Tech reviews

ASX to drop, Goldman misses, big tech hit by rising yields


“The emergence of skyrocketing expenses for Wall Street banks has many investors worried that wage inflation may have been broadly underpriced across the entire US economy,” Oanda’s Edward Moya said in a note.

Goldman tumbles as trading slides, compensation soars

“The key takeaway from the big banks is that expenses are soaring and you can’t just assume they will do just fine as Treasury yields rise.”

As for the tech sector, some investors sought to put the reset into perspective.

Big tech needs big profits with multiples under fire

“Investors have been rewarded by the ‘overweight tech’ trade for the better part of the past decade,” Seema Shah, chief strategist at Principal Global Investors, told Reuters.

“While conditions for the sector are becoming trickier, strong companies with robust balance sheets and pricing power still have further to run. For the profitless ones, technically speaking, the period ahead may not be so pretty.”

Today’s agenda

Local: Consumer confidence January at 10.30am AEDT

Overseas data: UK December CPI; US December housing starts and building permits

Market highlights

ASX futures down 80 points or 1.1 per cent to 7235 near 5.30am AEDT

  • AUD -0.5% to 71.78 US cents
  • Bitcoin on bitstamp.net -1.4% to $US41,583.85 as of 5.45am AEDT
  • On Wall St near 1.30pm: Dow -1.5% S&P 500 -1.9% Nasdaq -2.3%
  • In New York: BHP -1% Rio -0.09% Atlassian -0.7%
  • In Europe: Stoxx 50 -1% FTSE -0.6% CAC -0.9% DAX -1%
  • Spot gold -0.4% to $US1812.80/oz at 1.33pm New York time
  • Brent crude +0.6% to $US87.00 a barrel
  • US oil +1.3% to $US84.87 a barrel
  • Iron ore +2.7% to $US127.30 a tonne
  • 2-year yield: US 1.04% Australia 0.81%
  • 5-year yield: US 1.64% Australia 1.59%
  • 10-year yield: US 1.86% Australia 1.94% Germany -0.02%
  • US prices as of 1.37pm in New York

From today’s Financial Review

Isolation could be cut to five days amid workforce pressure: Treasurer Josh Frydenberg has signalled that stay-at-home requirements could be further eased, helping get more staff back to work sooner.

Chanticleer: BlackRock’s Larry Fink backs oil and gas: The world’s largest funds manager wants to help oil and gas companies make the transition to a net zero emissions economy.

United States

Goldman tumbles as trading slides, compensation soars: Goldman Sachs equities traders posted a decline in the fourth quarter, adding to evidence that the frenzied activity touched off by the pandemic is cooling

Microsoft buys Activision Blizzard in $96b game deal: Microsoft will pay $US95 a share in cash for one of the most legendary gaming publishers, known for titles like Call of Duty and World of Warcraft.

Netflix will be the first major streaming service to report earnings this week, offering investors a sign of whether companies have started to pull in enough new customers to justify big spending on online programming in 2022.

The dominant streaming service reports fourth-quarter results on Thursday (Friday AEDT). Wall Street will watch for how many customers Netflix picked up overseas as the pace of streaming growth levels off from torrid pandemic gains of 2020.

Peloton is working with consulting firm McKinsey & Co to review its cost structure and may cut some jobs, CNBC reported.

Europe

France faces sceptics over quick implementation of minimum tax: Poland, Hungary and Estonia are among some EU nations wary of Europe undermining its negotiation position with the US.

European shares closed at a one-week low on Tuesday, with tech stocks losing the most.

The pan-European STOXX 600 index dropped 1.0 per cent to 479.79 points. Tech stocks declined 2.2 per cent, the most among their peers, as they resumed a losing spree that began at the start of the year.

The European tech sector has closed lower for 10 of the 12 trading sessions so far this year.

Among individual stocks, Swiss asset management firm GAM Holding slumped 16.7 per cent after saying it expected to post a roughly 30 million franc net loss for 2021 when it reports earnings next month.

French food caterer Sodexo rose 1.7 per cent after Reuters reported Bain Capital was looking to bid for a stake in its benefits and rewards services unit.

