The ASX is set for a buoyant start to trading today, despite Wall St losing early gains in overnight trading.
The NASDAQ fell 10% from its November 19 closing record high.
ASX futures were up 10 points or 0.1% to 7,235 near 8am AEDT, paring earlier gains.
Here’s what we saw:
- The Aussie dollar rose from lows near US71.80 cents to highs near US72.35 cents and was near US72.15 cents in late US trade.
- Global oil prices climbed to 7-year highs. Reuters notes that "a fire on a pipeline from Iraq to Turkey briefly stopped flows, increasing concerns about an already tight short term supply outlook." Supply concerns have also been raised due to instability in the United Arab Emirates and Ukraine.
- The Brent crude price lifted by US93 cents or 1.1% to US$88.44 a barrel.
- The US Nymex crude price added US$1.53 or 1.8% to US$86.96 a barrel.
- Base metal prices rose by as much as 4.6% (nickel) with copper and tin up 1.8% and lead up 1.9%.
- The gold futures price rose by US$30.80 or 1.7% to US$1,843.20 an ounce.
- Spot gold was trading near US$1,842 an ounce at the US close.
- Iron ore rose by US$2.90 or 2.3% to US$130.20 a tonne.
Australian market
Quarterly reports now flowing in
Santos Ltd (ASX:STO) has reported record annual production and record quarterly sales revenue in 2021.
Santos has been the beneficiary of surging commodity prices and reported annual production of 92.1 million barrels of oil equivalent, inclusive of 1.7 million barrels from Oil Search assets from December 11.
Commodity prices and higher sales volumes delivered $US1.5 billion, up 34% on the prior quarter, and record annual sales revenue of $US4.7 billion, up 39% on the previous year.
Free cash flow is expected to be around $US1.5 billion in 2021, more than double the level in 2020.
“Our disciplined, low-cost operating model continues to drive strong performance across the business and has positioned us to take full advantage of the increase in commodity prices. The completion of the Oil Search merger delivers us the size and scale to deliver even stronger outcomes in 2022 and beyond,” CEO Kevin Gallagher said.
Resolute Mining increased gold production 5% in the quarter, delivering just shy of 80,000 ounces in poured gold.
The company said the result followed “strong performance in the month of December with all operations recording their highest production for 2021.”
Resolute reported quarterly gold sales of more than 75,000 ounces with an average realised gold price of $1,749 per ounce compared to the average spot price of $1,796 per ounce.
Resolute Mining has set a 2022 target of 345,000 ounces of gold poured with an average price of $1,425.
Northern Star Resources delivered $950 million in December quarter sales revenue and is on track to reach its gold production guidance levels. It has forecast 1.55 to 1.65 million ounces of gold with an average price of $1,475 to $1,575 per ounce.
The company had cash and bullion of $588 million at December 31 and net cash of $288 million with first-half 2022 cash earnings of $425 million to $440 million.
Household spending diverted to healthcare
Australian households have diverted money set for travel and shopping to medical and healthcare needs in January.
The CommBank Household Spending Intentions Index rose by 2.5% to 115.0 in December (its highest since July 2017). The Index gauges Australian consumer spending.
While Christmas trading was boosted by eased Delta restrictions and a strong urge to spend, including on travel intentions which rose 28.1% during December as state borders reopened, an increased number of COVID cases in isolation has reversed the trend.
"The Omicron variant, which has led to a surge in COVID cases late in December and into January, is an important development to watch," CBA senior economist Belinda Allen said.
"It is impacting the demand and supply side of the Australian economy. We can see from our high-frequency credit and debit card data there does appear to be a fall in spending in January, with spending on services more impacted than goods spending."
Spending has dropped by approximately 3%.
"It is important to note that there is always a high degree of volatility around spending over the Christmas and New Year period,” CBA economist Stephen Wu said.
"But our assessment at this stage, based on our internal data, is that the surge in COVID cases over the past three weeks has resulted in around 3% less spending over the period than would otherwise have been the case."
Transport and recreation spending has slowed, while medical and healthcare spending has risen as people scramble for rapid antigen tests (RATs) and pain relief medication.
US markets
It was a topsy turvy day of trade in the US, but ultimately the markets finished lower.
The S&P 500 benchmark fell 1%, the lowest level on a closing price basis since the start of December. The Dow Jones index closed near session lows, down by 340 points or 1.0% and the Nasdaq index lost 167 points or 1.2%.
Shares in Apple fell 2.2%, while Amazon fell 1.7% and Berkshire Hathaway (NYSE:BRK) dropped 1.4%.
So far this year there has been 5% from blue chips.
There was some good news.
Positive quarterly reports supported sentiment including reports from UnitedHealth (up 0.3%), Procter & Gamble (NYSE:PG) (up 3.4%) on the back of higher prices and resurgent cleaning products demand as COVID-19 infections spiked. Morgan Stanley (NYSE:MS) was up 1.8% and the Bank of America (NYSE:BAC) was up 0.4%).
Bank of America reported a better-than-expected 30% jump in quarterly profit, driven by loan growth as well as record-breaking M&A volumes.
The US is still jittery about interest rates.
European markets
European shares were higher Wednesday on the back of positive earnings from the luxury goods sector and strong commodity prices.
The pan-European STOXX 600 index was 0.2% higher after falling 1% in the prior session. Refinitiv data shows STOXX 600 companies are expected to post a 48.6% year-on-year rise in fourth-quarter profit to 109 billion euros, a marginal uptick from a prior estimate of 48.5%.
The German Dax index rose by 0.2% while the UK FTSE index gained 0.4%.
Mining stocks were the best performers for the day, up 2.7% as iron ore prices surged on signs of more stimulus in major importer China.
Britain does it tough
Inflation in Britain was at a near 30-year high in December. This has caused cost-of-living fears as wages fail to keep pace.
The UK’s inflation rate was 5.4% in December and is expected to move higher as domestic energy prices rise.
Inflation has led the Bank of England to raise its key borrowing cost for the first time in more than three years, with another rise expected in February.
BoE governor Andrew Bailey has said the prospect of prolonged high energy prices was “a cause of concern”.
Analysts believe Britain is in for a painful year as they not only face rising energy prices but a tax hike as well.
“With consumer prices rising at their fastest rate for three decades and wage growth slowing, Britons are being squeezed ever harder by the cost of living,” head of trading provider IX Prime Jay Mawji said.
“The inflation rate rose again at the end of the year and has not been higher for almost 30 years,” ONS chief economist, Grant Fitzner said.
The inflation rate is 5.1% compared with 7.1% in 1992.
“Food prices again grew strongly while increases in furniture and clothing also pushed up annual inflation,” Fitzner said.
Meanwhile, real wages are falling.
“More pain lies ahead in the form of tax rises in April and a likely 50% jump in energy bills,” Mawji said.