ASX to edge up, Dow resets record, bitcoin rallies

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[NOTE: Daylight savings time ended in North America on the weekend. The closing bell in New York will sound at 8am AEDT through mid-March 2022.]

With nearly 90 per cent of the companies in the S&P 500 index having reported results, earnings are expected to have climbed 41.5 per cent in the third quarter from a year earlier, according to Refinitiv IBES.

In a note, Morgan Stanley said equity markets continue to ride “the wave of retail flows, seasonal strength and institutional [fear of missing out].

“While this is very much in line with our thinking over the past few weeks, we have been surprised once again at the magnitude and speed of the move higher.”

Morgan Stanley’s bull target for the S&P 500 is 4800; the firm has shifted to a more nuanced position from a month ago when it was tipping a correction. “In short, equity markets can go higher but the risk/reward of the seasonal bullish trade is fading.”

Tesla slid, though pared early losses, after Elon Musk asked on Twitter whether he should sell 10 per cent of his holdings in the electric-car maker.

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Musk had previously said he would have to exercise a large number of stock options in the next three months, which would create a big tax bill. Selling some of his stock could free up funds to pay the taxes.

Today’s agenda

Local: NAB business survey for October; NZ credit card spending retail October

Overseas data: Japan current account September; Euro zone ZEW expectations November; US final PPI October

Market highlights

ASX futures up 7 points or 0.1 per cent to 7454 near 4.10am AEDT

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  • AUD +0.4% to 74.28 US cents
  • Bitcoin on bitstamp.net +6% to $US65,886.86 as of 4.15am AEDT
  • On Wall St at midday: Dow +0.1% S&P 500 +0.02% Nasdaq +0.03%
  • In New York: BHP +1.6% Rio +2.1% Atlassian -0.1%
  • Tesla -2.9% Alphabet +0.3% Apple -0.6% Amazon -0.2%
  • In Europe: Stoxx 50 -0.2% FTSE -0.5% CAC +0.1% DAX -0.1%
  • Spot gold +0.3% to $US1823.03/oz at 12.13pm New York time
  • Brent crude +1.1% to $US83.66 a barrel
  • US oil +1.1% to $US82.14 a barrel
  • Iron ore +0.7% to $US93.82 a tonne
  • 2-year yield: US 0.43% Australia 0.55%
  • 5-year yield: US 1.10% Australia 1.25%
  • 10-year yield: US 1.48% Australia 1.74% Germany -0.25%
  • US prices as of .. in New York

From today’s Financial Review

Big super looks for the next assets to take private: Telecom towers, data centres, electric vehicle chargers and water assets are on the lists of funds as prepare billions of dollars of infrastructure acquisitions.

Vulcan Energy sues short seller J Capital: The Western Australian Federal Court has banned J Capital from discussing or sharing its critical research of lithium hopeful Vulcan Energy for a week.

United States

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Federal Reserve governor Randal Quarles will step down from the central bank in the last week of December, freeing up another vacancy for President Joe Biden to fill as he considers new leaders for the US central bank.

Advanced Micro Devices said it has won Meta Platforms as a data centre chip customer, cementing some of its gains against Intel.

McAfee said a consortium led by US private equity firm Advent International will take the cyber security company private in a $US14 billion deal.

Walt Disney said it was offering a month of Disney+ for $US1.99 for a limited period, as the entertainment giant seeks to stem a slowdown in paid user growth at its streaming service.

The promotion will begin on November 8 and will be valid for a week through November 14 for new and eligible returning subscribers in the United States and some other countries, Disney said in a statement.

Europe

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Strength in commodity-linked sectors helped European stocks inch up to a record high close on Monday, although broader gains were stifled by some weak earnings and a lack of any major market cues.

The pan-European STOXX 600 closed marginally higher at 483.61 points, with basic resources and energy stocks leading gains.

Oil and base metal prices rose on the prospect of increasing demand after the United States passed a massive infrastructure bill.

A survey also showed investor morale in the euro zone rose in November for the first time since July, as investors expected supply bottlenecks and higher prices to hold back the economy only temporarily.

The STOXX 600 hit new highs every day last week on a series of strong earnings and on growing optimism over a global economic recovery.

“After the busy session last week, the clock has gone back to zero as we’re looking at months and months before monetary policy is changed, if at all,” said David Madden, markets analyst at Equiti Capital.

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“It’s the best of both worlds: U.S., UK, and euro zone economies are recovering at a decent rate, and we’re not expecting any major change from the ECB, Bank of England, or Fed for some time.”

Major regional indexes including France’s CAC 40, Germany’s DAX and UK’s FTSE were flat as the ECB’s chief economist Philip Lane said inflation would ease next year and remain weak in the near term.

Asia

China stocks rose on Monday, with tourism and new energy shares leading the gains, as investors latched on to data that showed exports beat forecasts in October to deliver a record trade surplus.

The blue-chip CSI300 index closed up 0.1 per cent at 4848.18, while the Shanghai Composite Index gained 0.2 per cent to 3498.63 points.

“The strong exports help to mitigate the weakening domestic economy, but we think it is unlikely to revert the trend. We continue to expect GDP growth to slow in Q4,” Zhiwei Zhang, chief economist at Pinpoint Asset Management said.

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Hong Kong shares finished lower on Monday, dragged down by tech giants and healthcare stocks, with COVID-19 vaccine-related stocks slumping after Pfizer’s advancement in coronavirus medicine.

The Hang Seng Index fell 0.4 per cent, to 24,763.77, while the China Enterprises Index lost 0.3 per cent, to 8793.73 points.

The healthcare sub-index lost 3 per cent, weighed by vaccine-related stocks.

Currencies

St. Louis Federal Reserve Bank president James Bullard said he expects the Fed to raise interest rates twice in 2022 after it wraps up its bond-buying taper mid-year, though he said if needed the Fed could speed up that timeline to end the taper in the first quarter.

“If inflation is more persistent than we are saying right now, then I think we may have to take a little sooner action in order to keep inflation under control,” Bullard said in an interview on Fox Business Network.

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Asked if the Fed could then raise rates three or four times next year, Bullard said “that is not my base case right now”.

The Fed has already “done a lot to move the policy in a more hawkish direction”, he said, with the Fed’s plan to pare its asset purchases, announced last week, starting earlier and projected to end sooner than had been anticipated just six months earlier.

Commodities

Iron ore futures languished on Monday, as benchmark prices collapsed under $US100 a tonne due to weak Chinese demand and swelling portside inventory of the steelmaking raw material, but the country’s upbeat October exports data lent some support.

The most-traded January iron ore on China’s Dalian Commodity Exchange slipped 0.1 per cent to 562 yuan ($US87.84) a tonne by 0240 GMT, trimming early losses but was down for an eighth consecutive session.

Iron ore’s December contract on the Singapore Exchange slumped 1.5 per cent to $US90.10 a tonne, after initially trading at $US89.45.

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Australian sharemarket

Blue chips, tech, health drag on ASX: Australian shares broke a three-day winning streak on Monday, trading lower as travel sector gains were offset by losses from a number of blue chips.

Small-cap veteran Frank Villante hangs up his boots: Celeste Funds Management’s chief investment officer counts ARB Corporation among his best picks and ‘concept stocks’ as the ones to stay away from.

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