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Morning Wrap

ASX to slip, iron ore poised to top $US100 a tonne - 28/11/22

Market Highlights

ASX futures down 9 points or 0.12 per cent to 7263
AUD -0.2% to 67.51 US cents
On Wall St: Dow +0.5% S&P -0.03% Nasdaq -0.5%
In New York: BHP -0.6% Rio -0.6% Atlassian -0.3%
Tesla -0.2% Apple -2% Amazon -0.8% Alphabet -1.2%
Stoxx 50 +0.01% FTSE +0.3% CAC +0.08% DAX +0.01%
Spot gold -0.02% to $US1754.93/oz in New York
Brent crude -2% to $US83.63 a barrel
Iron ore +3.3% to $US99.65 a tonne
10-year yield: US 3.68% Australia 3.57% Germany 1.97%
Australian shares are poised to open lower, reflecting somewhat listless overseas trading with investors continuing to refine their rate outlook bets. China’s surging COVID cases represent a new risk.
ASX futures were down 9 points or 0.12 per cent to 7263. US stocks were mixed in a short session with the Dow advancing, while both the S&P 500 and Nasdaq closed lower. Apple fell amid signs iPhone supplies are significantly short of demand.
The local currency slipped 0.2 per cent, holding near US67.50¢.
On bitstamp.net, bitcoin was up 0.3 per cent at $US16,544.
The spot price of iron ore is on the verge of retaking $US100 a tonne, which the Platts’ unit of S&P Global Commodity Insights attributes to 2023 planning. Platts put the price at $US99.65 a tonne on Friday.
Seaborne iron ore prices advanced “on the back of increased buying ... as Chinese end-users begin restocking for the Chinese Spring Festival which commences early 2023”, Platts said.
The festival will run from January 21 through January 27 next year.
Separately, China’s central bank moved to bolster flagging growth with a second cut this year in the amount of cash lenders must hold in reserve. The move is expected to inject $100 billion into the economy.
The cut is aimed at “keeping liquidity reasonably ample” and “increasing the support for the real economy”, as well as helping banks support industries damaged by the COVID pandemic, the PBOC said in a statement, according to Bloomberg.

Movers & Shakers

Broker Upgrades & Downgrades

(ALD) Ampol Target Price Cut 1.9% to A$38.00/Share by Macquarie
(BHP) BHP Price Target Raised 1.4% to A$42.90/Share by Goldman Sachs
(CCX) City Chic Collective Price Target Cut 62% to A$1.10/Share by Ord Minnett
(MAH) Macmahon Target Price Raised 8.7% to A$0.25/Share by Macquarie
(NHC) New Hope Target Price Cut 8.6% to A$6.40/Share by Macquarie
(NCK) Nick Scali Target Price Raised 4.2% to A$12.50/Share by Macquarie
(QAN) Qantas Price Target Raised 4% to A$8.20/Share by Goldman Sachs
(QAN) Qantas Price Target Raised 5% to A$7.40/Share by Macquarie
(SFR) Sandfire Resources Target Raised 26% to A$6.00/Share by Canaccord Genuity
(SIQ) Smartgroup Price Target Cut 33% to A$4.75/Share by Macquarie
(SGR) Star Entertainment Price Target Cut 0.9% to A$3.37/Share by Jefferies
(SNL) Supply Network Price Target Raised 14% to A$12.90/Share by Ord Minnett
(TYR) Tyro Payments Target Price Raised 6.7% to A$1.60/Share by Macquarie
(UNI) Universal Store Target Price Raised 2.0% to A$5.00/Share by Macquarie

Today's Agenda

Local: October retail sales at 11.30am AEDT
Overseas data: UK nationwide house prices November; US Dallas Fed manufacturing index November

Unites States

Scotiabank’s Derek Holt discounts at this point retail sales for Black Friday and Cyber Monday, saying it’s becoming ever more difficult to parse the data because promotions seem to arrive earlier each year.
Holt said a key issue is the extent to which companies have a surplus of inventories and the potential for deep discounting to be disinflationary at least in the near term.


In a note, Liberum Capital said its bear case for gold is fading.
“Why? Its price has already dropped 15 per cent since its war-related spike in March, quickly offset by the US Fed’s launch of its inflation-targeting rate hike cycle.”
Liberum said it sees little downside from here to its forecast 2023 floor of $US1630 an ounce. “So, is there a bull case to consider here? History shows that gold’s price is typically hit hard by either robust aggregate demand growth or recessions.
“There is, however, one macro-backdrop that promises a ‘sweet spot’ for price outperformance: when US/global growth remains weakly positive, stalked by risks like stagflation, trade anxiety or war. Sound familiar?”
Gold closed in New York near $US1755 an ounce on Friday.

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