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Wednesday, November 30, 2022

S&P win for 3rd day, Costa, Sims, Janus Henderson, Westpac, CBA, NAB watch today: ASX rises

Wall St turns higher after recession fears subsided, following a weak finish around the world. China has announced a collapse in Shanghai following a surge in Covid-19 cases as it maintains its zero-Covid-19 position, sending oil prices and energy supplies lower. A deep dive into what a soft landing is. AUD less than 75 cents before retail sales data today.

Good morning. Shares are turning higher. I am Melissa Darmawan for Finance News. These are your market prospects.

The Australian stock market is going to rise after we saw weakness worldwide.

S&P 500 wins for the 3rd consecutive day led by technology

US equities closed higher, extending its two-week gains as we close the quarter this week, and recovering almost all the losses since Russia invaded Ukraine more than a month ago amid persistent challenges and headwinds.

Market participants watched bond yields after reaching their highest level in three years. Concerns about recession have increased after the US Treasury yield curve reversed for the first time since 2006 in the recent period.

Building up yesterday, yield curves usually slope upwards which tends to indicate a strong economy amid rising inflation and rising interest rates. A flat yield curve represents less optimism from investors about economic growth, while a reverse yield curve indicates that a recession is likely based on historical figures – this is a major balancing act of all central banks this year.

Soft landing vs hard landing

We have seen several central banks raise interest rates to combat hot inflation while trying to avoid an economic recession, and a term used to describe it is called a “soft landing”. This is when central banks raise interest rates just enough to prevent them from overheating and suppressing inflation without harming the labor market, which means that the number of unemployed people will increase. A hard landing is when the economy avoids a recession closer to one.

JPM says the delay could be as long as 2 years

Meanwhile, a note from JP Morgan’s own global strategist said that despite concerns we see from the bond market, these warning signs of a reverse yield curve will not necessarily see a recession in the near term.

“Recessions usually do not start to reverse before the curve, and the lead backlog can be very significant, as long as 2 years … Furthermore, over this time frame, stocks tended to beat bonds nicely,” he adds. in stock markets historically occurs about a year after the inversion.

It turned out that traders were trying on this note where we initially saw a mixed market, which turned higher as dip buyers emerged to help lift Wall St higher.

Billionaire minimum income tax

President Biden spoke about the fiscal year 2023 budget which includes a new tax on the richest Americans and increased military spending. The budget will include a billionaire’s tax plan where it will tax 20 percent of a billionaire’s minimum income tax and also whatever they have made in unrealized profits. This means that each billionaire will have to pay a minimum of 20 percent of their income. It also applies to households worth more than US $ 100 million.

Diplomats meet in Turkey for new round of peace talks

Investors continue to watch as Russia and Ukraine negotiators meet in Turkey over the next 24 hours for another round of peace talks. Ukrainian President Volodymyr Zelenskyy has said he is ready to compromise with Russia only if he can meet face-to-face with Russian President Vladimir Putin.

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China’s shrinking demand tumbles

Elsewhere, oil prices fell by more than 9 percent due to concerns about slower demand from China due to new Covid-19 restrictions in effect in Shanghai, its largest city with more than 25 million inhabitants, through the city over the next nine days divide into two test zones. The city is also home to Tesla and Volkswagen factories that will be closed, along with the Chinese headquarters for many multinational companies.

China is the largest oil importer in the world and thus lower demand from the significant market plays a direct role on prices. The expected new round of peace talks overseas is also bringing these prices down. Meanwhile, an agreement between the US and the European Union reached late last week to strengthen the EU’s energy supply amid the war, which is causing some concern.

Experts say the plan to secure the enhanced energy supply for the EU is not enough to replace Russia’s supply, adding that governments and private industries will have to help while Europe will have to look at different energy sources. A very interesting point, if we go back to history, there was a demand decline in the 1970s, which caused the first shift to energy-saving technologies. The focus on electric vehicles could grow as we touched on last month.

AUD less than 75 cents before retail sales data

After a strong week, the Australian dollar is now below 75 cents against the dollar ahead of retail sales figures today at 11:30 EST. So far, the Aussie dollar has had a gain of about 3.5 percent thanks to the fact that we are a resource-rich country.

Figures around the world

At the close, the Dow Jones rose 0.3 percent to 34,956, the S&P 500 added 0.7 percent to 4,576 and the Nasdaq rose 1.3 percent to 14,355.

