US announces record green energy spending, RBA deputy gov to join FMG
Australian Market Strategist
Summary: India reopens, Malaysia is next, while oil prices retreat to $109.94, with these factors supporting global travel, tourism stocks and casinos stocks rallying. Meanwhile money chases uranium stocks as Biden considers sanctioning a major Russian Uranium supplier. Plus savvy traders note US oil reserves are falling, OPEC+ nations can’t meet oil production targets so investors continue to buy US oil companies, like OXY that makes 88% of its revenue from the US, seeing it hold its best performing post in the S&P500 this year. Meanwhile Amazon races to be included in the Dow Jones 30, Biden drops barriers for crypto adoption, the US House passes $1.5 trillion of spending, and Rio Tinto ends all commercial relationships with Russia.
What’s happening in equites markets?
- In Australia, the market benchmark, the ASX200 rose for the second day, 1.4% on Thursday, which erased yesterday’s fall. What do you need to know? The technical indicators show the market looks bullish on the hourly and day chart, but the ASX200 is poised for further pull backs in the weeks and months ahead as the market factors in the two Rs are coming… rate rises in the US and Australia and a recession.
- Today , the best performer on the ASX; was Paladin Energy (PDN). Its shares rose 13% after Biden looks set to exclude Russian Uranium. Countries and stockbrokers alike are increasingly optimistic about Uranium, as we mentioned yesterday. The second best performing is Block (SQ2), up 8%. SQ2 is the point of sale software provider that took over Afterpay and makes 74% of its revenue from Bitcoin (via transactions). As above, Block’s rally comes as Biden’s administration announced it’s stepping toward building a framework for the development of cryptocurrency, which is tipped to drop the barrier for institutional ownership.
- In the negative coroner of the Australian share market today; Nickel Mines (NIC) shares continued to fall, for the third day, stumbling 18%. This takes PDN’s shares back to the November 2021 price. The reason? The London Metal Exchange (LME) halted nickel trades after the Nickel price rose 250% in just two days after Chinese nickel giant Tsingshan Holding Group Co. reportedly closed its short positions in nickel futures. Now the Chinese nickel giant reportedly has billions of dollars of debt and it had to get loans from JPMorgan Chase and China Construction Bank. However, nickel is a key ingredient that faces rising demand over the long term due to its use in lithium batteries for electric vehicles. So that’s a consideration.
- In the US, in breaking news, the US house passed the long-delayed $1.5 trillion spending bill that’s expected to fund the government to the rest of the year, with 'record investment' pledged to lower emissions. $13.6 billion will go toward emergency spending related in Ukraine, including funds for aid, $3.5 billion to replace weapons given to Ukraine, and $3 billion to bolster US troops in Europe (this supports our view that globally listed military stocks and the military sector will likely see long term growth). Separately, $103 billion will be put in transportation, with $1.2 billion for a new carbon reduction program, and $3.3 billion to go to rail. And lastly, and excitedly, funds will also be allocated to an electric vehicle ferry pilot program, and toward research for automotive vehicles. On Thursday the S&P 500 (US500.I) and Nasdaq 100 (USNAS100.I) futures suggest the markets will open flat. Remember, importantly the market is bracing for the US Federal Reserve to make an interest rate hike of 0.25% next week.
- In Asia today, Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) rallied about 2% this morning. Financials and technologies led the market higher. Insurance and banks rose 1% to 5%. Hang Seng Tech Index (HSTECH.I) rose over 3%. Bilibili (09626) was up more than 8%. Energy stocks declined across the board. Semiconductors did well, leading names rising 2% to 5%. NASDAQ listed Chinese EV maker Nio (NIO) started trading today in Hong Kong today with ticker (09866). Li Ning (02331) stabilized after its 9% fall yesterday, following Norway’s sovereign fund announcement to exclude the company from its investment due to “unacceptable risk that the company contributes to serious human rights violations” in. [Written by Redmond Wong]
What to consider now?
- In Airline news: Qantas (QAN) and Air New Zealand (AIZ) announced they will rise fares as they are not able to absorb the rising cost of fuel.
- Fortescue Metals (FMG). Iron ore and future hydrogen business Fortescue Metals (FMG) announced a partnership with Airbus to ‘decarbonize’ the aviation industry. The FMG founder said; “green energy is so much simpler than putting in an oil and gas refinery or a nuclear power plant. I’d rather put in a few solar panels and wind turbines than those honking great smelly things”. Andrew Forrest said the new partnership was getting approvals and capital for the project. Twiggy Forest said Fortescue (FMG) will be the world’s first fully integrated resources and renewable energy company with lithium, iron, and nickel. FMG will be a“one-stop shop for that and your hydrogen and ammonia, and your green electricity”. Also in news;, the Reserve Bank of Australia Deputy Governor Guy Debelle resigned from the RBA to take a role with FMG as the Chief Financial Officer for its green energy business, Fortescue Future Industries.
- In Hong Kong & the China A share market: The Peoples’ Bank of China (PBOC) said that it would send more than RMB 1 trillion of its cumulative earnings to the Ministry of Finance (MOF). The amount has been accounted for as part of the RMB2.3 trillion transfer of SOE profits and fiscal stabilization to finance expenditures set out in Premier Li’s report to the National People’s Congress last Saturday. To access the impact on the money supply, market participants will keep a close eye on if the PBOC will sell foreign currencies from its reserve for RMB or to simply credit the MOF’s account at the PBOC, i.e. printing new money. China’s National Development and Reform Commission (NDRC) pledged to coordinate efforts to increase the country’s daily coal production to over 12 million tons. [Written by Redmond Wong]
Upcoming company calendar
- March 11, WiseTech (WTC) goes ex-dividend
- March 14, Chalice Mining (CHN) releases sales estimates
In Hong Kong & mainland China, company earnings to watch
- Mar 10: MTR Corp (00066), JD.com (09618), JD Logistics (02618), AIA (01299)
- Mar 11: China Unicom (00762), Swire (01972)
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.