The ASX has opened higher this morning ahead of the next round of Reserve Bank of Australia speeches.
ASX SPI 200 futures closed 0.8% higher at 6,964, pointing to a solid start to trading.
The S&P/ASX 200 index is so far 0.9% higher to 7,070.1 with value sectors including Energy, Materials and Financials leading gains as they did on Wall Street.
A positive opening follows Wall Street’s late rally yesterday, which saw the Dow Jones Industrial Average close 0.8% higher, the S&P 500 finish 0.7% higher and Nasdaq add 0.8%.
Here’s what we saw (source Commsec):
- The Aussie dollar rose from US70.55 cents to US71.27 cents and was near highs in late US close.
- Global oil prices were flat on Tuesday.
- Commsec’s Craig James writes, “There was speculation that OPEC+ oil ministers could decide on a bigger boost to supply at today's meeting. It had generally been expected that the OPEC+ group would decide on a gradual lift in production of 400,000 barrels per day. Oil prices were also pressured by forecasts that US crude stockpiles rose over the past week.”
- The Brent crude price fell by US10 cents or 0.1% to US$89.16 a barrel.
- The US Nymex crude price rose by US5 cents or 0.1% to US$88.20 a barrel.
- Base metal prices were mixed on Tuesday. Tin and lead fell by as much as 0.8%. Aluminium was flat. Other metals rose, with nickel up 2.2%.
- The gold futures price rose by US$5.10 or 0.3% to US$1,801.50 an ounce.
- Spot gold was trading near US$1,800 an ounce in late US trade.
- Iron ore was unchanged at US$141.75 a tonne (Chinese New Year).
Copper prices rose on the back of expanding factory activity in Europe, Japan and the United States, while nickel’s gains can be attributed to falling inventories in exchange warehouses pushing premiums for quickly deliverable metal to their highest since 2009.
Australian market
While yesterday was all about the RBA’s thoughts on raising interest rates and ceasing bond buying activities, today will focus on Governor Phillip Lowe’s address to the Press Club at 12.30 in a speech aptly titled ‘The Year Ahead’.
National Australia Bank currency strategist Rodrigo Catril will pose several questions to Lowe including where is full employment in Australia, when does high underlying inflation become sustainable, and given how close we are to both the inflation and unemployment objectives, does it all boil down to wages growth?
The big question is how long will the RBA’s patience last on wage growth?
We will update on Governor Lowe’s speech later in the day.
Sandfire completes acquisition
Sandfire Resources Ltd has completed its US$1.865 billion acquisition of the MATSA Mining Complex in south-western Spain, having met all outstanding conditions, including Foreign Investment Authority approval in relation to Foreign Direct Investment in Spain and Competition Authority approval in late December 2021.
Sandfire will take hold of 100% of the mine located in the Iberian Pyrite Belt in Huelva Province of Andalusia.
“Today marks the beginning of an exciting new era for Sandfire, with our business expanding to an organisation with a workforce of around 3,800 direct employees and contractors around the globe,” Sandfire’s managing director and CEO Karl Simich said.
“This is an incredibly exciting moment for everyone involved with our business, and I would like to take this opportunity to thank everyone who has worked so hard to bring this transaction to a conclusion.
“Our vision for Sandfire is to become an international diversified and sustainable mining company, and the completion of this transaction represents a major step closer to realising this aspiration.
“With the acquisition of MATSA, Sandfire immediately becomes one of the largest copper-focused producers on the ASX, with high-quality operations in Spain and Australia and an impressive growth pipeline and exploration portfolio that we believe will continue to drive our growth for many years to come.
“While this marks the completion of the transaction, it represents just the start of our journey with MATSA. In the days, weeks and months ahead, we will all be working incredibly hard to integrate MATSA into Sandfire to create a single unified team who will be working hard to strengthen the future of the operation and unlock the enormous exploration potential of our large landholding in Spain and Portugal.
“With a larger team, broader expertise and greater capability and strength across our business, we are all looking forward to the vast opportunities that this new chapter will deliver for all of our key stakeholders.”
