Based on Wall St gains, growing consumer confidence and housing data, the ASX is expected to rise this morning. However, knowing exactly what the market is going to do in the current climate is like trying to pick winning lottery tickets, so let’s just see how the day plays out.
ASX futures were up 28 points or 0.4% to 7,299 in early morning trading.
What we can say is that Omicron fears seem to have subsided as we come into Christmas and that markets have just about gone on holiday.
“Markets are certainly in holiday mode now, and that seems to be a good thing for risk-assets, even if one ought not to infer too much from price action given that dynamic,” said IG market analyst Kyle Rodda.
“Volumes were very low on Wall Street – below 20% of the 30-day average – so it wouldn’t be remiss to suggest that any move right now will be a tad exaggerated,” he said.
“Nevertheless, the S&P 500 climbed 1%, to close within touching distance of 4,700, and very close to a record high.”
The markets are slowing and investors look to take a well-earned break, but there are positive signs for 2022.
“Investors are preparing to go into hibernation for Christmas and will hope by this time next week we’ll know a lot more about the trajectory of Omicron — and the likelihood of further restrictions to contain it, and just how long those curbs will be in place,” AJ Bell investment director Russ Mould said.
“For now the markets, bar the odd day, have just about managed to hold on to the idea that, to employ central bankers’ favourite word of 2021, Omicron’s impact will be transitory."
Consumers are certainly (currently) upbeat and inflation scares are waning.
“Crucially, concerns about inflation declined after hitting a 13-year high last month, suggesting that fears over rising prices may be plateauing,” Forex.com head of global research Matt Weller said.
Here’s what we saw:
- The Aussie dollar lifted from lows near US71.20 cents to highs near US72.20 cents and was near the highs at the US close.
- Global oil prices gained approximately 2% with a fall in US inventories in the latest week offsetting worries about the potential impact of Omicron on economic activity.
- The Brent crude price rose by US$1.31 or 1.8% to US$75.29 a barrel.
- The US Nymex crude price added US$1.64 or 2.3% to US$72.76 a barrel.
- Base metal prices rose by between 0.2-3.3% with tin at the lower end and zinc up highest.
- The gold futures price rose by US$13.50 or 0.8% to US$1,802.20 an ounce.
- Spot gold was trading near US$1,804 an ounce at the US close.
- Iron ore fell by US$1.20 or 1.0% to US$122.60 a tonne.
Australian markets
The big news of the morning comes out of the Syrah Resources Ltd (ASX:SYR) stable.
Syrah signs offtake deal with Tesla
Syrah has signed a Binding Active Anode Material Offtake Agreement with Tesla and will supply natural graphite Active Anode Material (AAM) from its vertically integrated AAM production facility in Vidalia, USA.
Tesla has signed an initial four-year agreement to offtake the majority of the proposed initial expansion of AAM production capacity at Vidalia at a fixed price.
The offtake will start from the achievement of a commercial production rate, subject to final qualification.
Tesla also has an option to offtake additional volume from Vidalia subject to Syrah expanding its capacity beyond 10,000 tonnes per annum AAM.
Syrah stated, “The agreement provides a compelling foundation to proceed with the initial expansion of Vidalia’s production capacity and Syrah plans to make a final investment decision for construction of this expanded facility in January 2022."
Syrah said it was advancing commercial and technical engagement with other target customers to develop Vidalia AAM for mass production and secure additional long-term purchase commitments for Vidalia.
Buy recommendation for Charter Hall
Despite Charter Hall Group (ASX:CHC)’s tumble yesterday, Citi has reiterated a 'buy' recommendation as it "continues to have strong underlying growth (highlighted by last week's 27% EPS upgrade), with upside to guidance/consensus".
Charter fell hard on news that it was acquiring fund manager Paradice Investment Management for $207 million.
"We see today's (Wednesday) share price decline as an enhanced buying opportunity and retain our Buy rating," Citi said in a note to clients.
"The stock was down -7.5% today, indicating investor concerns around strategic issues (CHC buying a listed equities business) as well as growth concerns (as some investors saw the transaction as a reflection of a reducing opportunity in the core property funds management business).
"We were surprised by the announcement too, and understand investor concerns, but we see the share price reaction as overblown, given the purchase price represents ~2% of market cap."
US markets
US markets were higher yesterday. The S&P 500 index lifted by 47 points or 1.0% with the Nasdaq index up by 181 points or 1.2%. The Dow Jones index rose by 261 points or 0.7% and finished 11 points off session highs.
Markets were lifted by Tesla’s 7.5% rise and Pfizer’s 1% lift.
Musk sells enough stock
Tesla rose after billionaire chief executive Elon Musk said in a podcast interview that he had "sold enough" stock in the electric carmaker.
Musk has sold a combined $853.7 million worth of shares, which equates to 13.8 million shares, since he asked his Twitter followers in November whether he should offload a 10% stake.
"I sold enough stock to get to around 10% plus the option exercise stuff and I tried to be extremely literal here," he said in an interview with Babylon Bee.
Pfizer approval
Shares in Pfizer were higher after it received regulatory approval from the US Food and Drug Administration (FDA) for a COVID-19 antiviral pill.
Pfizer’s Paxlovid tablets and Ritonavir tablets will be used for the treatment of mild-to-moderate COVID-19 in adults and paediatric patients (12 years of age and older) who are at high risk for progression to severe COVID-19, including hospitalisation or death.
"Today’s authorisation of PAXLOVID represents another tremendous example of how science will help us ultimately defeat this pandemic, which, even two years in, continues to disrupt and devastate lives across the world," Pfizer chairman and CEO Albert Bourla said.
"This breakthrough therapy, which has been shown to significantly reduce hospitalisations and deaths and can be taken at home, will change the way we treat COVID-19, and hopefully help reduce some of the significant pressures facing our healthcare and hospital systems."
Pfizer is ready to pus out to US markets immediately.
In November, Pfizer announced an agreement with the US government to supply 10 million treatment courses of Paxlovid.
European markets
Markets were also higher in Europe, led by technology and industrial stocks.
Tech stocks rose 1.9%, industrials rose 1.5%, travel stocks rose 1.4% and construction-related stocks rose 1.2%.
Reuters reported: "Container shipping giant Maersk gained 0.9% after agreeing to buy Hong Kong-based LF Logistics for $3.6 billion in an all-cash deal."
The pan-European STOXX 600 index was 0.9% higher.
The German Dax index rose by 1.0% even as the government prepared to institute new measures to prevent the spread of Omicron.
The UK FTSE index gained 0.6%.
In London trade, shares in Rio Tinto fell by 1.0% while BHP shares fell by 0.5%.