Australia’s stock market rallied in late trade after the unemployment rate fell to its lowest level in more than a decade and China cut borrowing costs again.
Core items:
- The Dow Jones Industrial Average fell 1 percent to 35,029, the S&P 500 fell 1 percent to 4,533 and the Nasdaq Composite fell 1.2 percent to 14,340
- The FTSE 100 index rose 0.4 percent to 7,590, the DAX in Germany rose 0.24 percent to 15,810 and the CAC 40 in Paris rose 0.6 percent to 7,173
- Brent crude rose 0.7 percent to $88.08 a barrel, while spot gold rose 1.7 percent to $1,842.45 an ounce.
At midday, most sectors remained in the red although the unemployment rate has fallen to its lowest level since August 2008.
However, in the last hour of trading, the market rallied, with miners and energy stocks taking the lead.
Utilities and healthcare stocks also closed higher, while telecoms, consumer stocks and banks were among the detracting sectors.
The All Ordinaries Index rose nearly 0.2 percent to 7,669, while the ASX 200 Index rose 0.14 percent to 7,342.
Miners were the 10 best performing stocks in the ASX 200.
Big miners BHP (+3.1 percent) and Rio Tinto (+3.2 percent) rose on higher iron ore prices.
Iron ore prices were boosted after China cut interest rates again, with borrowing costs for one- and five-year benchmark loans falling.
China cut interest rates this week to boost its economy.
BHP investors will vote tonight on whether or not to unify the miner’s corporate structure with Australia as the company’s primary stock market listing.
Gold miner Northern Star Resources (+11.2 percent) was the best performer on the ASX 200 after a strong production report and a rise in gold prices.
The worst performer in the ASX 200 Index was transport company Kelsian Group (-5.7 percent).
Virtus Health rose 7.6 percent after receiving a $609 million takeover bid from European private equity firm CapVest Partners.
Shares in payments giant Block, formerly called Square, listed on the ASX after Square took over the takeover. Buy now, pay later afterpay company for $39 billion.
Woodside record sales
As oil and gas prices soared by more than half, Woodside Petroleum posted record quarterly sales.
Sales revenue for the September through December quarters increased 86 percent to $2.85 billion.
It also reversed impairments on its Pluto and Scarborough projects and the North-West Shelf.
Woodside agreed to merge with BHP’s petroleum business in November.
Based on the results, Woodside shares rose 1.5 percent.
Rival Santos also posted record annual production and sales after taking over Papua New Guinea-based oil exploration.
Qantas Pay Series
Qantas has petitioned the Fair Works Commission to end a company agreement involving cabin crew on long-haul flights, a move criticized by airline unions.
If the commission agrees, unions said wages could be cut by 30 to 50 percent while a new deal is negotiated.
Qantas said it wanted to change “restrictive and outdated rostering procedures”.
The move comes after six months of negotiations with the Flight Attendants’ Association of Australia over a new company agreement, which was rejected by the union and 97 per cent of crew members.
Meanwhile, the Transport Workers Union accused Qantas of being a “dictator” who attacks the “heroes” of the cabin crew.
“These are heroes of the pandemic who sacrificed their own health to bring home stranded Australians,” said Teri O’Toole, general secretary of the Flight Attendants’ Association.
“They have been on the front lines of the pandemic since the beginning and have faced stand-downs [of] up to 20 months, far longer than in any other industry.”
Qantas received nearly $900 million in JobKeeper wage subsidies and other COVID-19 aid from the federal government during the pandemic.
The rejected four-year deal included a pay rise and increased allowances in exchange for more flexible rosters.
Under the current workplace agreement, Qantas International crew is restricted to working only on Airbus A330 or on Airbus A380 and Boeing 787.
Qantas said the proposed changes would result in all crew being trained to work on all three aircraft.
“We are seeking termination because we cannot run our business effectively without the roster changes we desperately need to properly restart our international network in a post-COVID world,” said Andrew David, Qantas chief executive International.
Qantas shares fell 1 percent to $5.04.
Omicron meets airports
Sydney Airport said the rapid spread of the Omicron-COVID-19 variant has resulted in a 70 percent drop in passenger numbers in December compared to the same point in 2019.
It said that in the first 15 days of January, international passenger numbers fell by about 85 percent and domestic passenger numbers by about 58 percent from the same point in 2019.
“The outlook for passenger traffic remains subdued due to tightly controlled international inbound flights, entry regulations and restrictions in key overseas markets, and significant domestic flight cancellations announced for Q1 [first quarter] 2022,” according to the company.
Westpac forecasts a rate hike in August
Meanwhile, Westpac chief economist Bill Evans is now forecasting that the Reserve Bank could raise official interest rates by 0.15 percent this August from a record low of 0.1 percent to 0.25 percent.
The bank is also forecasting a second rate hike in October, taking official rates to 0.5 percent.
Mr Evans had previously forecast that the first official rate hike would come early next year.
He noted that RBA Governor Dr. Philip Lowe has insisted that he does not expect to raise rates until late 2023 or late 2024.
However, the market is now forecasting a rate hike in June 2022.
Nasdaq correction
The technology-heavy Nasdaq Composite Index entered correction territory, shedding 10.7 percent from its record closing high in November.
A correction is confirmed when an index closes 10 percent or more below its record high.
It is the fourth correction for the Nasdaq since the coronavirus pandemic began.
Tech heavyweights Apple, Tesla and Amazon weighed on the index.
Tech stocks have relied on cheap credit to thrive, so the prospect of rising interest rates weighs on their growth prospects.
Results from Morgan Stanley and Bank of America were well received by investors, as were reports from United Health and Procter & Gamble as the fourth-quarter earnings season resumed.
Bank of America said quarterly profit rose by a third, while Morgan Stanley’s fourth-quarter profit came in better than expected.
Equities got off to a rocky start in 2022 amid fears that the US Federal Reserve could become aggressive in controlling inflation.
“There is quite a bit of concern about how the next three to six months will play out, given that a rate hike cycle is expected to start in March,” said Michael James of Wedbush Securities in Los Angeles.
The Dow Jones Industrial Average fell 156 points, or 1 percent, to 35,029, the S&P 500 fell 1 percent to 4,533, and the Nasdaq Composite fell 1.2 percent to 14,340.
US Treasury yields retreated from their two-year highs.
The 10-year US government fell 2.3 basis points to 1.854 percent.
Investors are awaiting next week’s Federal Reserve monetary policy meeting for guidance on the central bank’s anti-inflation plan.
The Fed has announced that it will raise interest rates several times this year.
In Europe, the FTSE 100 index rose 0.4 percent to 7,590, the DAX in Germany rose 0.24 percent to 15,810 and the CAC 40 in Paris rose 0.6 percent to 7,173.
commodity prices rise
Oil prices rose for a fourth day after a fire at a pipeline from Iraq to Turkey briefly halted production.
And the International Energy Agency said global oil demand is on track to return to pre-pandemic levels.
Brent crude rose 0.7 percent to $88.08 a barrel.
Spot gold rose on a lower dollar and rising political tensions over Russia and Ukraine.
It rose 1.7 percent to $1,842.45 an ounce.
Iron ore prices rose 2.3 percent to $130.20 a ton.
ABC/Reuters
