Australian shares are poised to open higher, taking direction from Wall Street’s positive start to the week.
ASX futures were up 27 points or 0.4% to 6972 near 5.15am AEDT. The currency was flat.
AFR interim profit season calendar: Today’s scheduled results: Beach Energy, Challenger, Suncorp Group, Transurban
In overseas markets, Europe’s main benchmarks edged lower to start the week. In contrast, Wall Street advanced with the Nasdaq resetting its record high.
A gain of 2.1% in Amazon’s shares and a more than 1% rise in shares of Microsoft and Alphabet were among the top boosts to S&P 500 and the Nasdaq.
Bespoke Investment tweeted: “All five FAANG stocks start the week above their 50-DMAs, with $FB crossing back above last week.”
BlackRock’s Kurt Reiman said he was maintaining a “neutral” view on US stocks, pointing to “rising uncertainty around the US election and profit margin erosion typically seen in the late-cycle periods”.
“Analysts currently expect US earnings to grow about 9% in 2020, a hair lower than the typical range for the start of the year,” BlackRock’s senior strategist for North America said in a blog post. “Yet we see that as an ambitious goal given potential for rising wages and other cost increases to further compress corporate margins.
“Our analysis of US corporate profit margins over the stages of the business cycle since 1965 showed that profit margins have tended to contract in late-cycle periods. High earnings expectations, combined with these late-cycle dynamics and more attractive valuations in other regions, set a high bar for sustained US outperformance.”
Local: Housing finance December, NAB business survey
Overseas data: UK fourth quarter GDP
ASX futures up 27 points or 0.4% to 6972 near 5.15am AEDT
- AUD flat at 66.74 US cents
- On Wall St near 1.15pm: Dow +0.2% S&P 500 +0.3% Nasdaq +0.7%
- In New York: BHP -0.6% Rio -0.9% Atlassian +2.3%
- In Europe: Stoxx 50 -0.1% FTSE -0.3% CAC -0.2% DAX -0.2%
- Nikkei 225 futures flat
- Spot gold +0.3% to $US1575.39 /oz at 1.12pm New York
- Brent crude -2.1% to $US53.31 a barrel
- US oil -1.4% to $US49.63 a barrel
- Iron ore -0.8% to $US82.88 a tonne
- Dalian iron ore -0.7% to 581.5 yuan
- LME aluminium -1.4% to $US1702 a tonne
- LME copper +0.1% to $US5667 a tonne
- 2-year yield: US 1.37% Australia 0.73%
- 5-year yield: US 1.37% Australia 0.73%
- 10-year yield: US 1.55% Australia 1.00% Germany -0.41%
- 10-year US/Australia yield gap: 55 basis points
From today’s Financial Review
KPMG partners offered ‘high risk’ income-splitting model: KPMG disclosed new details about its structure in an email explaining to partners how to enter into the “Everett assignment”, a legal tax-minimisation strategy.
The Nasdaq hit a record high to start the week, as investors focused on strong domestic economic data and largely upbeat fourth-quarter earnings.
Of the 324 S&P 500 companies that have reported quarterly results so far, about 71% have beaten earnings estimates, which is above the long-term average of 65%, according to IBES data from Refinitiv.
Near midday on Monday in New York, ten of the 11 major S&P sectors were higher, with technology stocks climbing 0.7%.
Electric carmaker Tesla rose 2.7% as its Shanghai factory returned to service.
Apple fell marginally as analysts predicted China’s smartphone sales may plunge by as much as 50% in the first quarter due to store closures and production suspensions following the outbreak.
Eli Lilly dropped 2% after experimental drugs from the US pharmaceutical firm and Switzerland’s Roche failed to halt Alzheimer’s disease.
The United States has charged four Chinese military hackers in the 2017 breach of the Equifax credit reporting agency that affected nearly 150 million American citizens, Attorney General William Barr said.
“This was a deliberate and sweeping intrusion into the private information of the American people,” Barr said in announcing the indictments of four members of the Chinese Liberation Army in connection with one of the largest data breaches in US history.
The Chinese Embassy in Washington did not immediately respond to a request for comment.
Xerox Holdings raised its offer to buy HP by $US2 to $US24 per share on Monday, following several rejections of its previous buyout offer by the PC maker.
Xerox said its latest offer comprises $US18.40 in cash and 0.149 Xerox shares for each HP share — valuing the company at about $US35 billion — and that it plans to launch a tender offer on or around March 2.
Simon Property Group, the biggest US mall operator, agreed to buy rival Taubman Centers in a deal valued at $US3.6 billion.
Chaos in Germany as Angela Merkel’s anointed successor quits: Annegret Kramp-Karrenbauer’s exit spurs a struggle for the soul of her party, and could reset the country’s political zeitgeist.
