Wall St soared overnight, setting the ASX up for a great start in morning trading.
ASX SPI 200 futures are 0.3% higher to 7,353 at 8.20am AEDT.
Also of note, is that the Volatility Index (VXX) has fallen sharply in the past two trading sessions, indicating a Christmas rally in equities isn’t far off.
On the commodities front, gold, oil and iron ore were each higher on hopes that China will act against slowing economic growth.
Here’s what we saw:
- The Aussie dollar rose from lows near US70.69 cents to highs near US71.22 cents and was near US71.20 cents at the US close.
- Global oil prices jumped over 3% on Tuesday on optimism that the Omicron virus variant may not be as severe as feared, easing concern over the crude demand outlook.
- The Brent crude price rose by US$2.36 or 3.2% to US$75.44 a barrel.
- The US Nymex crude price added US$2.56 or 3.7% to US$72.05 a barrel.
- Copper climbed 0.6% as Chinese trade data pointed to buoyant demand in the world's top metals consumer.
- Nickel was 1.9% higher.
- Lead fell by 0.6%.
- The gold futures price rose by US$5.20 or 0.3% to US$1,784.70 an ounce.
- Spot gold was trading near US$1,784 an ounce at the US close.
- Iron ore jumped US$8.15 or 8.1% to US$108.55 a tonne on hopes that China's plans to ease property curbs will boost demand.
Australian markets
The Reserve Bank of Australia (RBA) met yesterday and is maintaining a cautious approach heading into 2022.
As expected, the RBA will keep the official cash rate on hold at 0.10%.
Speaking about the decision, CEO of Mortgage Choice and Smartline, Susan Mitchell, said, “In its last monetary policy meeting for 2021, the Reserve Bank board decided to leave policy unchanged. The economy is on track as the year comes to a close, however, it remains to be seen what challenges the new COVID-19 Omicron variant presents to the nation’s growth forecast.
"All eyes are now on the board’s first meeting in February 2022, when it is expected to announce the fate of its bond buying program.
“While we continue to see the cash rate unchanged month after month, there has been a lot of movement in home loan interest rates, particularly increases in fixed interest rates. We’re seeing borrowers react to these changes in pricing by steering away from locking in their home loan interest rates.
"Mortgage Choice home loan approval data shows that in the month of November, 37% of borrowers chose to fix part or all of their mortgage, compared with 41% in October and 43% the month prior,” said Mitchell.
Speaking about the changes in interest rates, realestate.com.au economist Paul Ryan said, “Fixed rates have increased for a couple of reasons. First, expectations for interest rate rises have increased, and second, the RBAs term funding facility that provided cheap funding has wound up.
"So, fixed rates, particularly for longer than three years, have been increasing and are likely to continue to do so. But competition for variable rate loans continues to be strong, particularly for owner-occupiers, and these rates are continuing to fall.”
Mitchell said, “As we enter the summer holiday break, this is traditionally a time many would-be homeowners and homeowners reflect on and review their housing needs for the year ahead. The good news is that access to historically low interest rates continues, however, affordability constraints remain the biggest barrier to entry for many, especially first-time buyers.
“The New Year is a great time to review your services and subscriptions. For most households, the home loan is by far the biggest expense so I encourage all borrowers to meet with their local mortgage broker to review their home loan and ensure they’re still getting a good deal,” she concluded.
Weaker business activity
The November 2021 CreditorWatch Business Risk Index (BRI) has revealed that business activity around Australia is currently weaker than expected, indicating that the return to pre-COVID levels is now likely to take longer than many pundits had anticipated.
The data also showed a jump in defaults, external administrations, payment arrears and court actions from October to November. However, credit enquiries rose 17%, indicating that business confidence is improving.
Key Business Risk Index insights for November:
- Australia’s economy fails to bounce back as strongly as expected post-lockdown.
- Trade activity continues to fall.
- Defaults, external administrations, payment arrears and court actions have jumped.
