Wall St mixed, Debt ceiling drama continues, Morgan upgrades Evolution Mining: ASX to riseCraig Foley
Mixed closed around the globe as the surge in bond yields take a breather amid lawmakers in Washington DC’s debate over the debt ceiling. European markets rose while Asian markets saw mixed reactions to Japan’s new prime minster and Evergrande’s moves. Morgan upgraded Evolution Mining (ASX:EVN) but cut its price target.
The Australian sharemarket is set to rise with the SPI futures pointing to a gain of 0.3 per cent.
U.S. investors buy-the-dip
Wall St had a better day today recouping some of its losses from yesterday’s steep sell-off. We saw the S&P 500 and the Nasdaq slightly recover from its worst day in months.
The yield on the government bond has taken a somewhat of a breather, that has helped on Wall St, however there is still caution looming as the 1.6 per cent mark isn’t too far away.
Caution still in the air on Evergrande’s fate, supply chain bottlenecks
The volatile run has definitely been fuelled by a number of variables at the moment. We have the power crisis in Europe, more so in China, the supply chain disruptions, the nervousness around Evergrande’s fate, let alone the inflation readjustment after the Fed’s hawkish turn last week. All of this ahead of the next quarter earnings, so we might be seeing a few profit updates on the back of this.
Debt ceiling debate continues, needs to be raised
Investors are also tracking the negotiation in Washington over the debt ceiling situation. To no surprise, lawmakers are still in debate over the funding and are likely to make a decision at the tail end of the countdown, to avert a government shutdown.
To give you a sense, check out this graph which I find quite amusing thanks to wolfstreet.com. As you can see, increasing the ceiling is set to see the debt come “out of the wazoo”. If the debt ceiling isn’t raised, they won’t be able to pay their bills on time which is one of many worries.
Yesterday, we saw some pretty firm words towards Fed Chair Jerome Powell from Senator Warren.
Today Senate Leader Chuck Schumer expressed that he hopes that the Senate Republicans would help the Democrats pass a government funding bill. Let’s take a look at what he said.
“….playing games with the American people… political, nasty and destructive games”.
Strong view there. The debt ceiling drama is one of the last things that investors want to focus on, as the distraction away from the economic recovery is of concern amid the risks of the spread of the delta-variant on businesses.
Wall St mixed, bond yield steady, gold falls
At the close, the Dow Jones gained 0.3 per cent to 34,391, the S&P 500 added 0.2 per cent to 4,359 while the Nasdaq closed 0.2 per cent lower at 14,512.
The yield on the 10-year treasury note fell 1 basis point from its surge yesterday to 1.53 per cent, while gold fell, on a firmer greenback.
Across the S&P 500 sectors, there were three losers to eight winners. Starting with the worst performers, materials fell 0.4 per cent, communication services shed 0.2 per cent while technology closed 0.1 per cent lower. Utilities rose 1.3 per cent followed by consumer staples, up 0.9 per cent then healthcare.
European markets rally as AstraZeneca buys up
Across the Atlantic, European markets rebounded, closing higher thanks to health and banking stocks.
Paris and Frankfurt both rose 0.8 per cent, while London’s FTSE enjoyed its best day this week up 1.1 per cent, thanks to AstraZeneca’s Alexion division. They are slated to buy the balance in Biosciences for up to US$500 million. Shares surged over 4 per cent.
In U.K. trade, Rio Tinto rose by 0.9 per cent while BHP added 0.8 per cent. Oil players BP and Shell both gained 0.5 per cent.
Asian markets react to moves by Evergrande & Japan election
Asian markets closed mixed on political & Evergrande moves.
Tokyo’s Nikkei fell after investors reacted to Fumio Kishida winning the election to head the Liberal Democratic Party. Mr Kisida, a former foreign minister, his win set aside the idea of a more progressive candidate becoming the next prime minister. This fall comes after a rally which saw the Nikkei hit a 30-year high recently. The index fell 2.1 per cent.
Hong Kong’s Hang Seng was the bright one, up 0.7 per cent, after Evergrande unveiled its plans to sell their US$1.5 billion stake in Shengjing Bank. China’s Shanghai Composite lost 1.8 per cent.
ASX 200 falls for 2nd day, set to snap 11-month winning streak
Yesterday, the Australian sharemarket fell for its second straight day, down 1.1 per cent at 7,197 as the reaction to inflation and bond yields continued.
Here’s a 5-day graph versus an intra-day one, to show you how the local bourse performed, from rally in the green to retreat in the red. A see-saw performance over that time, it is down 1.6 per cent for the month.
A few variables at play here. Yes, we saw the tech rout yesterday on the bond yield surge however, we also have our commodities market at play, with the bumpy moves in the iron ore price. This was compounded by an energy crisis in China which flickered with inflation worries, and saw the XJO dive to a four-month low.
