Australian shares are trading higher this morning.
ASX futures were up 20 points or 0.3% to 7,419 near 7am AEDT, pointing to this strong start.
Today’s rise also comes off the back of a good day on Wall St, which saw the S&P 500 and the Nasdaq indexes hit record highs, led by earnings reports from Qualcomm, Bookings Holdings, Electronic Arts and Take-Two Interactive Software.
Here’s what we saw:
- The Aussie dollar fell from highs near US74.50 cents to lows near US73.80 cents and was near US74.00 cents at the US close.
- Global oil prices fell on Thursday, reversing earlier gains on a TV report that Saudi Arabian oil output will soon surpass 10 million barrels per day for the first time since the COVID-19 outbreak. Commsec reports, “Earlier the OPEC+ production group decided to continue with the previously agreed plans to raise output by 400,000 barrels per day on a monthly basis.”
- The Brent crude price fell by US$1.45 or 1.8% to US$80.54 a barrel.
- The US Nymex crude price lost US$2.05 or 2.5% to US$78.81 a barrel.
- Base metal prices were generally lower on Thursday, falling by 0.2-4.0% with aluminium down the most.
- Copper bucked the trend, up by 0.5%.
- The gold futures price rose by US$29.60 or 1.7% to U$1,793.50 an ounce.
- Spot gold was trading near US$1,793 an ounce at the US close.
- Iron ore was steady at US$99.70 a tonne.
Australian markets
Australian shares were up at close of business on Thursday, with technology and financial stocks offsetting the weakness in energy.
The ASX is expected to continue the upward momentum this morning.
One tech stock that didn’t fare so well was Afterpay, whose shares look to be affected by poor results from Square.
Afterpay shares look set to drop further after disappointing results from acquirer Square.
According to Bloomberg, Square’s shares fell more than 3% in after hours trading.
They fell another 2.2% overnight, pointing to a possible 5% loss for Afterpay.
Josh Gilbert, an analyst at the multi-asset investment platform eToro, says, “Jack Dorsey’s Square revealed its Q3 earnings of US$0.37 per share on revenue of US$3.84 billion, compared to analyst expectations of US$0.37 per share on revenue of US$4.50 billion.
“For Afterpay shareholders, this Q3 report provides insight as to what investors will be inheriting as part of the acquisition from Square.
“Revenues for Square grew by 27% year-over-year but missed Wall Street expectations for the quarter. The company’s earnings aligned with expectations with marginal growth of 8% year-over-year.
“Square continues to benefit from the acceleration of digital transformation, with significant engagement via its digital wallet and cash app. In Q3, the company hit over 40 million monthly active users, thanks in part to its crypto-asset trading services and all-in-one spend and save banking feature.
“Bitcoin transactions make up a large portion of Square’s revenue, but it’s not a core moneymaker due to its high costs. Instead, investors with their sights set on Square should be more focused on its seller ecosystem, which helps businesses to grow. This segment of the business generated US$606 million of gross profit in Q3, growing by 48% year-over-year.
“The company’s gross payment volume also grew by 43% up to US$45.4 billion. More people than ever are now launching small businesses as a result of the eCommerce revolution, which consequently means this segment of Square, over the next one to two years, will continue to thrive.
“The acquisition of Afterpay will allow Square to reach a vast addressable market. Demand is growing for merchants to offer buy-now-pay-later services, as consumer preferences shift away from traditional credit cards. This, in turn, will allow Square to increase its payment flows with higher engagement, whilst providing more opportunities between consumers and merchants, ultimately driving higher monetisation per user.”
Bluescope to make US acquisition
BlueScope Steel (ASX:BSL) Limited will acquire a US-based business for $US240 million (A$324 million), to "strengthen its position in the US" – that just happens to be its largest supplier of scrap.
BlueScope has entered into a binding agreement to buy the ferrous scrap steel recycling business of MetalX, which supplies 20% of scrap feed to its Ohio-based mini-mill business, North Star BlueScope Steel.
BlueScope managing director and CEO Mark Vassella noted the US as a major focus for BlueScope's future growth.
"The MetalX ferrous acquisition adds to BlueScope's extensive US asset footprint of over $3 billion, which spans steelmaking, steel coating and painting, engineered building systems and industrial property development.
"And we have current and intended expansion projects totalling up to $1.5 billion, including the North Star expansion project."
"Using our strong financial position, moving upstream to acquire a scrap supply business helps underpin North Star's supply chain and its great competitiveness."
North Star is moving from a two million tonnes per annum mill to almost three million tonnes per annum.
"As the business expands, securing scrap is the right play.
"The acquisition brings us a crucial presence and expertise in scrap processing to further secure our scrap needs – both prime and post-consumer (obsolete) scrap."
"The acquisition meets our return on capital expectations and provides synergies to optimise logistics and reduce scrap costs."
