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As it happened: ASX up 0.1%, BHP closes at a 7-month high
Summary
- The ASX 200 closed 0.1% higher today, 6.2 points to 7412.4 with miners and banks higher. The tech sector dropped more than 2.5%.
- Futures point to declines of about 0.4 per cent on Wall Street tonight. On Friday the S&P 500 gained 0.5%, the Dow Jones gained 0.4%, and the Nasdaq softened by 0.2%
- Iron ore +0.2% to $US149.87 per tonne (Tianjin)
- Brent crude +1.4% to $US120.65 a barrel on Saturday
- 10-year yield: US 2.47% Australia 2.77% Germany +0.58%
March could see best performance in 17 months
By Lucy Battersby
The ASX is on track to record its best performance in 17 months, as materials, energy, and financial stocks off-set declines in the technology sector, which remains exposed to rising interest rates.
The local stock market had a flat day ahead of Tuesday’s Budget with the benchmark S&P/ASX 200 closing at a new ten-week high of 7,412.4 points, a gain of just 6.2 points or 0.1 per cent. It did get 0.6 per cent higher during the day, before declining as US futures weakened.
Oil prices softened as China imposed more lockdowns to curb a new COVID-19 outbreak, including a four-day lockdown for half of megacity Shanghai. US oil dropped 3.2 per cent, while Brent crude fell 2.9 per cent during Asian trade.
Chief investment officer at Burman Invest, Julia Lee, said the ASX200 was so far enjoying its best month since November 2020. The index was up 5.3 per cent since the end of February with three trading days left in March.
Traders roll out camp-beds as Shanghai starts lockdown
By Bloomberg
Half of Shanghai will go into lockdown for four days, followed by a similar lockdown in the other half of the city in an attempt to stamp out a COVID-19 outbreak. Residents will not be allowed to leave their homes and production at factories, including Tesla’s, will be suspended.
Meanwhile, Bloomberg reported last week that traders are volunteering to take turns camping out in their offices to avoid restrictions sweeping through the cities at a time when Chinese capital markets are experiencing the biggest bout of volatility since mid-2020.
That means making sure workers have enough provisions on hand in case they get stuck in the office. At AXA SPDB Investment Managers Co, for example, staff is being supplied with airbeds, instant noodles and emergency kits.
“We’re on the front line of investing here, and we need faster and more effective in-person communications,” said Alex Wang, who along with a dozen of his colleagues at another fund company volunteered to take turns living out of their Shanghai office over the past two weeks with the company’s consent.
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Equity markets ‘tranquil’ ahead of US rates returning to 3%: Citi
By Lucy Battersby
US-based economists with Citi Research are expecting to see four consecutive 50 basis point interest rate hikes by the Federal Reserve this year, with the target cash rating sitting 275 basis points higher by December.
This would see US interest rates reaching highs not seen since before the GFC, after spending all but two of the past 15 years at emergency lows.
This reassessment comes after the yields on two-year and ten-year treasury bonds increased 35 basis points in a week.
“Real yields will need to rise further to slow house price increases, restrain demand and meaningfully reduce inflation,” the team led by Andrew Hollenhorst wrote.
Insurers’ credit ratings ‘resilient’ to flooding: Fitch
By Clancy Yeates
Fitch Ratings has played down the impact of the recent catastrophic flooding in NSW and Queensland on insurance companies’ credit ratings, despite a run of natural disasters that exceeded industry expectations.
In a note on Monday, Fitch noted that Suncorp and IAG had frequently underestimated the cost of natural disasters in recent years, and this had eaten into profit margins.
Even so, Fitch said reinsurance companies would wear a large chunk of the estimated $2.5 billion cost from the flood, and also noted insurance companies had also been able to pass on “high single digit” home insurance premium increases following some previous disasters.
The ratings agency said the flooding would affect insurance companies’ earnings, rather than eating into their capital, due to strong reinsurance arrangements.
“Insurers’ robust earnings and capital headroom should ensure their ratings remain resilient to these effects. However, higher modelled catastrophe losses and rising reinsurance costs in the face of increasingly frequent extreme weather events, coupled with reduced appetite from global reinsurers, pose risks to insurers’ credit profiles over the medium term,” Fitch said.
IAG shares are up 0.7 per cent today to $4.50, up 5.6 per cent since the start of this year. Suncorp’s shares are up 1.4 per cent today to $11.32 and up 2.3 per cent since the start of this year, recovering from a dip down to $10.19 during the flooding.
Carsales management shake up as Australian MD departs
By Lucy Battersby
Carsales.com will shake up its management structure following the departure of managing director of carsales Australia, Ajay Bhatia, whose next step will be as chief executive of an unnamed “a European digital marketplace business”.