The pan-European STOXX 600 index ended 0.07% higher.
NMC Health shot up 24% after revealing preliminary buyout approaches from private equity firms KKR and GK Investment, while Italy’s Exor hit an all-time high after saying it is in talks to sell reinsurer PartnerRe in a deal that could be worth about $US9 billion.
At the other end of STOXX 600 were Irish lenders Bank of Ireland and AIB Group, sliding 8.3% and 6%, respectively as investors feared a negative impact from Sinn Fein’s policies, which include an end to tax breaks for banks.
Ireland’s main index dropped 1.2% as significant differences in the manifestos of the three main political parties reduced hopes among investors for a smooth formation of a new government.
London’s FTSE 100 weakened again on Monday after Britain declared the coronavirus epidemic a serious and imminent threat to public health, though preliminary takeover approaches thrust shares in troubled healthcare company NMC 32% higher.
The FTSE 100 index of blue-chip companies dipped 0.3%, with oil majors Shell and BP applying the most pressure as crude prices slipped. The midcap index ended the day marginally lower.
UniCredit confirmed plans to cut 6000 jobs in Italy over the next four years as the country’s biggest bank began the negotiation process with unions on Monday over layoffs and branch closures.
In December UniCredit unveiled a new plan to 2023, under which it would cut 8000 jobs and close 500 branches, angering Italian unions, which said then that they expected 5500 layoffs in Italy and up to 450 branch closures.
Economists are cutting their forecasts for Italian economic growth following shock falls in gross domestic product and industrial output at the end of last year.
The parliamentary budget watchdog (UPB) said on Monday it expects GDP to grow just 0.2% in 2020, far below its previous 0.5% forecast and the 0.6% rate officially targeted by the government in September.
At the close of trade on Monday in Hong Kong, the Hang Seng index was down 0.6% at 27,241.34, falling for a second straight session. The Hang Seng China Enterprises index fell 0.5%.
Trading volume thinned from the increase last week. About 1.61 billion Hang Seng index shares were traded, compared with the six-month high of 2.5 billion hit on February 4
Apple’s main iPhone maker Foxconn got the green light on Monday to reopen two major plants in China closed because of the coronavirus and aims to resume production even though only 10% of the workforce has returned so far, a source told Reuters.
In Tokyo, the Nikkei share average fell 0.6% to 23,685.98 points, slipping for two trading days in a row after hitting a two-week high on Thursday. The broader Topix lost 0.72% to 1719.64.
Nippon Steel fell 0.6% after the steelmaker booked a record loss of 440 billion yen this financial year as it announced closing three blast furnaces to deal with waning domestic demand.
Mexico’s central bank is expected to lower its key interest rate again on Thursday, according to a Reuters poll of analysts, as the economy appears to be stagnating.
A Reuters poll found that 23 of 24 analysts surveyed expected the Bank of Mexico, known as Banxico, to lower the rate by 25 basis points to 7%, which would be the bank’s fifth rate cut since August.
Mexico’s economy contracted 0.1% percent last year, its first such decline in a decade. Annual inflation rose 3.24% in the year through January, above the bank’s target of 3%.
“The tone of the statement will likely continue to be ‘dovish’ in the face of low growth levels, negative output gap, and additional downside risks on the horizon,” Banorte analysts wrote in a note to clients.
Zinc prices lurched on Monday to their lowest since July 2016 after a surge in inventories and worries over demand in China as cases of the coronavirus grow in number.
LME copper edged up 0.1% to $US5667 a tonne, though Nugent expects further losses. Citibank forecasts that copper will touch a low of $US5300 during the first quarter before recovering later in the year.
Spot charges for processing copper concentrate in China have risen to their highest in eight months owing to the coronavirus outbreak.
LME aluminium dropped 1.4% to $US1702 a tonne.
Oil prices fell to their lowest since January 2019 on weaker Chinese demand and as traders waited to see if Russia would join other producers in seeking further output cuts.
Oil has dropped over 25% from a peak in January after the spreading virus hit demand in China, the world’s largest oil importer, and fuelled concerns of excess global supplies.
Federal police examine Horizon Oil corruption allegations: The ASX listed company has set up an independent inquiry to examine $15 million payment due to the “seriousness of the allegations”.
Rio’s Kakadu uranium takeover faces blocking stake: Rio Tinto may struggle to compulsorily acquire all shares in ERA after the second biggest investor confirmed it would buy more shares.
After dropping sharply in early trade, the benchmark S&P/ASX 200 Index recovered to close 10.1 points, or 0.14 per cent, lower at 7012.5.