US tech stocks dragged Wall St down again in yesterday’s trading, while the ASX 200 futures closed just 1 point higher at 7,409 as of 8.28am, pointing to a flat start for the local market.
In good news for iron ore producers and stockholders, the commodity has surged back to approximately $100 per tonne.
Here’s what we saw:
- The Aussie dollar fell from highs near US72.30 cents to lows near US72.05 cents and was near US72.25 cents in afternoon US trade
- Global oil prices were 2.3-3.3% higher on Tuesday, despite the world’s power countries saying they will release oil from strategic reserves onto global markets. The US will release 50 million barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain, to lift global oil supplies to meet higher demand and drive down prices.
- The Brent crude price lifted by US$2.61 or 3.3% to US$82.31 a barrel.
- The US Nymex crude price was up US$1.75 or 2.3% to US$78.50 a barrel.
- Nickel was flat.
- Tin was 0.2% higher, while other metals fell 0.1-0.9% with aluminium down the most.
- The gold futures price fell by US$22.50 or 1.2% to US$1,783.80 an ounce.
- Spot gold was trading near US$1,789 an ounce at the US close.
- Iron ore rose by US$4.75 or 5.0% to US$99.45 a tonne.
Australian markets
Iron ore stocks could be back in favour, with the iron ore price surging back to $100 per tonne and enjoying a third straight day of gains.
The word is China will soon lift volumes at its steel mills.
“Hopes that easing of curbs of China property developers, rising margins for steel producers and signs that the [Chinese] authorities are, or are about to, add some fiscal and monetary support to the broader economy, will add to demand for steel making inputs,” NAB economists said.
This has led Citi's Paul McTaggart to speculate on a growing risk appetite for iron ore stocks.
Interestingly, while the iron ore price plummeted, stocks didn’t fall as much as the commodity and while still down have held firm in comparison.
Improved demand for iron ore could reverse the trend.
Yesterday we saw BHP Group Ltd rise 4%, Rio Tinto Ltd up 3.6% and Fortescue 9.8% higher – all outperforming Tuesday's market.
Of course, iron ore has a long way to go before it hits the heady heights of May's $US229.50 a tonne.
ASIC watches ASX
The Australian Securities & Investments Commission (ASIC) looks set to tighten its leash on the ASX.
The national regulator could impose tighter controls on the ASX, open it to further competition following last year’s trading outage and impose a fine for a breach of market conditions.
ASIC chairman Joe Longo could make a decision today, more than a year after the ASX was forced to shut down the market for a day.
ASIC wants to ensure better access to the ASX’s competitor ChiX in the event of another failure. It would also arbitrate disputes between the exchange and third parties.
‘The ASX outage was a very serious event, exacerbated by subsequent operational issues," Longo said.
"The imposition of these licence conditions will confirm that remedial actions are implemented appropriately and efficiently to address these operational issues – including for the critical rollout of the CHESS Replacement Program."
ASIC noted "serious deficiencies" in the ASX’s and market participants’ ability to limit the impact on overall liquidity highlighted by the outage.
"ASIC finds this particularly disappointing in circumstances where some of these deficiencies had previously been raised by ASIC in Report 509 Review of the ASX equity market outage on September 19, 2016," Longo said.
"ASX and market participants must act to ensure that the market can function at all times, so that vital sources of capital are available to the economy."
Australian indices (at time of writing)
- ASX 200 rose 0.78% to 7,410.60.
- ASX24 futures were flat at 7,409.
- S&P/ASX Small Ordinaries fell 0.57% to 3,530.80.
- All Ordinaries rose 0.69% to 7,741.70.
US markets
US markets were mixed as tech stocks once again dragged down the NASDAQ.
Gains in financial and oil companies offset the losses.
Banks were 2% higher as longer-term bond yields climbed.
Energy stocks climbed 3.1% tracking the oil price higher.
Shares of Zoom crashed to a 17-month low after it posted its slowest quarterly revenue growth amid competition from Cisco, Microsoft and Salesforce.
It highlighted the current danger for tech stocks, with Best Buy also faltering.
Best Buy’s projected quarterly sales were below market estimates, signalling shortages of electronic products will hamper its business during the holiday season.
The retailer’s shares tumbled amid shipping logjams, shuttered factories and raw materials scarcity that have marred global supply chains in 2021.
Best Buy’s supply constraints in appliances, mobile phones and gaming are a major concern according to CEO Corie Barry.
US indices
- Dow Jones was up 0.6% to 35,813.80.
- S&P 500 lifted 0.2% to 4,690.70.
- Nasdaq fell 0.5% to 15,775.14.
European markets
Were mixed yesterday.
Basic materials gained 0.6% and oil & gas rose 0.5%.
Travel stocks fell 1.8% after the US issued an advisory against travel to Germany and Denmark due to rising COVID case numbers.
Technology shares followed the US lead, falling 3.4%.
In London trade, shares in Rio Tinto rose by 2.9% and BHP rose by 3.0%.
Turkey continues to have issues with the Lira.
Joseph Palmer and Sons director Alex Moffatt says, “Turkey has again caught the interest of traders with the Lira diving to a new record low of US$13.44 overnight; that is a fall of around 15% on where it had been trading the previous day.
“The selling was triggered by the Turkish president defending the central bank’s interest rate cuts notwithstanding inflation running at close to 20%. He is standing firm on his own ‘economic’ beliefs labelling the rate cuts as Turkey’s ‘economic war of independence’.
“Just four years ago the Lira was trading at US$3.5 which makes one appreciate the magnitude of the moves and of Turkey’s problems. Looking at his biography it appears he has no formal economic training and that his major achievement was a gift for public speaking.
“It is also an issue that by his actions and dictatorial manner he is distancing Turkey from the rest of the world which is a real shame as the Turks do not deserve it. Under his misguided premiership, the nation has fallen into chronic debt, trade has collapsed and her citizens are suffering through the devastating effects of high inflation.”
European indices
- STOXX 600 fell 1.28% to 479.25.
- German Dax fell 1.1% to 15.937.00.
- UK FTSE rose 0.2% to 7,266.69.