Across the S&P 500 sectors, energy was the worst performer, falling by 2.6 per cent, followed by materials and finance. Risk was up again as there were more winners with consumer discretionary, 2.7 percent higher, followed by real estate and information technology, 1.3 percent each.

The yield on the 10-year treasury note fell by 4 points to 2.45 percent while the 2-year yield rose by 4 points to 2.34 percent, we saw a yield curve reversal on the medium to longer term treasuries, the 5 years and the 30 years gold rose on a stronger dollar.

Across the Atlantic, European markets closed mixed. Paris won 0.5 per cent, Frankfurt added 0.8 per cent while London’s FTSE fell 0.1 per cent.

On the London Stock Exchange, Rio lost 1.1 percent, BP fell 2.8 percent and Shell fell 2.3 percent.

Asian markets closed mixed. Tokyo’s Nikkei fell 0.7 percent, Hong Kong’s Hang Seng rose 1.3 percent while China’s Shanghai Composite added 0.1 percent.

Yesterday, the Australian stock market closed 0.1 per cent higher at 7,412, rising to a 10-week high for its fifth consecutive session, lifted by miners and banks, offsetting losses with information technology still lagging behind. BHP (ASX: BHP) jumped 2.3 percent to $ 50.92 after qualifying shareholders received their dividends, paying more than $ 10 billion.

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SPI futures

If we take it all in comparison, the SPI futures contracts indicate a profit of 0.5 percent.

Local economic news

The Australian Bureau of Statistics (ABS) will release retail data in February. Economists expect a 0.9 percent increase with the range going from a 1 percent drop to an increase to 1.5 percent. This is despite the floods in NSW and Queensland that could weigh on sales.

Also keep an eye on ANZ and Roy Morgan’s weekly consumer sentiment reading.

Tonight, the federal budget will be handed over, one that is being closely watched ahead of the upcoming election scheduled for May. It is expected that a major focus of the budget will be on the cost of living and how the government will help alleviate household pressures. Aussies struggle with higher prices at shops, supermarkets and at the pump.

The government has refrained from disclosing the details of new policy spending. However, the treasurer noted that spending will be on “productivity-enhancing investments”.

On the other hand, rising commodity prices and the excellent performance of the economy are expected to lead to stronger revenue for the government. This will help improve the profit margin and fund new pre-election policy priorities, without aggravating the budget deficit.

What to look for today

Technology stocks may face that high point, which will deter their 2-day losing range, while energy stocks may be sitting at the bottom of the ladder. Amid the rising iron price despite the unrest over what it means for the restrictions in China, miners may also be ready to pull together.

Wilsons upgraded Costa’s (ASX: CGC) rating to overweight of market weight with a price target of $ 3.66, an increase of 16 percent from yesterday’s closing price.

Sims (ASX: SGM) is going to present its investor day today. Currently there are 8 buy, 2 hold and 1 sell on this company.

Fitch Ratings confirms Commonwealth Bank of Australia (ASX: CBA)National Australia Bank se (ASX: NAB)and Westpac’s (ASX: WBC) rating of ‘A +’.

News from Janus Henderson’s (ASX: JHG) Retirement head investment firm can see the needle moving for this stock today.

Let’s also look at the direction the Aussie dollar is heading today, as we have a big day of data ahead.

Ex-dividend

Southern Cross Electrical Engineer (ASX: SXE) pay 1 cent fully franked

Dividend payment

There are six companies that will pay suitable shareholders today

Australian Pharmaceutical Industries (ASX: API)
Bluescope Steel (ASX: BSL)
EQT Holdings Holdings (ASX: EQT)
Grange Resources (ASX: GRR)
Northern Star Resources (ASX: NST)
People Infrastructure (ASX: PPE)

Commodities

Iron ore rose 1.1 percent to US $ 152.40. Its futures contracts indicate a profit of 1.1 percent.

Gold lost $ 34.30 or 1.8 percent to US $ 1926 per ounce. Silver dropped $ 0.61 or 2.4 percent to US $ 25.00 per ounce.

Oil fell $ 10.49 or 9.2 percent to US $ 103.41 a barrel.

Currencies

One Australian dollar at 07:50 weakened from yesterday, buying 74.93 US cents (Mon: 75.07 US cents), 57.24 Pence Sterling, 92.83 Yen and 68.21 Euro cents.

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