Americans are quitting their jobs leaving over ten million vacancies in the job market. This is concerning in that employers may need to raise employee remuneration in order to keep and lure staff, this could fuel inflation.”
US indices
- Dow Jones fell 0.3% to 34,378.34.
- S&P 500 dropped 0.2% to 4,350.65.
- Nasdaq fell 0.1% to 14,465.93.
European markets
Europe was generally weaker on Tuesday.
European investors are also fretting that rising inflation will crimp company profits.
Concerns about the Chinese property sector after Evergrande missed another bond payment are also affecting the market.
Mining fell 0.7% with autos and travel down near 0.4%. Utilities and real estate rose by 1%.
In London trade shares in Rio Tinto fell 1.9% and BHP shares lost 1.2%
European indices
- STOXX 600 fell 0.070% to 457.21.
- German Dax fell 0.3% to 15,146.87.
- UK FTSE fell 0.2% to 7,130.23.