Paul Barlow will replace Mr Bhatia, moving from his role as managing director of international, and report directly to chief executive Cameron McIntyre along with the chief executives of all international subsidiaries.
And chief financial officer Will Elliott will take on responsibility for subsidiaries Tyresales, Redbook Inspect and iMotor.
“I am really looking forward to our international CEO’s joining our executive leadership team and working with Paul and Will as we continue to drive growth in our Australian and international markets,” Mr McIntyre said through an ASX announcement.
Carsales.com shares are down 1.6 per cent to $20.17 today compared to a 0.5 per cent rise in the benchmark S&P/ASX 200.
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Out in the cold: The race is on to solve the Russian gas puzzle
By Stephen Bartholomeusz
The big question flowing from the deal the US has struck with the European Union to displace Russian gas with LNG sourced from the US and elsewhere is whether there is enough available LNG. The answer, at least in the immediate future, is no.
Last Friday, after a summit between US president Joe Biden and EU leaders, the US announced it would increase the supply of LNG to Europe by at least 15 billion cubic metres (Bcm) by the end of this year and by 50 Bcm by 2030.
It wasn’t specified where the gas would come from, although clearly much of it in the near term will come from the US, now the world’s largest LNG exporter and the producer with the most uncontracted gas. About 70 per cent, perhaps a bit more, of LNG production from Qatar and Australia is committed under long-term contracts.
The EU is reliant on Russia for about 40 per cent of its gas, or the equivalent of about 120 Bcm, most of which flows through pipelines.
On paper, the 30 per cent or so of LNG – about 135 million tonnes of LNG a year -- that hasn’t been contracted and which is sold in the spot market ought to be sufficient to meet Europe’s needs, but that would only happen if it was the only buyer of those spot cargoes and had the infrastructure to handle the massive shift in its energy supplies. Neither of those prerequisites is in place.
Vimy and Deep Yellow may form a nuclear family
By Peter Milne
ASX-listed uranium plays Vimy Resources and Deep Yellow have both entered a trading halt in relation to a “potential control transaction” following months of manoeuvring.
In November Vimy let a takeover offer from Deep Yellow lapse after what Deep Yellow termed a lack of “meaningful engagement” from Vimy.
Vimy’s chair Cheryl Edwardes called the offer “unrealistic and uncommercial”.
A week after the November deal fell over, Vimy notified the WA regulator that it had achieved “substantial commencement” of its Mulga Rock uranium project, without which its environmental approvals would have expired weeks later.
ASX higher in early afternoon
By
The benchmark S&P/ASX 200 is up 0.5 per cent in early afternoon trading, up 34.7 points to fresh two-month highs of 7,441 points. The index is currently up 5.6 per cent since the start of March.
The Aussie dollar is still hovering around five-month highs at US75.04¢. Oil prices have eased slightly, with US crude down 3.2 per cent to $US110.23 a barrel in Asian trade and Brent crude down 3 per cent to $US117.04 per barrel.
The ASX-listed material and financial sectors are adding the most points, while information technology, communications, healthcare and consumer discretionary sectors are dragging.
Within materials, Lynas is up 4.2 per cent while Incitec Pivot, BHP, Iluka, and Alumina are all up more than 2 per cent. But St Barbara is down 3.3 per cent after confirming a COVID outbreak at its Simberi mine in Papua New Guinea would drag on full-year production.
In financials the big banks are higher, but Zip Co is down 3 per cent and ASX Ltd is down 0.6 per cent after confirming delays in its CHESS replacement program.
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Tech out, miners in: Retail investors flock to resources as inflation rises
By Clancy Yeates
Retail investors have responded to rising inflation and expected interest rate hikes by piling into commodity businesses in oil, gas, gold and even coal, while shunning speculative technology stocks such as buy now, pay later firms.
While some fund managers have questioned whether small investors appreciate the implications of rising interest rates, data from rival online brokers Nabtrade and Stake suggests “mum and dad” investors have joined the wider market “rotation” into stocks that are tipped to benefit from higher inflation.
In a sign of the sharp change in investor attitudes, oil and gas companies Woodside and Santos had both pushed their way into Nabtrade’s 10 most traded stocks by mid-March, alongside ever-popular blue chips the big banks, mining giants and CSL.
Loss-making technology stocks such as Zip Co and Airtasker - both of which were in the top 10 this time last year - have fallen out of favour after a surge in “growth” stocks in the pandemic when interest rates fell to record lows.
Stake also said it had seen a 50 per cent surge in trade interest in BHP and Fortescue in the last three months, alongside a 40 per cent lift in trading in gold miners Newcrest, Northern Star and Evolution Mining.
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