It was a mixed day of trading on Wall St, with the local market set to follow the same pattern.
The ASX has opened slightly higher this morning after the S&P 500, Dow industrials and Nasdaq Composite interchanged small gains and losses throughout the session, before succumbing to selling pressure.
The S&P/ASX 200 index was 0.1% higher to 7,117.7 at 10.11am AEDT.
In the US, communication services dipped 2.2%, while information technology lost 0.7%, leading the session’s declines.
On the flipside energy was up 1.3%, with oil and gas producers up 26% so far in 2022.
The Dow Jones Industrial Average was flat, while the S&P 500 index closed down 0.5% lower to around 4,484 and the Nasdaq Composite Index finished the day off 0.6% to about 14,016.
Peloton Interactive (NASDAQ:PTON) Inc. was one of the best performers finishing the session up 21% amid speculation about suitors for the exercise-equipment company.
Spirit Airlines gained over 17% on Monday after it said it was merging with Frontier Group.
Here’s what we saw (source Commsec):
- The Aussie dollar rose from near US70.80 cents to US71.25 cents and was near highs in afternoon US trade.
- Global oil prices eased by up to 1.1% on Monday. Commsec states, “Concerns over tight supplies were offset by signs of progress in nuclear talks between the US and Iran, which could lead to the removal of US sanctions on Iranian oil sales. Iran is well placed to resume oil exports if sanctions are lifted.
- The Brent crude price fell by US58 cents or 0.6% to US$92.69 a barrel.
- The US Nymex crude price fell by US99 cents or 1.1% to US$91.32 a barrel.
- Base metal prices were firmer on Monday with aluminium up 2.4% and nickel up 1.8%.
- Copper fell 0.6% with tin down 0.3%.
- The gold futures price rose by US$14.00 or 0.8% to US$1,821.80 an ounce.
- Spot gold was trading near US$1,823 an ounce in late US trade.
- Iron ore rose by US$US2.80 or 1.9% to US$149.40 a tonne. China's National Development and Reform Commission said over the weekend that authorities should appropriately bring forward infrastructure investment according to the Xinhua news agency.
Australian markets
The Australian tourism industry now has two weeks to prepare for international borders opening, but they aren’t complaining.
Flight Centre Travel Group Ltd chief executive Graham Turner, who has been extremely vocal about border closures, welcomed the Federal Government’s decision to reopen the border to fully vaccinated travellers saying the call is “better late than never”.
“It's good news and I think it means the tourism industry — particularly those who focus on the inbound — will be able to develop and get their products back on.”
Flight Centre let go approximately 67% of its workforce during the pandemic, but remains Australia’s biggest travel retailer,
“We're in 24 countries with about 21,000 people, so we lost about two-thirds now. We're back up globally from 21,000 originally to about 10,000 to make sure we can cover the increase as (travel) comes back.
“Obviously this announcement is going to help our business places like South Africa, UK, Europe, Canada and the US,” Turner said.
Meanwhile, Tourism and Transport Forum chief executive Margy Osmond has also welcomed the decision.
“Nobody could be more thrilled than I except I suppose every other tourism operator in the country who's been doing the happy dance steps for the last 24 hours,” she told Channel 9’s Today.
Osmond pointed out that the industry had been suffering since the bushfires in 2019, which cut the tourism season short.
“Remember, because we have had the bushfires before COVID,” she says.
“That was having an impact of somewhere around $100 billion lost capacity over the last two years.
“Not to mention the jobs. And the pain and agony for many of those operators falling away.”
Positive earnings for Macquarie Group
Improved overall market conditions in the three months ended December 31 led to a “record quarter” for Macquarie Group Ltd.
“We continue to maintain a cautious stance, with a conservative approach to capital, funding and liquidity that positions us well to respond to the current environment,” Macquarie chief executive Shemara Wikramanayake said.
“More broadly, we remain well positioned over the medium term, based on our deep expertise in major markets, a diversified and adaptable mix of strong businesses, an ongoing program to identify cost-saving initiatives and efficiency, a strong and conservative balance sheet and a proven risk management framework and culture.”
Macquarie reported a group capital surplus of $11.5 billion while the bank’s CET1 ratio was 12.2%.
The company did not offer specific guidance as part of the update and did not quantify what it meant by “record quarter”.
US markets
Facebook is losing its longest-serving external board member Peter Thiel, who has been with the company for 17 years.
Thiel is one of Silicon Valley's top venture capital investors: his $500,000 initial stake in Facebook is worth hundreds of millions of dollars.
Thiel will now turn his attention to assisting Republican candidates with their 2022 midterm elections.
“Peter has been a valuable member of our board and I’m deeply grateful for everything he has done for our company—from believing in us when few others would, to teaching me so many lessons about business, economics, and the world," Meta CEO and chairman Mark Zuckerberg said in a statement.
“It has been a privilege to work with one of the great entrepreneurs of our time,” Thiel said in a statement. “His talents will serve Meta well as he leads the company into a new era.”
Thiel is jumping ship at a time when Facebook parent Meta has plummeted 26% as it battles bad publicity, inflation and Apple’s privacy changes.
Monetary policy
Investors are now factoring in the possibility of the steepest monetary tightening cycle since the 1990s.
On the back of a strong US jobs report, markets are pricing in more than five quarter-point Federal Reserve interest-rate hikes in 2022.
Yesterday’s US inflation report could lead to more market volatility: north of 7%, the highest since the early 1980s, is expected.
“The market is in transition,” Essex Financial Services president and chief executive officer Chuck Cumello said.
“You’re going from an accommodative Fed to one that’s going to tighten, you’re going from a scenario last year where the federal government was literally putting money in people’s pockets to spend and that’s not happening, and you have these big geopolitical events. It’s a very challenging environment for high P/E stocks.”
European markets
Sharemarkets were firmer yesterday, with Refinitiv reporting "gains in mining stocks and positive earnings outweighed worries of a looming policy tightening cycle and geopolitical tensions."
Mining stocks were 1.7% higher in response to higher iron ore and metal prices.
European Central Bank president Christine Lagarde said on Monday that price pressures could still subside before becoming entrenched in expectations.
The pan-European STOXX 600 index rose by 0.7%. The German Dax index rose by 0.7% and the UK FTSE index rose by 0.8%.
In London trade, shares in Rio Tinto rose by 2.8% while BHP rose by 4.2%.
Within the FTSE 100, HSBC, Barclays and Lloyds Group were up about 2% each, extending last week’s winning run.
Anglo American and Rio Tinto led the gains as aluminium prices in China jumped 3%, while Shanghai steel and iron ore futures also rose on hopes of economic stimulus.
Oil major Shell gained 1.2% after multiple brokerages raised price targets, BP rose 0.7% recording its highest closing levels since March 2020.
“A low tech exposure, high energy/resources and large cap weighting has insulated the UK equity market from the worst of the January global rout,” Jefferies analysts wrote in a note.
“Whilst cost pressures both at the consumer and corporate levels are hurting headline confidence and margins, the underlying data points are much more bullish.”