The ASX is expected to start morning trading the same way it finished the day yesterday – on the rise.
ASX futures were up 7 points or 0.1% to 6,989 near 8am AEDT, reversing earlier modest losses.
That said, some analysts are predicting a flat start.
Wall St continued its positive run.
The Dow was up 0.6%, the S&P 500 gained 0.9% and Nasdaq was 0.5% higher.
In fact, while global stock markets shed some of their earlier gains on Wednesday, most indices were higher.
Investors have now turned their attention to central bank monetary policy in the eurozone and Britain on Thursday.
Investors are also looking at oil prices.
OPEC+ stuck to its guns yesterday and modestly increased output despite the price of crude soaring to multi-year highs.
“The news was hardly surprising, as the group has rigidly followed this approach since it was first agreed upon, even in December when oil prices plunged following the emergence of Omicron,” Capital Economics commodities expert Edward Gardner said.
The 23-nation OPEC+ group said it would increase production by 400,000 barrels per day in March, the same amount as in previous months.
The group continues to resist US pressure to further boost production to calm prices.
OPEC+ said the decision was made “in view of current oil market fundamentals and the consensus on the outlook”.
“What matters going forward is whether OPEC+ can keep up with its planned production increases,” Gardner said.
Oil prices are currently at seven-year highs, with Brent topping $US90. Prices are now hovering under $US90.
Interactive Investor’s Victoria Scholar said she expected “further gains” due to solid demand and “drip-feed production increases” by OPEC+.
Global tensions are also causing issues. OPEC+ member nations Russia, Saudi Arabia and the United Arab Emirates all have geopolitical issues to deal with, not least tensions between Russia and Ukraine as well the United Arab Emirates this week intercepting another ballistic missile launched by Yemen’s Huthi rebels.
Meanwhile, member nations Angola and Nigeria are unable to scale up their production, while Saudi Arabia and the United Arab Emirates, are unwilling to do so.
According to Bloomberg, in December, the total volume of OPEC+ output increased by only 90,000 barrels per day, far short of the 400,000 target.
Here’s what we saw (source Commsec):
- The Aussie dollar held between US71.18 cents and US71.58 cents and was near US71.40 cents in late US close.
- Global oil prices rose modestly on Wednesday. OPEC+ oil producers agreed to extend the program of gradual supply increases, lifting output quotas by 400,000 barrels per day in February. Supporting prices was data showing US crude stockpiles fell by 1 million barrels last week, against expectations for an increase.
- The Brent crude price rose by US31 cents or 0.3% to US$89.47 a barrel.
- The US Nymex crude price rose by US6 cents or 0.1% to US$88.26 a barrel.
- Base metal prices were mixed on Wednesday.
- Aluminium, zinc and nickel fell by as much as 1.5%.
- Other metals rose by up to 1.4% with copper up the most.
- The gold futures price rose by US$8.80 or 0.5% to US$1,810.30 an ounce.
- Spot gold was trading near US$1,808 an ounce in late US trade.
- Iron ore was unchanged at US$141.75 a tonne (Chinese New Year).
Australian market
Westpac Banking Corp reported an 80% jump in net profit of $1.82 billion for the December quarter. However, despite the good numbers has noted pressure on margins.
Unaudited cash earnings climbed 74% to $1.58 billion, excluding notable items. Lending increased $5 billion for the quarter while the net interest margin of 1.91% fell 8 basis points due to competition and higher liquid assets.
"We have made a sound start to the year and we are seeing the cost benefits of our simplification programs," Westpac chief financial officer Michael Rowland said.
“The environment however remains highly competitive, and we continue to see pressure on margins.
“Given this, we are bringing forward our simplification plans and changing our operating structure to improve efficiency and move more of our people closer to the customers they support.”
As for the banks in general, UBS has begun its research coverage and has taken a positive view of the sector, including a circa 10% share price upside across the sector.
UBS said banks are "defensive in a volatile and uncertain market".
Westpac was UBS’ top pick and highest conviction Buy rating, with a 23% share price upside to $25 over 12 months.
Buy ratings on ANZ and NAB, seeing 13% and 12% upside to respective 12-month targets of $30 and $30.50 have also been given.
UBS remains Neutral on CBA with a $95 target.
"Top down, the base case set-up for the banks is strong, with tailwinds from an improving macro backdrop and gradually rising interest rates supportive of accelerated topline revenue growth and expanding return on equity," UBS says.
US markets
Tech stocks dominated yesterday, led by Alphabet.
“Google crushed earnings and that optimism has many traders feeling that the bottom is in for the mega-cap tech giants,” Oanda’s Edward Moya said.
“Apple and Google have made Wall Street turn more optimistic about earnings season and that is largely because some of these tech giants are still delivering impressive results despite ongoing supply chain issues.
“With almost four out of five companies delivering in-line or better results this earnings season, traders who were looking to sell into rallies are starting to doubt that trade,” Moya also said.
Alphabet was at $US2981.79 in late trade, while Bank of America (NYSE:BAC) reiterated its Buy rating and lifted its 12-month price target to $US3510 from $US3470.
On the other hand, Meta Platforms’ (Facebook if you aren’t used to the name change yet) shares dived 22% in afterhours trading.
The Facebook owner reported Q4 revenue of $US33.67 billion compared with an expected $US33.43 billion.
The EPS of $US3.67 was lower than the $US3.84 expected, while 1Q revenue of $US27 billion to $29 billion was less than the $30.25 billion expected based on Bloomberg's consensus estimates.
Meta chief financial officer David Wehner estimates the Apple “head wind” will cost Meta an estimated $10 billion in 2022.
According to Insider Intelligence principal analyst Debra Aho Williamson, “It’s clear that there are many big roadblocks ahead as Meta faces tough new competition for ad revenue such as TikTok, and as it contends with ongoing ad targeting and measurement challenges from Apple’s iOS changes.”
Despite Meta’s fall, there is a positive sentiment among analysts that technology is through its worst period.
“The technology sector started 2022 with some of the biggest question marks over it since the dotcom crash more than two decades ago,” AJ Bell investment director Russ Mould said.
“However, the largest and highest quality US tech names continue to deliver the answers the market wants with big earnings beats.”
European markets
The ECB and BoE meetings will be the highlight once European markets open.
However, markets continue to be tempered by tensions between Moscow and Western allies over the amassing of Russian troops at the Ukraine border.
We haven’t seen anything like this since the Cold War in the 1980s.
“Ukraine-Russia (tensions) can only keep pushing it up as long as the situation keeps getting worse,” Markets.com analyst Neil Wilson said.
Despite the tensions, markets in Europe were higher yesterday, backed by strong fourth-quarter earnings.
According to Refinitiv, fourth-quarter profits for companies listed on the STOXX 600 are expected to rise 55% from a year earlier.
The pan-European STOXX 600 index rose by 0.5%. But while the German Dax index was flat, the UK FTSE index rose by 0.6%.
In London trade, shares in Rio Tinto rose by 0.1%. Shares in BHP rose by 1.4%.