ASX set to rise as US equities hit new highs

Australian shares are set to rise as US equities climbed to record levels amid a wave of merger and acquisition activity.

The SPI 200 was up 0.3% at 4.40am AEDT. The Australian dollar was down.

The S&P 500 and Nasdaq Composite Indexes climbed to all-time highs after China said it will tighten intellectual property rules, a move aimed at boosting the chances of a trade deal between the two largest economies. Charles Schwab agreed to buy TD Ameritrade, while LVMH purchased US jeweler Tiffany & Co.

It’s a shorter trading week in the US with the Thanksgiving holiday on Thursday and an early close on Friday.

But there’s still plenty of data coming up, including the Conference Board Consumer Confidence Index today and the Federal Reserve’s latest edition of the Beige Book on Wednesday.

Stephen Innes from AxiTrader warns that the shorter trading week in the US could lead to more uncertainty.

“While the bar for further Fed policy action is very high for the remainder of 2019, it’s wise not to fall into a complacency trap as any significant shift in critical economic data variables could trigger a ‘material reassessment’ that Fed Chair Powell and other policymakers have repeatedly cited as the bar for further policy actions,” he writes.

“However, markets could be a bit of a jumble as they tend to be on Thanksgiving week as traders have a propensity to flatten books ahead of US holidays.”

“Third quarter S&P 500 Index earnings barely budged after last week’s wave of retail results. S&P 500 profits are tracking to a 2.2 per cent year-over-year decline last quarter, with over 480 S&P 500 companies having reported,” says LPL Financial Research.

“While that year-over-year change is nearly 2 percentage points higher than September 30’s estimate, the upside is slightly less than recent trends. The consensus S&P 500 earnings estimate for the next 12 months has fallen 2 per cent since September 30.”

Today’s agenda

Local: RBA deputy Guy Debelle speaks in Canberra at 10.50am AEDT; NZ retail sales volumes Q3

Overseas data: US FGFA house prices September; S&P CoreLogic CS house prices September; US Richmond Fed index November; US consumer confidence index November; US new home sales October.

Market highlights

ASX futures up 23 points or 0.3% to 6765  near 4.20am AEDT

  • AUD -0.2% to 6772 US cents at 4.20am AEDT
  • On Wall St: Dow +0.4% S&P 500 +0.6% Nasdaq +1.1% at 3.40am AEDT
  • In New York: BHP +1.2% Rio +1.4% Atlassian +0.4%
  • In Europe: Stoxx 50 +0.6% FTSE +0.9% CAC +0.6% DAX +0.5%
  • Nikkei 225 futures +0.8%
  • Spot gold -0.3% to $US1457 an ounce at 3.48am AEDT
  • Brent crude -0.1% to $US63.33 a barrel
  • US oil -0.2% to $US57.64 a barrel
  • Iron ore +3.2% to $US90.92 a tonne
  • Dalian iron ore -0.4% to 654 yuan
  • LME aluminium % to $US a tonne
  • LME copper % to $US a tonne
  • 2-year yield: US 1.62% Australia 0.76%
  • 5-year yield: US 1.61% Australia 0.78%
  • 10-year yield: US 1.76% Australia 1.09% Germany -0.35%
  • 10-year US/Australia yield gap: 67 basis points

From today’s Financial Review

Investors cool on Westpac as lawyers swarm: Moody’s says Austrac’s allegations are a “credit negative” for Westpac as ministers continue to pile on pressure over accountability.

Westpac’s expert must look outside for answers: The heavy turnover of key executives in Westpac’s financial crime division was highlighted by the bank at the weekend. The external expert looking into its breaches must turn to them to find out who knew what and when.

ICAC asking fresh question about China’s influence: The corruption watchdog is investigating $35,000 given by Huang Xiangmo to former NSW ALP boss Jamie Clements.

United States

The S&P 500 and the Nasdaq indexes hit record highs, as a report that the United States and China were nearing a trade truce sparked a rally in Apple and semiconductor stocks, with sentiment also buoyed by a raft of blockbuster deals.

