The ASX is likely to enjoy a strong start to the trading week, with SPI futures pointing to a gain of 0.9% at open.
Bank and technology stocks are tipped to lead the way, however, resources stocks could pull back the gains as commodity prices fall.
Here’s what we saw:
- The Aussie dollar fell from highs near US75.55 cents to lows near US75.00 cents and was near US75.20 cents at the US close.
- Global oil prices were firmer on Friday. Capping gains, Iran said talks on its nuclear program will resume by late November, raising hopes that it will be permitted to lift oil exports.
- Brent crude rose by US6 cents or 0.1% to US$84.38 a barrel.
- The US Nymex crude price gained US76 cents or 0.9% to US$83.57 a barrel. Over the week Brent crude fell US$1.15 or 1.3% and Nymex crude fell US19 cents or 0.2%.
- Base metal prices were mixed on Friday.
- Tin rose 4.5%.
- Zinc rose 0.5%.
- Lead fell by as much as 1.7%.
- Over the week metals fell 0.5-5.2% with aluminium down the most in reaction to lower Chinese coal prices. But tin rose 0.5%.
- The gold futures price fell by US$18.70 or 1.0% to U$1,783.90 an ounce.
- Spot gold was trading near US$1,783 an ounce at the US close. Over the week gold fell by US$12.40 or 0.7%.
- Iron ore slid by US$6.40 or 5.7% to US$106.75 a tonne. Over the week iron ore fell US$13.60 or 11.3%.
Source: Commsec
Australian markets
The ASX is expected to rise today after Friday’s session proved to be its worst session in a month.
The S&P/ASX200 share index fell 1.4% to 7,323.7 points, dragged down by real estate, financials and consumer discretionary sectors.
Bond yields soared during the decline, with the April 2024 bond yield jumping to 81 basis points, well above the RBA’s target.
It is likely the RBA is now abandoning its yield curve control.
The three-year bond yield rose 10 points to 1.225%, up 49 points for the week, while the important 10-year bond yield rose 24 points to 2.09%, the first time it has been over the 2% mark since March 2019.
This is all leading to a rate hike on the back of rising inflation.
CommSec chief economist Craig James sees it differently.
“Higher prices won’t be sustained until we see much stronger wage outcomes. Now. There’s anecdotal evidence that wages are lifting but we haven’t got anything in concrete form that wages are ratcheting higher together with prices,” he said.
The RBA meets tomorrow to discuss policy.
AMP chief economist Shane Oliver said, “The RBA on Tuesday is expected to weaken its dovishness in response to the faster than expected reopening of the economy and the greater than expected rise seen in underlying inflation.
“This is likely to see it bring forward its guidance for the first cash rate hike to 2023 and it may even ditch or soften its 0.1% yield target,” he predicted.
Bits and pieces
AusNet Services is set to be acquired by Brookfield in a $10.2 billion bid.
Service Stream has completed the acquisition of Lendlease Services for $185 million.
Seven West Media will acquire Prime Media Group for $121.9 million – a 57% premium to Prime Media’s close on Friday.
“This proposal is an important step forward for both companies. Seven West Media and Prime Media are great partners and have a long, successful relationship. Together, they will offer the best content for our national audience and unmatchable premium revenue opportunities for our clients,” said Seven West chief executive James Warburton.
“The acquisition means Seven West Media will become Australia’s leading commercial premium broadcast, video and news network, with the potential to reach more than 90% of Australia’s population each month.”
Westpac reported a cash profit of $5.35 billion in the 2021 financial year and announced a $3.5 billion off-market buyback, following the lead of the other major banks.
Best and worst performing sectors
The best-performing sectors last week were Communication Services up over 2% followed by Healthcare and Consumer Discretionary, up over 1%. The worst performing sectors include Consumer Staples down over 2% followed by Utilities and Materials, as they are both down over 1%.
The best performers in the S&P/ASX top 100 stocks include Reliance Worldwide Corporation (ASX:RWC) Ltd up over 10% followed by Lynas Rare Earths Ltd and Computershare Ltd, which are both up over 6%. The worst-performing stocks include the a2 Milk Company Ltd down over 11% followed by AGL Energy (ASX:AGK) Limited and Aurizon Holdings Ltd (ASX:AZJ), down over 6%.
What's next for Australian share market?
As we do each week, we caught up with Wealth Within founder and analyst Dale Gillham to get his take on what we should be looking out for.
“The indecision in the market over the last few weeks has continued given that four of the last eight trading days have closed within a few points of where they opened for the day. The All Ordinaries index was only just in the green.
“Looking at the top 20 stocks, 13 were in the red last week, however, six of the largest 10 stocks were in the green, which is why the market is holding up. Given the sustained indecision, I believe we may now experience a down week next week, so don’t be surprised to see the market fall away.
“As I continue to say, right now it will pay to be patient, as there will be some great purchasing opportunities in the market once it turns to trend up.”’
Australian indices
- ASX 200 fell 1.44% to 7,323.70.
- ASX24 futures rose 0.9% to 7,348.
- S&P/ASX Small Ordinaries fell 0.55% to 3,502.90.
- All Ordinaries fell 1.30% to 7,639.10.
US markets
The US ended the week well, with sharemarkets advancing to new highs.
While Apple down 1.8% and Amazon down 2.2% tried their best to drag things down following disappointing earnings, the US proved resilient to the finish.
In October the Dow rose 5.8%, the S&P 500 rose 6.9% and the Nasdaq rose 7.3%.
How much will big pharma make from COVID?
While some anti-vaxxers, or anti-COVID-19 vaxxers, have been urging people to follow the money, we’ll soon find out exactly how much big pharma is making.
Pfizer and Moderna are expected to report in the coming week.
In the first half of the year, Pfizer Inc (NYSE:PFE). and Moderna Inc. reported collective sales of $17.2 billion for their vaccines, the totals are expected to be higher in Q3 to a collective $18 billion.
Pfizer is scheduled to report earnings on Tuesday. It collected revenue of $11.3 billion in the first half of the year from its COVID-19 vaccine: analysts project third-quarter sales of $11.86 billion.
Moderna reports on Thursday morning. Moderna is expected to report vaccine sales of $6.17 billion in the third quarter, after collecting $5.93 billion in the first half.
Johnson & Johnson (NYSE:JNJ) reported more than $500 million in third-quarter sales last week, nearly double the $264 million it collected in the first half.
US indices
- Dow Jones rose 0.3% to 35,819.56.
- S&P 500 rose 0.2% to 4,605.38.
- Nasdaq rose 0.3% to 15,498.39.
European markets
Trading in Europe was mixed on Friday.
Insurers and banks rose but mining, energy, utilities and real estate fell.
In London trade shares in Rio Tinto fell .8%, and BHP shares fell 1.1%.
European indices
- STOXX 600 rose 0.074% to 475.51.
- German Dax fell 0.1% to 15,688.77.
- UK FTSE fell 0.2% to 7,237.57.