The ASX is likely to fall in morning trading, dragged down by COVID affected energy and travel stocks, as well as banks stocks.
It is likely the market will follow the US lead, where travel and airline stocks fell on fears that European countries may follow Austria and declare a full lockdown due to escalating COVID cases.
The ASX futures were down 0.6% to 7,351 at 6.45am AEDT.
Here’s what we saw:
- The Aussie dollar fell from highs near US72.90 cents to lows near US72.30 cents and was near US72.35 cents at the US close.
- Global oil prices fell by around 3% on Friday due to surging COVID cases throughout Europe. Further pressure came from ongoing speculation of a coordinated release of oil from strategic reserves in a number of major economies.
- The Brent crude price fell by US$2.35 or 2.9% to US$78.89 a barrel.
- The US Nymex crude price fell by US$2.47 or 3.2% to US$75.94 a barrel.
- Crude benchmarks fell for a fourth straight week with Brent down by US$3.28 or 4% and Nymex down by US$4.85 or 6%.
- Base metal prices were firmer by 0.4-2.7% on Friday.
- Zinc rose the most with lead up the least.
- Tin fell by 0.3%.
- Over the week nickel, zinc and tin rose by as much as 1.3% but other metals fell.
- Lead lost 7.2%.
- The gold futures price fell by US$9.80 or 0.5% to US$1,851.60 an ounce.
- Spot gold was trading near US$1,845 an ounce at the US close. Over the week gold fell US$16.90 or 0.9%.
- Iron ore rose by US$4.10 or 4.7% to US$91.30 a tonne. Over the week iron ore rose by US$1.55 or 1.7%.
Australian markets
The local retail sales report for October will be released on Friday and is expected to be higher as NSW and Victoria continue to open up.
That said, the start of the week is expected to be slow based on the sharp rise in infections from the delta plus strain of the coronavirus that pushed Austria back into lockdown and is causing major concern across Europe and the United Kingdom. Those concerns spread to travel stocks which bore the brunt of the FTSE’s fall on Friday.
The best-performing sectors in Australia last week were Information Technology up over 3%, followed by Healthcare up over 2% and Communication Services up over 1%. The worst-performing sectors were Financials down over 3%, followed by Materials and Energy, both down over 2%.
Best performers in the S&P/ASX top 100 stocks were NextDC Ltd and WiseTech Global Ltd, both up over 7% followed by Virgin Money UKJ CDI (NYSE:CDI), Incitec Pivot Ltd (ASX:IPL) and Evolution Mining Ltd (ASX:EVN), all up over 5%. The worst-performing stocks include Commonwealth Bank of Australia (ASX:CBA) down over 9% followed by James Hardy Industries plc, Bank of Queensland Limited (ASX:BOQ), BHP Group Ltd and Worley Ltd, all down over 4%.
What's next for the Australian share market?
As we do each week, we asked Wealth Within founder and analyst Dale Gillham his thoughts on what we can expect next.
“As I have mentioned previously, both the Financial and Materials sector determine our markets direction and last week both traded down, as did the Energy sector. Given this, despite seven other sectors rising, the All Ordinaries Index was slightly in the red for the week. As such, even though our market rose last Monday to its highest level since September 8, it struggled to rise up out of the sideways pattern it has been in over the past month.
“While I believed our market would rise until January or February, I am starting to think the opposite might occur. Right now, I would not be surprised to see the All Ordinaries Index fall away around less than 5% over one or two weeks before rising up into February: although if the fall is larger in price and lasts longer than two weeks, we may need to be prepared for a longer, steeper fall in the New Year.
“One thing I am sure of is that any move down will be good for the market, as it will set it up for a good year in 2022.”
Australian indices
- ASX 200 rose 0.23% to 7,396.50.
- ASX24 futures fell 0.6% to 7,351.
- S&P/ASX Small Ordinaries fell 0.17% to 3,569.00.
- All Ordinaries rose 0.22% to 7,729.90.
US markets
In past years, this last week or so of November is when we are likely to see the Santa Rally start or at least setup.
History shows the Thanksgiving period is a good one for the market.
“The last five trading days of November are traditionally positive, since 1950,” said CRFA chief investment strategist Sam Stovall. “There’s a two-thirds likelihood the market is up on the day before Thanksgiving and a 57% likelihood the day after Thanksgiving, and a 71% likelihood that it’s up on Monday.”
For those unfamiliar with the term, a Santa Rally is when the stock market rallies in the last weeks for the calendar year usually based on holiday shopping, holiday spirit optimism and institutional investors settling their books before going on vacation.
According to Joseph Palmer & Sons director Alex Moffatt, “The data scheduled for release this week may just prove to be the catalyst. There is also the outstanding matter of the announcement of the next chairman of the Federal Reserve.
“On the economic calendar we have durable goods orders, GDP, new claims for unemployment benefits and new home sales data from the US on, yes – you guessed it, Thursday. Americans are likely to turn the Thanksgiving holiday into a long weekend and in expectation of this, markets in the land of the free will all close early on Friday.”
Back to whether we will see a Santa Rally in the coming weeks, well that depends on who you ask.
The NASDAQ asks: “Are we being greedy to expect a Santa Claus Rally when the S&P is already sitting at its all-time high (and up a whopping 25% so far this year)?”
While analysts at Market Watch call it a myth.
Whether it is a myth or not, the market is likely to be higher this week as we head into the broader holiday period.
“Barring a change at the helm of the Fed, I think the market trajectory is going to continue to be higher, as we move toward 2022,” ClearBridge Investments investment strategist Jeff Schulze said.
Fed chair Jerome Powell’s term comes to an end in February and President Biden has interviewed Fed Governor Lael Brainard, who is supported by progressive democrats.
“Given that Brainard is even more dovish than Powell, I think markets would recover very quickly ... the markets are unsure whether the new Fed chairman could command consensus within the FOMC to effectively deliver policy,” Schulze added.
US indices
- Dow Jones fell 0.8% to 35,601.98.
- S&P 500 fell 0.1% to 4,697.96.
- Nasdaq rose 0.4% to 16,057.44.
European markets
Europe was weaker due to the aforementioned COVID issues.
European countries have imposed fresh restrictions to battle rising COVID cases, with Austria announcing a fresh lockdown.
This led banks to fall 2.5% in line with lower bond yields.
However, technology bucked the trend to rise 0.6% and healthcare rose by 1%.
In London trade, shares in Rio Tinto rose by 1.8% and BHP rose by 0.8%.
European indices
- STOXX 600 fell 0.33% to 486.08.
- German Dax fell 0.4% to 16,159.97.
- UK FTSE fell 0.5% to 7,223.57.