The ASX is expected to open flat this morning.
ASX futures were up about 0.1% at 7,422 at 6.30am AEDT.
However, it won’t be enough to spark too much action.
Here’s what we saw:
- The Aussie dollar held between US74.88 cents and US75.24 cents and was near US75.05 cents at the US close.
- Global oil prices rose by up to 1.1% on Tuesday to 7-year highs. According to Commsec, “traders expect tight global markets to continue with forecasts for a colder-than-normal November”.
- The Brent crude price rose by US41 cents or 0.5% to US$86.40 a barrel.
- The US Nymex crude price rose by US89 cents or 1.1% to US$84.65 a barrel.
- Base metal prices fell by between 0.4-1.6% on Tuesday with lead down the least and aluminium down the most.
- Copper fell 1.1% on fears that a power crisis in China will crimp demand.
- The gold futures price fell by US$13.40 or 0.7% to U$1,793.40 an ounce.
- Spot gold was trading near US$1,793 an ounce at the US close.
- Iron ore rose by US$3.00 or 2.5% to US$122.75 a tonne.
Australian market
The economy is expected to contract about 3% in the September quarter, Treasury secretary Steven Kennedy told a Senate estimates hearing on Wednesday morning.
This would make it the "the second largest fall in the history" of the data.
However, as the borders reopen and vaccination rates climb, we should see a speedy recovery.
"We are expecting the transition away from emergency household and business support to continue smoothly," Kennedy said.
Meanwhile, the Australian Bureau of Statistics (ABS) will meet today.
The ABS will talk about the hot topic of inflation, which it tips will pull back from a 12-year record in the September quarter.
This is despite pandemic-related supply chain pressures.
Bloomberg has surveyed economists who predict annual CPI growth of 3.1%, down from 3.8% in the June quarter – its highest level since 2008.
Quarterly growth is expected to remain steady at 0.8%.
Woolworths could be star of the day
Woolworths boosted sales in the first quarter of FY22, defying supply chain issues.
Woollies today announced sales of $16.07 billion across its Woolworths and Big W businesses. This is 7.8% higher on the same time last year.
Online sales grew 53.5% year on year to $1.87 billion.
COVID seems to have a positive impact on the retail giant as everyone stayed home to cook or shopped online.
Woolworths Group CEO Brad Banducci said the quarter was the "most challenging COVID quarter for our business, with the Delta variant causing major disruptions to our supply chains and stores".
However, Australian food sales grew 3.9%.
Big W, on the other hand, saw sales drop 17.5% due to store closures, sales restrictions and cycling off a period of peak demand.
The end of lockdowns should bring a reversal of fortune for the Big W brand.
"In October to date, sales have slowed in Australian food as NSW lockdown restrictions have eased,” Banducci said.
"In contrast, Big W sales trends have improved as Greater Sydney stores open again."
US markets
Wall St was firm on Tuesday on the back of generally positive earnings results.
In response to their latest results, shares in United Parcel Service (NYSE:UPS) rose 7% and shares in General Electric (NYSE:GE) rose by 2%.
Shares in Facebook fell by 3.9%.
Alphabet numbers higher than analysts forecast
According to eToro analyst Josh Gilbert, "Google’s parent company, Alphabet, today revealed its Q3 2021 earnings of US$27.99 per share on revenue of US$65.12 billion, compared to analyst expectations of US$23.50 per share on revenue of US$63.39 billion.
"Alphabet has enjoyed an excellent year so far, climbing as much as 59% year-to-date, as a direct result of marketers ramping up budgets with the world's biggest search engine, Google. The company’s revenues rose by 41% year-over-year, with advertising revenues demonstrating growth of 43% year-over-year.
"Cash-flow from Alphabet’s operations has returned to record highs at US$25.5 billion after dropping to US$19.2 billion in Q1 and US$22.6 billion in Q2 2021, from highs in Q4 2020 of US$22.6 billion. Free cash flow is expected to reach US$67.5 billion by the end of 2021.
"Google currently dominates the online search industry with 80% market share, and it’s unlikely that this will change in the near future, which means that the company is likely to remain fruitful moving forward.
"Alphabet has a powerhouse of business segments in Google Search, YouTube and Google Cloud, which continue to innovate and grow. The company’s Google Cloud revenue grew by 44%, slightly lower than the 53% year-over-year growth in Q2 and coming in just below Wall Street’s expectations.
"The company’s fortress balance sheet, future growth prospects and aggressive share buybacks all point towards further strong returns in the share price moving forward. Investors adding tech to their portfolio right now will be looking for high profitability, strong cash flow, good growth, and that’s something that Alphabet offers in abundance."
Global foundries to IPO
Global Foundries could be one of the star IPOs this year.
"GlobalFoundries is set to go public on the Nasdaq on October 28, with the expectation of raising around US$1.55 billion and offering 55 million shares. The IPO is currently scheduled to be priced between US$42.00 and US$47.00, with a valuation of around US$25 billion,” Gilbert said.
"GlobalFoundries is one of the world’s leading semiconductor manufacturers and was spun off by Advanced Micro Devices (AMD) in 2009. GlobalFoundries is known as a ‘FAB’, which means it provides fabrication services to the semiconductor industry. For example, Qualcomm, known as ‘FABless’, will take its designs to a ‘foundry’ company such as GlobalFoundries for production, hence the namesake.
"GlobalFoundries faces a fair bit of competition in the space from some of the biggest foundry semiconductor firms such as Intel, Samsung and Taiwan Semiconductor Manufacturing Company (TSMC). Many of these companies are on a spending spree right now, with Intel building factories in Europe valued around US$95 billion and Taiwan Semiconductor expected to spend around US$100 billion in the next three years. Interestingly, Intel even considered acquiring GlobalFoundries earlier this year to increase production.
"Taking a deep dive into the company’s financials, GlobalFoundries reported sales of US$4.85 billion and a loss of US$1.35 billion in 2020. However, amid a global chip shortage and high demand, its losses are starting to shrink. In the first six months of 2021, it reported a loss of US$301.2 million, down 43% from the first six months of 2020.
"GlobalFoundries’ customers include some of the biggest names in the world, such as Broadcom, NXP Semiconductors and Qualcomm Inc, all of which currently supply chips to Apple. As we continue to see the demand for 5G networks and further advancements of electric vehicles (EV), GlobalFoundries will continue to see high demand and a bolstered market share. However, the company’s revenues declined 17 per cent last year, whilst the foundry sector grew by 23%, a worrying sign for potential investors.
"With any IPO, we’re likely to see volatility in the first few days of trading, so investors should remember to do their research before jumping in."
European markets
Europe was firmer as well on Tuesday on the back of generally positive earnings results.
Travel & leisure stocks rose 1.9%.
Reuters reported that "hotel operator Whitbread reported a smaller half-year loss and predicted a full-year recovery at its UK hotels in 2022."
Financials gained 0.9% on the back of strong earnings recorded by UBS (shares up 1.3%).
In London trade shares in Rio Tinto fell by 0.9% and BHP fell by 0.8%