The Dow took a bow at close of trading in the US overnight up over 500 points, with the ASX set to follow suit this morning.
The S&P/ASX 200 closed 0.5% higher on Thursday after trading more than 1% higher in the early afternoon.
The trend is set to continue.
Here’s what we saw:
- The Aussie dollar lifted from lows near US73.81 cents to highs near US74.26 cents and was near US74.15 cents at the US close.
- Global oil prices rose by 1% on Thursday after Saudi Arabia rejected calls for additional OPEC+ supply. At the same time, the IEA increased its global oil demand growth forecast in 2022 by 210,000 barrels per day.
- US crude stocks rose by a surprising 6 million barrels last week.
- The Brent crude price lifted by US82 cents or 1% to US$84 a barrel.
- Base metal prices climbed on Thursday, led by zinc's gain of 3.8%. Zinc surged to its highest price since 2007 as European smelters cut output.
- Copper gained 3.8% and traded over the US$10,000 a tonne mark.
- Aluminium was up 1.6% and hit its highest price since 2008.
- The gold futures price rose by US$3.20 or 0.2% to U$1,797.90 an ounce.
- Spot gold was trading near US$1,796 an ounce at the US close.
- Iron ore was up US$2.40 or 1.9% to US$126 a tonne.
Australian markets
The blue chips were up for the first time this week at market close yesterday, but the star performer on the ASX 200 was Netwealth Group Ltd which jumped 15.6%, its best performance since March last year and one of the company’s biggest one-day gains since listing.
It seems the fintechs were out in force with Hub24 Ltd jumping 8.7% to be the second best-performed stock on the index.
Tech shares led the ASX higher, with a 4.1% jump, followed by a 1.7% advance for materials companies, which included a 4.9% bump for South32 Ltd after it acquired a stake in a Chilean copper mine for $2.8 billion.
E-commerce group Redbubble was the laggard reporting a gross profit decline for the September quarter. RBL was down 12.5% at close of trading.
ASX futures were up 46 points or 0.6% to 7335 at 7am AEDT, pointing to a positive day on the market.
Rio downgrades iron ore shipment guidance
Life isn’t so positive for Rio Tinto Limited, which despite closing just over a percentage point higher, has downgraded its iron ore shipment guidance.
Rio has blamed labour shortages and WA’s skills crisis for the problems facing its once-dominant iron ore division and lowered its annual shipment guidance by 5 million tonnes.
The company expects to ship 320 to 325 million tonnes of iron ore from the Pilbara, down from previous expectations of 325 to 340 million tonnes. This comes despite the company having a better-than-expected September quarter shipping 83.4 million tonnes of iron ore in the September quarter, compared with the 76.3 million tonnes in the June period.
“It has been another difficult quarter operationally and despite improving versus the prior quarter, we recognise the opportunity to raise our performance. We have consequently modestly adjusted our guidance,” Rio’s chief executive Jacques Stausholm said.
“We are progressing against our four pillars and striving to make Rio Tinto even stronger, notably to become the best operator. This will ensure we continue to deliver attractive returns to shareholders, invest in sustaining and growing our portfolio, and make a broader contribution to society, particularly in relation to the drive to net-zero carbon emissions.”
TWE presents outlook for 2022
One of many peoples’ favourite topics is wine, so let’s see what Treasury Wine Estates Ltd is up to.
The company today released notes from its 2021 AGM.
The wine giant’s shares are up 32% over the past year, however, the company has flagged that due to Sydney and Melbourne lockdowns, the closure of on-premise channels means execution plans within the channel are slightly behind schedule in FY 2022.
The luxury wines channel in the Americas is also slightly behind expectations.
Despite this, it’s been a good year and lovers of the Penfolds brand, or other TWE brands, should be well-stocked for the festive season if they choose to be.
CEO Tim Ford highlighted the company’s performance in trying times.
“In fiscal 21 we successfully delivered a strong trading performance across the globe against a backdrop of significant external disruption from the ongoing global pandemic, wildfires in California and the introduction of significant import duties on Australian wine sold into China.
“Reported net sales revenue declined 3%, however, on an organic basis, which excludes the impact of currency and the US commercial brands divested in March, revenue increased by over 4%.
"Pleasingly, top line growth was achieved in all regions outside of China, and was led by our $10-30 Premium portfolio, with strong performance delivered by a number of priority brands including 19 Crimes, Pepperjack, Squealing Pig, Beringer Brothers and Matua.
"The most pleasing aspect of our sales mix in fiscal 21 was the six per cent increase in the luxury and premium portfolio contribution of our global revenue, which now sits at 77%.”
As for the coming year, Ford highlighted TWE’s ambition to become the “world’s most admitted premium wine company”.
“The Penfolds team will be focused on growing global demand for the brand by attracting new consumers and expanding distribution and availability in the right channels and markets, while optimising the portfolio for long-term growth, with the execution of a multi-country of origin strategy that will include propositions sourced from the US and France. Investing behind this strategy will continue to be a priority, and we are currently finalising the acquisition of an additional winery and vineyards in Bordeaux that will provide incremental sourcing and production capacity for Penfolds.
