ASX to rise, Dow edges higher

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The Swiss bank tumbled 13.8 per cent to a three-month low after saying an unnamed hedge fund defaulted on margin calls made last week by Credit Suisse and other banks and said that while it was “premature to quantify” the resulting loss, “it could be highly significant and material to our first quarter results”.

Today’s agenda

Local: Weekly payrolls data; NZ February building permits

Overseas data: Euro zone March economic confidence; US January FHFA house prices, January S&P CoreLogic CS house prices, March consumer confidence index

Market highlights

ASX futures up 40 points or 0.6% to 6800 near 4.30am AEDT

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  • AUD +0.1% to 76.41 US cents
  • Bitcoin on bitstamp.net +3.4% to $US57,900 near 4.45am AEDT
  • On Wall St near 1.35pm: Dow +0.3% S&P 500 flat Nasdaq -0.2%
  • In New York: BHP -0.8% Rio -1.4% Atlassian -4.2%
  • Tesla -1.1% Apple +0.4% Facebook +2.7% Amazon +1.1%
  • In Europe: Stoxx 50 +0.4% FTSE -0.1% CAC +0.5% DAX +0.5%
  • Spot gold -1.1% to $US1713.33/oz at 1.32pm New York time
  • Brent crude +0.2% to $US64.70 a barrel
  • US oil +0.4% to $US61.24 a barrel
  • Iron ore +4.1% to $US167.88 a tonne
  • 2-year yield: US 0.14% Australia 0.06%
  • 5-year yield: US 0.88% Australia 0.80%
  • 10-year yield: US 1.70% Australia 1.68% Germany -0.32%
  • US prices as of 1.30pm in New York

From today’s Financial Review

PM promises ‘women’s filter’ from his new cabinet: Women have been awarded two of the most senior jobs in cabinet and a new ministerial taskforce will ensure women’s interests are considered in all cabinet decisions.

Has the RBA given big banks too many free kicks?: The Reserve Bank’s term funding facility slashed borrowing costs for consumers and businesses, but non-banks complain it tilted the playing field in favour of the big banks.

Chanticleer: Key questions follow Nine’s cyber attack: The cyber disruption at Nine comes in the midst of a wave of criminal and nation-state attacks that take advantage of employee ignorance of phishing emails.

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United States

Southwest Airlines said it is expanding its all-Boeing fleet with an order for 100 Max jets instead of buying planes from Europe’s Airbus.

Southwest ordered the 150-seat 737 Max 7 and expects the first 30 to show up next year. It is also converting orders for 70 Max 8s to the smaller model.

Morgan Stanley’s market view: “As demand comes roaring back, we are likely to witness supply shortages. This means higher costs or even missed sales altogether. We suspect these higher costs will not be passed on completely and believe incremental operating margins may have peaked for the cycle.

“Furthermore, the anniversary of last year’s recession trough (i.e. now) will mark the peak 12 month rate of change in many key variables. These include fiscal spending, equity inflows, the Fed’s balance sheet, earnings revision breadth and many economic data series including PMIs. Expect a shift from early cycle to mid cycle leadership.”

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As a result, Morgan Stanley said: “We took a systematic approach to assessing Quality’s historical outperformance and found that with statistical significance, Quality’s outperformance tends to come with slowing rates of change in inflation, personal income, PMIs, and GDP – all places where we think it is reasonable to expect a slowing in the y/y and sequential rate of change into 2Q21.

“We downgrade Consumer Discretionary to Underweight and upgrade Staples to Neutral.”

Europe

London’s FTSE 100 ended flat on Monday, as weakness in banks and consumer discretionary stocks outweighed gains in defensive sectors.

The blue-chip FTSE 100 index ended down 0.08 per cent, with bank stocks including HSBC Holdings, Barclays and Prudential Financial falling between 1 per cent and 1.8 per cent.

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Deutsche Bank CEO Christian Sewing will hand over oversight of the investment and corporate bank to board member Fabrizio Campelli, the German bank said, as part of an overhaul of the management board.

Mario Draghi’s government expects Italy’s virus-hit economy to grow by 4.1 per cent this year and 4.3 per cent in 2022, three sources close to the matter told Reuters ahead of official publication of the new forecasts next month.

Asia

China stocks ended higher on Monday, as upbeat earnings at industrial firms boosted sentiment, though foreign selling through the Stock Connect programme capped gains.

The blue-chip CSI300 index rose as much as 1 per cent, before closing up 0.2 per cent at 5046.88, while the Shanghai Composite Index added 0.5 per cent to 3435.29.

Annual profits at China’s industrial firms surged in the first two months of 2021, highlighting a rebound in the country’s manufacturing sector and a broad revival in economic activity from the coronavirus crisis early last year.

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Aiding sentiment, profit growth rose at the country’s major lenders in the fourth quarter of 2020.

Three of China’s largest lenders on Friday booked a jump in fourth-quarter net profit of well over 40 per cent, the first green shoots since the COVID-19 pandemic battered borrowers last year.

Currencies

Capital Economics sees widening US and European government bonds yield gap as economic growth rates and central bank policies diverge: “The upshot is that we forecast ten-year government bond yields in Germany and Italy to rise by just about 30bp and about 10bp respectively by end-22, even as the ten-year Treasury yield increases by about 80bp.”

Mohamed El-Erian sees trouble for Turkey’s new central bank chief as the nation’s currency extends its depreciation.

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Commodities

Chinese steel futures advanced on Monday, with rebar and hot-rolled coil both closing at record highs, as attractive industrial profit margins and rising demand amid strong construction and manufacturing activity lifted prices.

China’s industrial profit surged 179 per cent in the first two months from the year-ago period, data from the National Bureau of Statistics showed on Saturday.

Margins in the manufacturing sector jumped 219.5 per cent on an annual basis, while profit earned by ferrous smelting and processing companies soared 271 per cent during the January-February period, according to the statistics bureau.

Apparent demand for five main steel products, including steel rebar and hot-rolled coil, rose 5.6 per cent week-on-week, data from Mysteel consultancy showed.

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“According to the usual practice, if daily turnover for construction materials stays above 200,000 tonnes for a week, it can be proved that peak demand season has come,” Tang Chuanlin, analyst with CITIC Securities said in a note.

Construction rebar on the Shanghai Futures Exchange, for May delivery, ended up 2.6 per cent to 4971 yuan ($US758.11) a tonne. It hit record high of 5017 yuan per tonne earlier.

Australian sharemarket

Equity markets slid on Monday to a loss in a rocky day of trading that punished tech shares and sent markets into negative territory after news emerged that Brisbane was entering a three-day snap lockdown.

The S&P/ASX 200 fell 0.4 per cent, wiping 25 points from the benchmark, which closed at 6799 points. The All Ordinaries index fell by the same margin, easing 27 points to end the day at 7036 points.

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