Fortescue acquires new Hydrogen asset
Fortescue Future Industries (FFI), a division of Fortescue Metals Group (ASX:FMG) Ltd, will take a stake in Sparc Hydrogen.
The strategic investment will see FFI gain an interest in a company with an exclusive licence to develop and commercialise next-generation green hydrogen technology.
This technology was created by the University of Adelaide and Flinders University.
Sparc Hydrogen is conducting research into the production of green hydrogen via only sunlight and water (photocatalytic water splitting coupled with solar radiation) sources, instead of renewable energy and electrolysis.
FFI will pay an initial sum of $1.8 million for a 20% interest in Sparc Hydrogen. FFI would then invest a further $1.475 million at stage two for a total investment of $3.275 million over 4.5 years to earn a 36% interest.
US markets
A late rally on Wall St yesterday saw all indices finish in the green.
The energy sector rose 3.6% to record highs, led by a 6.5% gain for Exxon Mobil, which posted its biggest quarterly profit in seven years as oil prices soar across the globe.
Shares in United Parcel Service (NYSE:UPS) were 14% higher after projecting 2022 revenue above market expectations.
Netflix was 7% higher and Alphabet gained 1.7% leading tech stocks higher.
The banking sector was also higher with Goldman Sachs (NYSE:GS) up 2.6% and JPMorgan Chase 1.7% higher.
Looking at Alphabet, Josh Gilbert, an analyst at the multi-asset investment platform eToro says, “Google’s parent company, Alphabet, revealed its Q4 earnings of US$30.69 per share on revenue of US$75.33 billion, compared to analyst expectations of US$27.35 per share on revenue of US$71.90 billion.
"In 2021, Alphabet was the best performing Big Tech company returning 65% overall for the year, and it has set the scene to potentially outperform once again in 2022 with this report.
"Marketers continue to spend more on digital advertising, as global economies grow. This is demonstrated in Alphabet’s resilience to the pandemic, despite the surge of Omicron which has disrupted many industries. As a result, Alphabet’s advertising revenues soared to US$61.24 billion up 32% year-over-year, helping to push the company’s overall revenues up by 32% year-over-year.
"Alphabet has put a heavy emphasis on e-commerce growth this year, and it seems to be paying off with US$43 billion in search business revenue compared to the US$32 billion a year ago.
"Alphabet’s cloud growth was once again a highlight in this report, especially with it being a heavy investment segment and long-term growth prospect. However, while its growth is robust, it's not quite enough to match that of Microsoft or Amazon for now. Alphabet’s cloud revenue grew to US$5.54 billion.
"In this report, Alphabet has also announced it would be looking to complete a 20-for-one stock split. This makes Alphabet’s shares much more accessible and attractive to the everyday investor, especially with the new wave of retail investing. This stock split will take the share price from US$2,700 a share to as little as US$135 a share. Although this is simply psychological and the value of the stock won't change, it will affect the way the stock is viewed, enticing new investors.
"Many tech stocks have taken the brunt of the recent market downturn, yet Alphabet's earnings will help to reassure investors with this solid report. With its fortress balance sheet and trading at only 24 times earnings, Alphabet’s stock appears to be an appealing prospect for many budding investors."
European markets
European shares finished higher yesterday.
It was a positive sign as Europe looks to recover its January losses.
The pan-European STOXX 600 rose 1.3%, putting its worst month since October 2020 behind it. The index has been weighed down by concerns over rising interest rates, inflationary pressures and geopolitical tensions, which knocked it down 4% in January.
Financial stocks were 2.1% higher, led by UBS after it posted its best annual profit since the global financial crisis.
Switzerland’s biggest bank gained 8% - to record a four-year-high.
Mining stocks were the best performers, up 3.5%.
More stimulus in major importer China has buoyed metal prices in recent weeks.
Euro zone manufacturing activity has also accelerated, easing supply chain issues.
The German Dax index and the UK FTSE index both rose 1%.
In London trade, shares in Rio Tinto rose by 3.2%. Shares in BHP rose by 1.0%.