Chocolate maker Lindt & Spruengli fell 3.0 per cent after it said sales of its upmarket chocolates will likely grow at a slower pace in 2022 than last year, due to supply chain bottlenecks.

Asia

Xi urges the West not to lift global interest rates: In an unprecedented intervention, the Chinese president says Western central banks are jeopardising global economic stability.

The Biden administration is reviewing e-commerce giant Alibaba’s cloud business to determine whether it poses a risk to US national security, Reuters reported, as the government ramps up scrutiny of Chinese technology companies’ dealings with US firms.

China stocks ended higher on Tuesday, with infrastructure and property firms leading the gains as the country’s central bank unexpectedly cut the borrowing costs of its medium-term loans.

The blue-chip CSI300 index rose 1 per cent to 4813.35, while the Shanghai Composite Index gained 0.8 per cent to 3569.91. Both indexes posted their best daily performance since last Wednesday.

In contrast, Hong Kong stocks ended lower on Tuesday weighed down by technology stocks, including index heavyweights Tencent and Alibaba.

The Hang Seng Index fell 0.4 per cent to 24,112.78, while the China Enterprises index lost 0.2 per cent to 8449.00 points.

The Hang Seng Tech index fell 0.5 per cent, with Tencent Holdings down 2.8 per cent and Alibaba Group Holding off 1.6 per cent.

The Hang Seng Composite index tracking financial stocks was down 0.2 per cent and the Hang Seng Finance index fell 0.3 per cent.

Insurer AIA Group Ltd lost 1.1 per cent on Tuesday after Capital Group Cos Inc’s long position in AIA fell to 6.84 per cent from 7.03 per cent.

Mainland developers listed in Hong Kong gained 1.8 per cent, as sentiment was lifted by China’s central bank cutting the borrowing costs of its medium-term loans.

Currencies

The US dollar rose to a one-week high on Tuesday following a jump in benchmark US Treasury yields, while the yen steadied after initially sliding as the Bank of Japan said it would stick to its ultra-loose monetary policy.

The US Federal Reserve meets next week and likely will signal that it will raise rates in March for the first time since the start of the coronavirus pandemic.

The fed funds futures have priced in four rate hikes in 2022.

As investors prepared for the possibility of the Fed being more hawkish than expected, Treasury yields jumped, with two-year yields – which track short-term rate expectations – crossing 1 per cent for the first time since February 2020.

The US 10-year yield also hit a two-year peak of 1.856 per cent.

Commodities

Chinese steel rebar and hot rolled coils futures traded within a tight range on Tuesday as consumption by the construction sector remained weak, with mills cutting production ahead of holidays.

Around 50 steelmakers have announced maintenance plans near the coming Lunar New Year holidays, with some producers planning to resume production in late-February or March, according to consultancy Mysteel.

However, a still sluggish real estate market offset the impact from reduced supply. China’s gross domestic product in the property sector fell 2.9 per cent in the fourth quarter of 2021 compared with same period a year earlier, data from the National Bureau of Statistics showed.

The most-active construction rebar on the Shanghai Futures Exchange for May delivery inched up 0.3 per cent to 4599 yuan ($US724.45) per tonne at close.

Nickel cash premium surges amid supply squeeze: The turmoil in nickel is another sign of acute supply stress in global metals markets, prompting the LME to increase monitoring to steady trading if needed.

Exxon Mobil pledged to cut to zero its net carbon emissions from its global operations by 2050, catching up with rivals who are minimising their carbon footprints.

Exxon’s 2050 plan, first mulled last year, covers emissions from its oil, gas, and chemical production and from the power those operations consume, so-called scope 1 and 2 targets. It made no commitment for emissions from consumers using those products.

Australian sharemarket

JB Hi-Fi earnings surprise brightens ASX’s loss: The S&P/ASX 200 Index closed 0.1 per cent lower at 7408.8. Redbubble shares plunged 22.4 per cent to $2.32, and JB Hi-Fi rallied 6.9 per cent to $49.84.

Big tech threat stares down at banks: ‘Apple, Google, Amazon, Square, they’ve all got the same end game’, warns Up chief executive.

Big tech needs big profits with multiples under fire: If ever there was a time for megacaps like Apple and Microsoft to show off surprisingly strong profit growth, it’s now.

Street Talk



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