ASX to drop as omicron sale sweeps the market

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Goldman Sachs economists cut their forecasts for economic growth in the United States after Senator Joe Manchin blinded the White House on Sunday by rejecting Biden’s roughly $ 2 trillion tax and spending package, leaving Democrats have few options to revive it.

“In our view, markets can ignore omicron’s problems, and the gradual pace of monetary tightening will not end the rally in equities,” UBS Global Wealth Management wrote in a note. “Overall, the latest news is not changing our outlook for equities.”

A Bank of America research report identifies 11 U.S. stocks for recovery in 2022, ranging from heavyweights such as Disney and Mondelez to real estate firm Welltower.

“These stocks have an implicit increase of 23%, on average, over our analysts’ price targets (as of December 16, 2021), plus an average dividend yield of 2.2% (compared to 1.7% for the 11 sectors on average) ”, write the bank’s analysts.

“These stocks are mostly overlooked by active funds and benefit more from inflation, higher GDP, higher interest rates, higher oil prices and wage growth than a portfolio of 11 equally weighted sectors, which we believe will happen in 2022. “

The full list of stocks is: Disney, BorgWarner, Mondelez, ExxonMobil, Wells Fargo, CVS, Welltower, Eaton, F5, Eastman Chemical Company and NRG Energy.

Today’s agenda

Local: Australian RBA Board meeting minutes; New Zealand credit card spending in November

Overseas data: consumer confidence in the euro zone December

Market highlights

ASX futures down 30 points or 0.4% to 7165 around 4:18 a.m. AEDT

  • AUD flat at 71.16 cents US
  • Bitcoin on bitstamp.net US $ 46,404.79 at 4:18 a.m. AEDT
  • On Wall Street: Dow -1.8% S&P 500 -1.6% Nasdaq -1.7%
  • In Europe: Stoxx 50 -1.3% FTSE -1% DAX -1.9% CAC -0.8%
  • In New York: BHP -1.1% Rio -1.6% Atlassian -2.6%
  • Tesla + 0.5% Apple -0.8% Amazon -2.1% Alphabet -1.1%
  • Spot gold -0.2% at US $ 1,794.03 per ounce
  • Brent crude 4.8% to US $ 69.97 per barrel
  • US oil -5.8% to US $ 66.77 per barrel
  • Iron ore% at US $ per ton
  • 2-year yield: US 0.62% Australia 0.59%
  • 5-year yield: US 1.15% Australia 1.30%
  • 10-year yield: US 1.40% Australia 1.53% Germany -0.38%
  • American prices from 12:27 in New York

From today’s financial review

Magellan calls for calm as investors drop $ 1.8 billion: Hamish Douglass says fund manager can recover from shock loss of biggest institutional client as shares drop 30% to low level in six years.

National cabinet to meet ahead of calls for an omicron break: An instant national cabinet meeting has been scheduled amid calls from health officials for indoor mask warrants and reduced wait times for boosters.

Not on track ‘: Only 45% of eligible adults received a booster shot: the figure is lower than estimates by Prime Minister Scott Morrison and Health Minister Greg Hunt, who said 75 to 80% of adults eligible had been bitten.

Read today’s newspaper, exactly as it was printed, here

United States

US stock indices fell more than 1%. Travel stocks fell the most, with the S&The P 1500 airline index fell 2.0%. Royal Caribbean Group slipped 1.8% after saying 48 people on its Symphony of the Seas cruise ship tested positive for COVID-19.

“Typically what’s going on in Europe is a bit of a snapshot of what we’re seeing in the United States. So if we see a lot more infections in the United States, it could stress hospitals, make people less reluctant to go out, spend, and participate in the economy. It’s definitely a cause for concern, ”said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

All 11 major S&The P 500 sector indices fell early in the session as energy fell 3.0% as oil prices slumped by around US $ 3.

Europe

European stocks fell the most in more than three weeks, with investors worried about the risk of lockdowns and travel restrictions as the omicron variant of the coronavirus continued to spread.

The Stoxx Europe 600 fell 1.4% at the close in London, crushing declines of up to 2.6% after Moderna said a third dose of its Covid-19 vaccine raised levels of antibody against omicron. Mining and energy underperformed along with commodities, while automakers were the biggest declines.

“We remain optimistic for 2022, but the winter months are expected to be difficult due to rising inflation, persistent energy shortages and the need for additional measures in Europe and the UK,” said Joachim Klement, Head of Strategy, Accounting and Sustainability at Liberum Capital. “All of this should dampen growth expectations in the coming months, but we remain weak buyers as we expect growth to remain strong overall in 2022 and inflation to decline.”