Across the sectors, consumer staples and utilities attempted to offset the major losses across the board. Technology fared the worst, down 2.4 per cent followed by healthcare, down 1.9 per cent and energy, after its recent winning streak, closing 1.8 per cent lower.
The best-performing stock in the ASX 200 was St Barbara (ASX:SBM) closing 6.7 per cent higher at $1.35 followed by shares in Regis Resources (ASX:RRL) and Silver Lake Resources (ASX:SLR).
The worst-performing stock in the S&P/ASX 200 was Pinnacle Investment (ASX:PNI), closing 9.1 per cent lower at $16.29, it looks like the rising bond yields also impacted investment managers, followed by shares in Chalice Mining (ASX:CHN) and Tyro Payments (ASX:TYR).
Local economic news
The Australian Bureau of Statistics is set to release job openings for August. This is a timely pulse check on the labour market given the restrictions that NSW and Victoria have been in as of late.
The Reserve Bank is also on the agenda today. They are set to release private sector credit data for August, so the growth of outstanding loans.
Reflecting on the first half of the year, credit growth was on an upward trajectory across the residential and business sectors firming up from 0.2 to 0.4 per cent. This was underpinned by the reopening play and government stimulus being injected into the economy.
The lockdowns have played a role around businesses accessing lines of credit to assist with cash flow. When the pandemic hit in the first quarter of last year, this figure jumped 2.9 per cent in March, and again mid this year.
Total credit grew 0.9 per cent in June, then 0.7 per cent in July, which included strong gains in business of 1.6 and 1.1 per cent respectively.
According to Westpac group economists, they expect a 0.5 per cent rise factoring in another increase in business, as Victoria went into another lockdown however, not at the same pace as seen in June and July.
Morgan Stanley upgraded Evolution Mining (ASX:EVN) to an equal-weight with a target price of $3.70. The broker slightly increased the gold price forecasts, and thus financial years 2022 to 2024 estimates for earnings per share.
The gold miner has some shorter life mines however, Morgan believes there is exploration and expansion upside potential.
The rating upgrades to equal-weight from underweight while the target price is reduced to $3.70 from $3.90.
Shares in Evolution Mining (ASX:EVN) closed 4.2 per cent higher at $3.48 yesterday.
There are three companies slated to make their debut on the ASX today. Keep an eye out for computer services firm Activeport Group (ASX:ATV), Forrestania Resources (ASX:FRS), and Mitre Mining (ASX:MMC).
There are 10 companies going ex-dividend today.
CI Resources Limited (ASX:CII) is paying 1 cent fully franked
Cosol Limited (ASX:COS) is paying 1 cent fully franked
Global Value Fund (ASX:GVF) is paying 3.3 cents fully franked
Metrics Income Opportunities Trust (ASX:MOT) is paying 0.93 cents unfranked
Metrics Master Income Trust (ASX:MXT) is paying 0.64 cents unfranked
Probiotec Limited (ASX:PBP) is paying 3 cents fully franked
Partners Group Global Income Fund (ASX:PGG) is paying 0.6833 cents unfranked
PTB Group Limited (ASX:PTB) is paying 5 cents fully franked
Westgold Resources (ASX:WGX) is paying 2 cents unfranked
XRF Scientific (ASX:XRF) is paying 2 cents fully franked
Today there are 27 companies set to pay their eligible shareholders their dividends.
Abacus Property Group (ASX:ABP)
Austin Engineering (ASX:ANG)
Antipodes Global Investment Company (ASX:APL)
Ariadne Australia (ASX:ARA)
Bendigo and Adelaide Bank Ltd (ASX:BEN)
Beach Energy (ASX:BPT)
CPT Global (ASX:CGO)
Emeco Holdings (ASX:EHL)
Fortescue Metals (ASX:FMG)
Glennon Small Companies ASX:GC1)
Grange Resources (ASX:GRR)
Intega Group (ASX:ITG)
Kelly Partners Group Holdings (ASX:KPG)
Mercury NZ (ASX:MCY)
MNF Group (ASX:MNF)
Medibank Private (ASX:MPL)
Newcrest Mining (ASX:NCM)
Plato Income Maximiser (ASX:PL8)
Regis Healthcare (ASX:REG)
Ramsay Health Care (ASX:RHC)
St Barbara (ASX:SBM)
Sunland Group (ASX:SDG)
Shriro Holdings (ASX:SHM)
Thorney Opportunities (ASX:TOP)
WCM Global Growth (ASX:WQG)
Iron ore has gained 1.8 cent to US$114.13. Its futures are pointing to 7.2 per cent gain.
Gold has dropped $14.60 or 0.8 per cent to US$1,723 an ounce, while silver fell $0.98 or 4.4 per cent to US$21.49 an ounce.
Oil was down $0.46 or 0.6 per cent to US$74.83 a barrel.
One Australian Dollar at 7:20 AM has weakened from yesterday, buying 71.79 US cents, 53.47 Pence Sterling, 80.39 Yen and 61.91 Euro cents.
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Source: Finance News Network