Gains in trade-sensitive chip stocks, including Applied Materials and Lam Research, helped lift the Philadelphia Semiconductor index 2.27 per cent after a Chinese state-backed tabloid said Beijing and Washington were “very close” to an initial pact.

Apple Inc rose 1.3 per cent and was the top boost to the S&P and Nasdaq, while it provided the second-biggest support to the Dow Jones.

TD Ameritrade was up 6.4 per cent; Charles Schwab rose 1.3 per cent. EBay gained 1.4 per cent after the e-commerce major said it would sell ticketing unit StubHub to ticket reseller Viagogo for $US4.05 billion in cash.

Netflix slipped 1 per cent after Wells Fargo downgraded shares of the streaming service to “underperform” from “market perform”.

Europe

European shares posted their best day in six weeks, as transatlantic deals by Louis Vuitton owner LVMH and Swiss drugmaker Novartis, as well as hopes that the United States and China would seal a trade deal, boosted sentiment.

Shares of LVMH rose 2 per cent as the French firm agreed to buy US jeweller Tiffany for $US16.2 billion in its biggest acquisition yet.

Tiffany’s lower-priced rival, Denmark’s Pandora, gained 1 per cent, while other luxury goods makers such as Gucci parent Kering, Italian jacket maker Moncler and London’s Burberry gained between 0.4 per cent and 2.7 per cent.

Novartis shares were a big boost to the STOXX 600 index on the back of the drugmaker’s $US9.7 billion takeover of The Medicines Co.

Fresh data revealed that British retailers saw a stronger-than-expected improvement in sales in November and are more upbeat about the month ahead.

Asia

Hong Kong stocks closed higher as investors cheered signs of headway in the trade negotiations between Washington and China.

The elections in Hong Kong, or at least their smooth holding, also helped lift market sentiment, said Linus Yip, a Hong Kong-based analyst with First Shanghai Securities, adding positive comments over the weekend on the trade talks were also a boost.

Liquidity conditions for the market would also improve as funds frozen for the subscription of Alibaba’s share sale will flow back, as the e-commerce giant is due to start trading on Tuesday in Hong Kong, he said.

MSCI’s Asia ex-Japan stock index was firmer by 0.69 per cent, while Japan’s Nikkei index closed up 0.78 per cent.

Currencies

The pound rose off 10-day lows, climbing back above $US1.29. Against the euro too, it firmed 0.6 per cent at 85.37 pence to reach a one-week high.

Bitcoin sank to the lowest level in six months, extending this month’s slide on concerns about a crackdown on cryptocurrency operations by China.

It has tumbled about 22 per cent in November, the biggest monthly decline in a year. The world’s largest cryptocurrency is also on track for eight straight days of declines, tying a record losing streak from 2014, according to Bitstamp pricing going back to August 2011 and including weekend trading.

Commodities

Benchmark copper on the LME traded up 0.5 per cent at $US5886 a tonne in official rings after touching $US5917, its highest since November 12. But prices of the metal are down about 20 per cent from last year’s high.

LME aluminium traded down 0.2 per cent at $1736 a tonne, zinc was flat, nickel fell 0.1 per cent and tin dipped 0.2 per cent. Lead did not trade in official rings but was bid down 0.5 per cent at $US1957 a tonne.

China’s October nickel ore imports from Indonesia jumped by more than 23 per cent from the previous month as Chinese buyers stocked up ahead of a ban on exports from Indonesia from January.

Australian sharemarket

Australian shares headed back towards a record on Monday, as sharp gains from Afterpay Touch bolstered the benchmark and helped to offset losses from banking giant Westpac.

The S&P/ASX 200 index rose 0.3 per cent, or 21 points, to end the session at 6731.39, with the gain putting the benchmark back on track to surpass July’s 6845.08 record closing high.

The top index has been threatening to smash though the record high in November as optimism over a phase one trade deal between the US and China combined with ongoing central bank policy support to send investors scurrying towards shares.

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    Natasha Rudra is an online editor at The Australian Financial Review based in London. She was previously life and entertainment editor at The Canberra Times. Connect with Natasha on Twitter. Email Natasha at natasha.rudra@afr.com.au

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