Germany’s economy, Europe’s largest, could contract this quarter as the resurgence of coronavirus infections sets off new brakes and keeps buyers home, according to the Bundesbank.

“The endemic nature of omicron and its potential impact on a sharp slowdown in global growth continues to confuse investors,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “The Netherlands has already imposed a new lockdown, and there will likely be a domino effect from restrictions imposed across Europe in the days and weeks to come.”

The Euro Stoxx 50 VSTOXX volatility index hit its highest level in two weeks on Monday as market swings deepened.

The omicron variant is likely to have a bigger effect on European stocks than their US counterparts due to the region’s service-oriented economies and prolonged lockdowns, said Altaf Kassam of State Street Global Advisors.

“We believe that in the medium to long term it still makes sense to move risky assets from the United States to Europe, as Europe is starting to experience a bit more of a recovery,” said Kassam, head of the Company’s EMEA investment strategy. and research, in a Bloomberg television interview.

“Europe’s service-oriented economy needs the uncertainty over the omicron variant to be lifted for it to really take off.”

Asia

Hong Kong stocks closed near a 21-month low on Monday, dragged down by tech giants and financial firms, after a rate cut in China’s benchmark lending index n failed to improve investor sentiment.

The Hang Seng Index fell 1.9% to 22,744.86, while the Chinese Business Index fell 2.1% to 8,042.74 points.

“Today’s drop has been exacerbated by regulations limiting the inflow of ‘fake foreign funds’ through ties and concerns about the US market,” said Zhang Fushen, analyst at Shanghai PD Fortune Asset Management. “The stocks that are falling the most today are also the ones preferred by momentum traders and those looking for cheaper leverage through the link.”

Currencies

The dollar came under pressure as US Treasury yields fell. The 10-year German Bund yield fell to its lowest level in nearly two weeks as demand for safe-haven assets increased.

The US dollar currency index fell 0.2% to 96.388. The index, up about 7 percent for the year, has rallied in recent weeks.

“I think there’s a lot of year-end flow right now,” said Kathy Lien, Managing Director of BK Asset Management. “With the fear of Omicron, with stocks falling quite large, people are just liquidating and preparing for the year.”

Yields on German 10-year bonds, considered one of the safest assets in the world, fell to -0.402%, their lowest level since December 8. They flirted with their lowest levels since August.

The pound fell to a three-day low, struggling to stay above US $ 1.32 against the dollar as a risky mood swept over financial markets

“Government bonds offered little competition to equities. But that is starting to change. Although US Treasuries have remained calm amid the Fed’s hawkish pivot, there has been a steady increase in the low yields seen at the start of the pandemic, ”write Mark Gilbert and Marcus Ashworth in an opinion piece for Bloomberg.

“Bonds that pay more than stocks have been the historic status quo, but in the massive new stimulus standard, that’s pretty rare. Stocks are no longer the obvious place to park money now that fixed income yields are starting to move. “

Merchandise

Libya’s oil production has been hit after militias shut down the OPEC member’s biggest days ahead of an election. Members of the Petroleum Facilities Guard, a paramilitary force meant to protect energy facilities, shut off a valve on a pipeline carrying crude from Sharara to the port of Zawiya, a person familiar with the matter said.

Elsewhere, African Rainbow Minerals, backed by South African billionaire Patrice Motsepe, has agreed to buy Anglo American Platinum’s Bokoni platinum mine for 3.5 billion rand ($ 221 million).

The deal comes after the world’s largest platinum miners declared record dividends this year as rebounding demand for their metals from automakers bolstered earnings. African Rainbow, which owns investments ranging from manganese to gold, is looking to capitalize on an asset that was on hold before the platinum group metals surge in recent years.

Gold has finally seen some buying as concerns about rising inflation and the growing spread of the virus halt the rally in stocks, said Madhavi Mehta, senior analyst at Kotak Securities.

Australian equity market

Australian stocks began to pull back on Monday, affected by a steep drop in Magellan Financial and renewed concerns about global growth as central banks become more hawkish even as the rapidly spreading omicron strain forced Europe to reimpose more stringent restrictions.

The&The P / ASX 200 index lost 11.8 points, or 0.2%, to 7,292.2.

Magellan Financial Group leads the losses, plunging 33% to $ 19.70 after confirming the loss of UK wealth manager St James’s Place, the fund manager’s largest institutional client. Termination of the contract will reduce Magellan’s annual sales by approximately 12%.

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