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ASX 200 expected lower, oil drops, Citi cuts FMG

oil field

SPI futures are down 35 points, or 0.5%, indicating a lower start on the ASX 200.

Energy stocks could be a focus for the start as Brent crude, the global benchmark for oil prices dropped as much as 4% and has now fallen four of the past five sessions. It lost 16% in November, capping the worst month for the commodity since March 2020.

Locally, broker Wilsons has raised its valuation on Kentucky Fried Chicken merchant Collins Food from $15.30 to $15.75 and held its Overweight recommendation.

Collins Foods said on Tuesday a sales rebound at its European stores helped it grow adjusted EBITDA 10% to $92.5 million on revenue up 8.5 per cent to $534.2 million for the half year to October 17.

Citi cut Fortescue Metals to Neutral from Buy.

The Dow Jones Industrial Average finished down 1.9%, The S&P 500 was 1.9% lower and the Nasdaq dropped 1.6%. The small cap index Russell 200 lost 1.76%.

In New York, BHP was up 0.6%, Rio Tinto was -0.4% lower and Atlassian was down -6%. Tesla was +0.03%, Apple +2.4%, Meta lost -3.2% and Alphabet was down -2.1%. Facebook owner Meta has been ordered to sell social-media animated company Giphy by UK regulators, who say the acquisition would hurt both users and advertisers.

Salesforce shares tumbled in after hours trade after the CRM platform and owner of Slack Technologies guidance for FY 2022 revenues missed analysts’ estimates.

Stocks have mostly been on a tear this year. The S&P 500 and Nasdaq have risen more than 20% as the Fed's stimulus program continued, earnings reports came in strong and businesses slowly regained the footing they lost as Covid-19 shut down many corners of the economy.

But the market's rise left stocks looking overextended, some analysts said. Some investors suspect that the year's approaching end has only added to the market's fragility, as many look to hold onto gains scored in earlier months.

The S&P 500's earnings growth for the third quarter has come in at nearly 40%, the third-highest level since the second quarter of 2010, and analysts expect full-year profits to expand more than 40%.

Federal Reserve chairman Jerome Powell said it’s appropriate to consider finishing the US central bank’s tapering of asset purchases a few months earlier than previously expected, with inflation proving more persistent than forecast. He said it is time to stop calling inflation “transitory”.

The Fed is currently scheduled to complete its asset-purchase program in mid-2022 under a plan announced at the start of November; policymakers next meet December 14-15, where they could make a decision to accelerate the tapering.

An FDA advisory panel has endorsed Merck’s covid treatment pill in a 13-10 vote. The endorsement could pave the way for a full FDA authorisation by the year’s end.

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