Wall Street’s four-session climb came to an end yesterday, with the rate-sensitive Nasdaq Composite Index falling the hardest.
The Nasdaq lost 3.7%, shedding about 540 points, to finish near 13,878.
The S&P 500 index fell 2.4%, while the Dow Jones Industrial Average closed down 1.5%.
Meta Platforms was one of the worst performers, falling 26.39% on missed sales and growth estimates in the December quarterly.
There was a broad tech rout on Wall St, and this, along with the Bank of England (BoE) and the European Central Bank (ECB) both signalling a more aggressive stance on interest rates, is likely to push the ASX lower today.
So far, the ASX has opened flat, which is better than expected.
Here’s what we saw (source Commsec):
- The Aussie dollar rose from near US71.10 cents to US71.65 cents and was near US71.30 cents in late US close.
- Global oil prices rose on Thursday to 7-year highs on ongoing supply concerns.
- The Brent crude price rose by US$1.64 or 1.8% to US$91.11 a barrel.
- The US Nymex crude price rose by US$2.01 or 2.3% to US$90.27 a barrel.
- Base metal prices were lower by as much as 2.2% on Thursday with lead down the most. Aluminium rose 2.4%.
- The gold futures price fell by US$6.20 or 0.3% to US$1,804.10 an ounce.
- Spot gold was trading near US$1,805 an ounce in late US trade.
- Iron ore rose by US$4.20 or 3% to US$145.95 a tonne.
Australian markets
Amazon’s stronger-than-expected results are expected to limit the ASX’s fall today.
Amazon gained 19% in after-hours trading, setting US futures up for a big jump.
The ASX is otherwise looking vulnerable as the BoE and ECB put renewed upward pressure on global bond yields, which magnified the sell-off started by Meta.
On Amazon, eToro analyst Josh Gilbert said: "Amazon announced its Q4 earnings of US$27.75 per share on revenue of US$137.4 billion, compared to analysts' expectations of US$3.79 per share on revenue of US$137.8 billion.
"Amazon’s earnings have smashed through initial analyst expectations and demonstrated a significant year-over-year increase, up by 97%. The company’s sales did, however, miss the mark slightly, gaining only 9.4% year-over-year.
"The company’s net income increased to US$14.3 billion, up from US$7.2 billion a year ago, thanks to its investment in electric vehicle manufacturer Rivian. However, despite the beat on net income, Amazon’s operating income took a hit, down 50 per cent year-over-year. The drop was, of course, due to supply chain issues globally and the cost of labour soaring in the US.
"The major focus for Amazon right now seems to be Amazon Web Services (AWS), and its push into streaming and advertising. AWS once again delivered robust growth, with revenues up 39.5 per cent year-over-year. With remote working continuing to be “the new normal” and enterprises' cloud budgets increasingly swelling, it seems that the shift towards cloud technologies is only just getting started and Amazon is in the prime position to benefit.
"Finally, Amazon also announced it would be raising its Prime Membership from US$12.99 to US$14.99, the first price hike since 2018. Right now, the biggest issue for Amazon is its margins, and this price hike could potentially address this issue."
Banks raise fixed rates
Australia’s banks aren’t waiting for the Reserve Bank of Australia to raise interest rates.
National Australia Bank has upped its fixed rates by up to 0.2% for owner-occupiers and investors.
This follows rises by the Commonwealth Bank of Australia (ASX:CBA) and Westpac Banking Corp last month.
RateCity.com.au research director Sally Tindall said NAB has "bowed to pressure once again, hiking fixed rates as cost of funding pressures bite.”
NAB’s fixed rates are now up to 1.56 percentage points higher than they were 12 months ago.
“Westpac and ANZ currently have the lowest rates out of the big four banks, however, with the cost of fixed rate funding continuing to increase, both lenders are likely to be mulling over further rate hikes," Tindall said.
Five-year fixed interest rates across the big four banks’ products are now above pre-pandemic levels, with RateCity predicting in the next six months, fixed rates may hit 4%.
“There are still a handful of 1- and 2-year fixed rates under 2 per cent, but they’re becoming increasingly harder to find, which makes shopping around all the more important,” Tindall said.
US markets
Ford was another that fell sharply as Wall St dipped, losing more than 3% after its quarterly profit fell short of Wall St expectations. Sales were well below expectations as the carmaker faced “persistent supply-chain disruptions.”
The upside for Ford is that customers are seeing how the company “is taking EVs mainstream,” chief executive Jim Farley said in a statement.