BlueScope was trading at $20.47 at market open.
REA delivers impressive results
REA Group has lifted Q3 free cash flow 29% to $49 million on sales excluding acquisitions up 22% to $264 million. EBITDA is 24% higher to $158 million.
“REA has delivered an impressive result given the prolonged lockdowns in Sydney and Melbourne,” REA Group chief executive officer Owen Wilson said.
“Our performance reflects the continued value our premium listing products are delivering to our customers, and realestate.com.au’s clear position as the number one place to search, find and finance property.
“Our teams have made excellent progress across a number of key initiatives including the integration of our Mortgage Choice and Smartline businesses, the rollout of new products such as our Connect offering and our integrated rental applications platform, all of which provide the foundations for continued growth.”
REA Group shares are 30.3% higher over the past year.
Australian indices (at time of writing in morning trading)
- ASX 200 rose 0.35% to 7,454.00.
- ASX24 futures was flat at 7,389.
- S&P/ASX Small Ordinaries rose 0.56% to 3,585.20.
- All Ordinaries rose 0.37% to 7,775.00.
US markets
“You have better than expected earnings, a Fed that is following a well-telegraphed path and the economic data, for the most part, has seen some sequential improvement as we start to get the October reports,” said Art Hogan, chief market strategist at National Securities in New York.
“You put all those things together, and you get markets ultimately making new highs.”
Those comments explain the strong performance on Wall St overnight.
There is also hope in the market that President Joe Biden will be moving forward on two key spending initiatives: the infrastructure bill and the social spending bill, with the Democrats in the House of Representatives close to voting on the social bill later today.
Meanwhile, news wasn’t so good for Uber, which posted a Q3 net loss of $US2.4 billion including a $US3.2 billion unrealised loss from a revaluation of its equity investments over the quarter.
It’s not all bad though.
For the quarter Uber posted adjusted EBITDA of $8 million on revenue up 72% to $US4.8 billion. Gross bookings grew 57% year over year to $US23.1 billion.
“Our early and decisive investments in driver growth are still paying dividends, with drivers steadily returning to the platform, leading to further improvement in the consumer experience,” said Dara Khosrowshahi, CEO. “This is especially important as Mobility reignites. Mobility Gross Bookings are up 18% over just the last two months and this Halloween weekend surpassed 2019 levels.”
Uber shares were 7.9% higher over the past year.
Then there is Airbnb (NASDAQ:ABNB)
According to Josh Gilbert, “Airbnb (NASDAQ:ABNB) announced its Q3 earnings today of US$1.22 per share on revenue of US$2.24 billion, compared to analyst expectations of US$0.70 per share on revenue of US$2.06 billion.
“Amid strong summer-rental demand across Europe and the US, Airbnb has set a record quarterly revenue in the company's history, as it continues to bounce back from the pitfalls experienced during the global pandemic. Revenue climbed by 67% year-over-year
“Nights and experiences booked through Airbnb reached 79.7 million in Q3 and climbed by 29.7% year-over-year. Thanks to these summer seasons, net income jumped to record levels coming at US$834 million, up 280% year-over-year. This is an impressive profit level from Airbnb as it beat Wall Street expectations, whilst also managing to tighten internal costs amidst rising costs globally.
“As demand for Airbnb continues to advance, the company’s main challenge will be to ensure it has enough supply to meet demand. In Q3 2021, Airbnb saw its active property listings increase by 15% across Europe and North America, indicating more options for travellers than ever before. These key metrics are vital for Airbnb to ensure it continues on its steady growth trajectory.
“As travel restrictions ease globally, particularly in Australia as vaccine rates climb and the spread of the Delta strain slows, investors are becoming increasingly bullish on Airbnb. It’s clear that the demand for travel is here, but now it will be up to Airbnb to position itself well to benefit from the secular trends.”
US indices
- Dow Jones fell 0.1% to 36,124.23.
- S&P 500 rose 0.4% to 4,680.06.
- Nasdaq rose 0.8 to 15,940.31.
European markets
While everyone thought the Bank of England would move on interest rates, it ended up keeping them hold which according to some commentators raises questions about the credibility of the bank and governor Andrew Bailey.
European shares rose for a fifth straight session on Thursday to hit record highs.
The euro zone’s volatility gauge fell further to its lowest since mid-June.
Gains on the STOXX 600 were led real estate stocks up 2.3% after a takeover offer for German real estate company Alstria Office REIT AG from Canadian investment firm Brookfield.
Roche was 0.5% higher after it bought back its nearly one-third voting stake from Novartis for $US20.7 billion. Novartis was up 2.4%.
European indices
- STOXX 600 rose 0.41% to 483.21.
- German Dax rose 0.4% to 16,029.65.
- UK FTSE rose 0.4% to 7,279.91.