The ASX will rise this morning, following gains in Europe and the US.
While it seems inflationary pressures are a concern, there has been no real significant downturn on those worries.
Investors also took the latest Federal Reserve minutes in their stride as well.
The minutes of the last Fed meeting were released overnight and showed the bank could begin a gradual tapering process as soon as next month.
All-in-all overnight augurs well for a good day for Australian stocks.
Here’s what we know:
- The Aussie dollar lifted from lows near US73.25 cents to highs near US73.81 cents and was near US73.80 cents at the US close.
- Commsec tells us “Global oil prices eased on Wednesday after OPEC's estimate for global oil demand growth this year was reduced from 5.96 million barrels a day to 5.8 million barrels a day.
- The Brent crude price fell by US24 cents or 0.3% to US$83.18 a barrel.
- Base metal prices were mostly higher on Wednesday.
- Zinc was up 5%, surging to three-year highs after producer Nystar slashed output at three European smelters due to surging power prices.
- The gold futures price rose by US$35.40 or 2% to U$1,794.70 an ounce.
- Spot gold was trading near US$1,792 an ounce at the US close.
- Iron ore slid US$4.90 or 3.8% to US$123.60 a tonne.
Australian market
In a good sign for the day ahead, ASX futures were up 49 points or 0.7% to 7281 near 6.20am AEDT.
The S&P/ASX200 closed little unchanged on Wednesday sitting at 7,272.50.
Over the last five days, the index has gained 0.92% and is currently 4.72% off of its 52-week high.
The top-performing stocks in this index were the A2 Milk Company Ltd up 13.45% and GUD Holdings Limited (ASX:GUD) up 8.72%.
Coal on the rise
The coal price is surging and Whitehaven Coal believes record thermal coal prices will result in heavy cash generation as we head into the festive season.
Whitehaven says it is yet to benefit from the price surge due to pricing lags, but that will soon change.
Newcastle thermal coal has surged to an all-time high of $US243 a tonne.
Buyers are now lining up for supplies of the commodity used for power generation ahead of the Northern Hemisphere winter, creating an energy crunch reverberating through major economies, including China.
Further to this, premium metallurgical coal, used for steelmaking, more than doubled to $US412 a tonne.
Industrial demand for metallurgical coal has roared back to life post-pandemic lockdowns.
"During recent weeks, thermal coal prices reached record highs which we will see reflected in significant cash generation over the coming months," Whitehaven managing director Paul Flynn said.
"The economic rebound has driven a rapid increase in the demand for high energy coal for both power generation and industrial processes.
"Meanwhile, disruptions across multiple supply chains, including the Newcastle coal supply chain, have tightened coal supply."
RBA’s climate warning
RBA deputy governor Guy Debelle has warned that climate-conscious global investors will move elsewhere and the pressure on Australia to adopt a net-zero by 2050 emissions target will only grow stronger.
“The transition path to net-zero needs to be funded and that will require funding for projects with varying degrees of emissions intensity, not just those with zero. The longer we leave actions to reduce carbon emissions, the more likely it is that we will need to take drastic and disruptive actions later,” Dr Debelle said.
However, Dr Debelle did say that “simply shutting down parts of the economy is unlikely to deliver a socially optimal transition”.
“It is not necessary today to go down such a path, though the time we have before such a path might be necessary is decreasing,” he said.
“Investors will adjust their portfolios in response to climate risks. Governments in other jurisdictions are implementing net zero policies. Both of these are effectively increasing the cost of emissions-intensive activities in Australia,” Dr Debelle said.
“So, irrespective of whether we think these adjustments are appropriate or fair, they are happening and we need to take account of that. The material risk is that these forces are going to intensify from here,” he said.
Australian indices
- ASX 200 rose 0.68% to 7,321.90.
- ASX24 futures rose 0.7% to 7,282.
- S&P/ASX Small Ordinaries rose 0.79% to 3,482.30.
- All Ordinaries rose 0.66% to 7,622.00.
US markets
US markets were mixed overnight, but mostly in the green.
The inflation report for September in the US was released yesterday and showed a 0.4% increase, slightly lower than the 0.5% gain forecast by economists.
Year-on-year consumer price inflation is up by 5.4% and excluding the volatile food and energy components, the rise was 4% for the year and 0.2% for the month, both lower than generally forecast.
According to Joseph Palmer & Sons director Alex Moffatt, “The outcomes may be the early sign that the inflation spike is indeed transitory.”
Here is Moffatt’s take on what happened overnight.
“The bond market reacted according to script with yields at the short end of the curve rising again and longer-dated yields falling further and thus flattening the curve a bit more. The logic is that while inflation is high now and growth relatively robust, both measures will slow, hence the lower long-term yields.
“By a happy coincidence, the minutes of the last Federal Reserve meeting were also released overnight and showed the bank could begin a gradual tapering process as soon as next month.
“Supply chain issues seem to be starting to ease, which will also help restrain inflation. China reported a strong month of exports with a 28.1% rise year-on-year to a new record US$305.7 billion.
“Equity investors seemed happy with all of the above and pushed prices higher giving the major indices a modest boost. Local index futures are pointing to a gain of 45 points today and the Dollar is also trading higher at US$0.7378.
US indices
- Dow Jones was unchanged at 34,377.81.
- S&P 500 rose 0.3% to 4,363.8.
- Nasdaq rose 0.7% to 14,571.64.
European markets
Were also in the green yesterday. Technology shares led the way with a gain of 2.6%, with SAP shares up 3.9% after it raised its full-year revenue outlook.
The UK FTSE index rose 0.2%, held back by a 2.1% fall in banks.
In London trade shares in Rio Tinto and BHP both fell by 1.5%.
European indices
- STOXX 600 rose 0.70%% to 460.39.
- German Dax rose 0.7% to 15,249.38.
- UK FTSE rose 0.2% to 7,141.82.