Farley noted that Ford has more than 275,000 orders or reservations for its all-electric Mustang Mach-E SUVs, F-150 Lightning pickups and E-Transit commercial vehicles, he said. Ford is “breaking constraints to deliver every one of them as fast as we can.”
Ford tried to sidestep chip shortages by allocating the chips on hand to in-demand vehicles such as the Bronco and the Maverick, the same path its rival carmakers took.
It ended the quarter with more than $36 billion in cash and $52 billion in liquidity. This includes its investment in Rivian Automotive Inc., which was valued at $10.6 billion at the end of 2021. At the close of trading on Feb. 2, the value was $6.6 billion
Snap back
Snap Inc (NYSE:SNAP). reported its first quarterly profit as Meta tumbled.
Snap’s bottom-line numbers beat Street expectations, with results turning around the company’s recent stock slide.
Shares surged as much as 61% in extended trading.
The Snapchat owner said privacy changes imposed last year by Apple Inc (NASDAQ:AAPL). on iOS devices had hurt its ability to target and measure its digital advertising — the same concerns Meta pointed to.
However, its strong sales could be affecting Meta’s audience.
“2021 was an exciting year for Snap and we made significant progress growing our business and serving our global community,” Snap chief executive Evan Spiegel said in a statement.
“The strength of our core business has enabled us to accelerate our investments in augmented reality, transforming the way that the Snapchat community experiences the world through our camera.”
Snap chief financial officer Derek Andersen said Snap’s direct-response advertising recovered “quicker than we anticipated” from Apple’s privacy changes, which meant it could oversee supply-chain and labor issues.
Snap posted a net income of $22.6 million, compared with a loss of $113.1 million, or 8 cents a share a year ago, beating predictions of a loss of 9 cents a share, according to analysts polled by FactSet.
Snap’s adjusted earnings were 22 cents a share.
Snap’s sales improved 42% to $1.3 billion.
“Snapchat is clearly not as prone to the TikTok effect as Meta, with strong daily active user growth in all regions, including North America,” Insider Intelligence analyst Jasmine Enberg said.
“Even so, most growth came from Rest of World, and most of that likely from India, where TikTok remains banned.”
European markets
The BoE has lifted its main interest rate for the second time in a row, in response to rising inflation.
Rates are now 0.25% higher to 0.5%, where it was before the pandemic.
The BoE expects the country’s annual inflation rate to peak at 7.25% in April, compared with 5.4% last December – a near 30-year high.
The UK's 2022 economic growth was also slashed to 3.75% from an estimate of 5% before the Omicron coronavirus variant struck.
Soaring energy prices are hurting the economy.
“The Bank has become more hawkish, but it doesn’t appear to be signalling it intends to raise interest rates very rapidly,” Capital Economics chief UK economist Paul Dales said.
Dales is expecting three more hikes this year to 1.25%.
Meanwhile, despite record inflation, the ECB stuck to its ultra-loose monetary policy.
However, the Frankfurt-based institution is under mounting pressure to raise rates.
Cyber attack strikes oil terminals
Several of Western Europe’s major oil terminals have been cyberattacked.
Oil facilities in Belgium’s maritime entryways, including Antwerp, Europe’s second-biggest port after Rotterdam were targeted, with Belgian prosecutors now looking into the hack.
German prosecutors are also investigating a cyberattack targeting oil facilities, described as a possible ransomware strike.
This is when hackers demand money to reopen hijacked networks.
“There was a cyberattack at various terminals, quite some terminals are disrupted,” said Jelle Vreeman, senior broker at Riverlake in Rotterdam.
“Their software is being hijacked and they can’t process barges. Basically, the operational system is down,” he said.
Europol, Europe’s police agency said it was aware of the incidents in Germany.
“At this stage the investigation is ongoing and in a sensitive stage,” Europol spokeswoman Claire Georges said.
The cross-border Dutch and Belgian Amsterdam-Rotterdam-Antwerp oil trading hub is one of the main victims.
SEA-Tank Terminal was also hit.
The Dutch National Cyber Security Centre said the attacks were “probably committed with a criminal motive”.
German newspaper Handelsblatt reports that German security services have identified the BlackCat ransomware as the tool used in the cyberattack in Germany.
BlackCat allows hackers to seize control of target systems.
The hacks come at a time when energy prices are soaring.
Meanwhile, on market the pan-European STOXX 600 index fell by 1.8%. The German Dax index fell by 1.6% and the UK FTSE index lost 0.7%.
In London trade, shares in both Rio Tinto and BHP both rose by 0.4%.