- Credit enquiries jumped 16.6%, indicating that business confidence is returning.
- States that shut their borders but kept their internal economies going, such as WA and QLD, are seeing their metro areas bounce back fastest.
- Melbourne and Sydney CBDs remain the worst performing capital city centres with probability of default at historic high levels due to depressed trade activity continuing post-lockdown.
- Credit behaviour and performance scores are improving among the hardest-hit.
“The increase in credit enquiries in November is an encouraging forward indicator of business confidence, however, there’s a long way to go before business activity is at pre-COVID levels,” says CreditorWatch CEO Patrick Coghlan.
“Worryingly, trade receivables continued to decline last month, and we also saw significant increases in defaults and administrations. Businesses in the Sydney and Melbourne CBDs, in particular, are at historically high probabilities of default.”
Australian indices (at time of writing)
- ASX 200 rose 0.95% to 7,313.90.
- ASX24 futures rose 0.3% to 7,353.
- S&P/ASX Small Ordinaries rose 1.74% to 3,387.00.
- All Ordinaries rose 1.01% to 7,605.20.
US markets
Investors rushed into tech stocks overnight, propelling the Nasdaq sharply higher.
Apple Inc (NASDAQ:AAPL). reset its record high, with its market cap topping $US2.8 trillion.
The buoyancy was due to the feeling that the Omicron variant won't derail global growth.
Chip giant Intel was up 3.1% on plans to take its self-driving car unit Mobileye public.
Microsoft, Alphabet and Amazon were all up over 2.5%.
American Express was 3.9% higher as holiday spending soared.
The loser was Merck shares, which slipped 1.6% after the drugmaker paused enrolment in its HIV-1 clinical trials.
The Nasdaq index posted its best day since March.
US markets delist more than 170 companies in 12 months
Major stock exchanges in the US have continued to dominate the global equity market, however, despite the dominance, they have been on a delisting spree over the past year.
According to data acquired by Finbold, a total of 179 companies have been delisted from the major US exchanges between 2020 and 2021.
In 2021, the number of companies on Nasdaq and the New York Stock Exchange stands at 6,000, dropping 2.89% from last year's figure of 6,179. In 2019, the listed companies stood at 5,454.
NYSE recorded the highest delisting with companies on the platform, dropping 15.28% year-over-year from 2,873 to 2,434. Elsewhere, Nasdaq listed companies grew 7.86% from 3,306 to 3,566.
As of 2021, Nasdaq had 2,819 listed domestic companies, while foreign entities stood at 747. NYSE accounts for 1,848 domestic companies, with the foreign entities standing at 586.
Are alternative markets potentially driving delistings?
The report highlights some of the factors impacting the listing and delisting of companies on the US stock exchanges. According to the research report:
"Furthermore, the delisting on US major exchanges might be due to the emergence of new alternative markets, especially in Asia. China and Hong Kong markets have become more appealing, with regulators making local listings more attractive. Over the years, exchanges in the region have strived to emerge as key players amid dominance by US equity markets."
Over the past, the number of foreign companies listing on US exchanges also surged. Generally, the US has dominated the global equity market with companies aiming to gain liquidity, high potential to raise capital as legitimacy.
US indices
- Dow Jones gained 1.4% to 35,719.43.
- S&P 500 rose 2.1% to 4,686.75.
- Nasdaq rose 3% to 15,686.92.
European markets
European share markets were also higher on Tuesday.
The pan-European STOXX 600 was higher led by technology shares up 5.6%.
The German Dax index was higher on reports that Volkswagen (+8.6%) is exploring a possible initial public offering (IPO) of its luxury brand Porsche (+8.5%).
German industrial production lifted by 2.8% in October.
In London-listed shares, Rio Tinto was up 4.8%) and BHP was 5.6% higher – both jumped as iron ore prices surged.
European indices
- STOXX 600 rose 2.45% to 480.18.
- German Dax rose 2.8% to 15,813.94.
- UK FTSE rose 1.5% to 7,339.90.