“Treasury Americas will be focused on driving relentless focus on premiumisation across the business, delivering portfolio expansion through bold, consumer-led innovation, and completing the brand and asset optimisation program that we commenced over a year ago. The Americas team will also pursue opportunities to further complement what is now a highly 11 focused portfolio of premium brands, either organically or through targeted bolt-on acquisitions that meet our strategic and financial criteria.
“For the Treasury Premium Brands team, the focus will be expanding a fantastic portfolio of premium brands across priority growth markets and channels, building out multi-country of origin consumer offerings, and establishing a sustainable, fit for purpose cost and capital base that will support the margin ambitions we have outlined for the division.”
All this talk of wine is making me thirsty.
With lockdowns coming to an end, it is expected that most alcohol producers will be happy to have people back in the pubs, restaurants and bars and that revenues for 2022 could smash some records.
Australian indices
- ASX 200 rose 0.54% to 7,311.70.
- ASX24 futures rose 0.6% to 7,335.
- S&P/ASX Small Ordinaries rose 1.36% to 3,501.90.
- All Ordinaries was stable at 7,620.20.
US markets
Wall St finished higher on the back of strong results from US majors.
Banks were in a good position after solid earnings results.
“It’s a bit of a sigh of a relief rally,” said Art Hogan, chief strategist at National Securities. “Earnings are here and so far they’re not disruptive.”
We spoke to eToro’s Josh Gilbert about the performance of Bank of America (NYSE:BAC) and Wells Fargo and what this means.
Bank of America
“Bank of America reported its Q3 earnings of US$0.85 on revenues of US$22.8 billion, compared to analysts' estimates of US$0.71 per share on revenues of US$21.73 billion.
“Last year, Bank of America saw its profits hurt by credit loss provisions and lower net interest income. However, profits this year are recovering, thanks to rising bond yields and the economic recovery. As a result, Bank of America beat earnings expectations by 19% and experienced growth of 58% growth year-over-year, higher than the 17 per cent financial sector expectation. This was further boosted by credit loss releases of USD$1.1 billion.
“Bank of America’s net interest income came in at US$11.1 billion, up 10% from the year-ago period. Average loan balances were up 8 per cent year-over-year, to US$200 billion.
“Bank of America continues to expand its digital efforts, with branch numbers dropping by 29% from 2009 and mobile banking users multiplying by more than 8x in that same period. Ultimately, this keeps costs lower and has driven the ratio of costs to deposits down from 2.5% in 2010 to 1.3% in 2021. Overall, this helps Bank of America to stay relevant amongst the rise of neobanks and fintechs across the industry.”
Wells Fargo
“Wells Fargo reported its Q3 earnings of US$1.17 on revenues of US$18.83 billion, compared to analysts' estimates of US$0.97 per share on revenues of US$18.39 billion.
“Earnings for Wells Fargo grew by 67% year-over-year and benefited from loan loss releases of US$1.7 billion or US$0.30.
“Wells Fargo’s net interest income suffered in 2020 with interest rates falling to rock bottom. For Q3, this figure came in at US$8.91 billion, down 5% year-over-year, as a result of weak loan demand.
“The bright spot for Wells Fargo was its banking revenues, which climbed by 12% due to higher advisory fees with the record activity from IPOs and M&A. However, its trading activity dipped, demonstrating a 15% decline.
“This was a mixed report from Wells Fargo, beating bottom-line expectations, but showing weak year-over-year growth in some key segments which might disappoint some investors. Despite this, Wells Fargo is the best positioned for rising interest rates amongst the large banks, with more than 50% of its revenue coming from net interest income.”
US indices
- Dow Jones rose 1.6% to 34,912.56.
- S&P 500 rose 1.7% to 4,438.26.
- Nasdaq rose 1.7% to 14,823.43.
European markets
European stocks were also up on Thursday –the highest in more than two weeks.
Investors are hoping that a steady economic recovery will benefit corporate earnings despite signs of elevated inflation.
Mining shares jumped 3.3%, their biggest daily gain in three months.
British e-commerce company THG was the strongest performer with its shares rebounding 10.6% after a disappointing capital markets day earlier in the week
Technology stocks rallied, with the top gainers including European chipmakers ASML, Infineon and BE Semiconductor. Taiwan chip giant TSMC posted a 13.8% jump in third-quarter profit due to booming demand for semiconductors.
In other sectors, French advertising group Publicis gained 2.7% after it raised its outlook for 2021. It is backing a global shift towards digital media and e-commence. British rival WPP rose 0.5%.
There was some red: Danish food ingredients maker Chr Hansen fell 6.7% after fourth-quarter profit came in below estimates.
European indices
- STOXX 600 rose 1.2% to 465.92.
- German Dax rose 1.4% to 15,462.72.
- UK FTSE rose 0.9% to 7,207.71.