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Positive stock market catalysts 'not exhausted'

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The S&P/ASX 200 closed near its lows on Wednesday, falling by 0.3%. Information Technology led the index down, losing 2.9%, with six out of 11 sectors falling by the end of trading. Afterpay was 4% lower. Healthcare stocks dropped, CSL down 1.8% and Imugene and Pro Medicus two of the biggest decliners for the day, each about 9.4% lower.

US futures are losing ground indicating markets there could open lower. The Australian dollar is trading around US72.30c. 

Top equity strategists are warning investors to expect more modest returns in 2022 despite the benchmark getting off to a spectacular start to trading by achieving its second-highest ever close on Tuesday.

After posting a calendar year gain of 13% in 2021, or 17% including the value of dividends paid, the S&P/ASX 200 Index is expected to rise marginally over the coming 12 months as the market grapples with slower earnings growth, ongoing inflationary pressures, and central bank tightening, according to The Australian Financial Review.

While this equates to a more muted performance, afr.com says it would still represent an extension of the market’s recovery from the depths of the pandemic in March 2020, when the benchmark plunged nearly 34% in the space of a month as the world grappled with the arrival of Covid-19.

Bitcoin was trading above $US46,230. Goldman Sachs predicts $US100,000 is possible as the cryptocurrency continues to take market share from gold as a store of value reports Bloomberg.

Everything is falling into place for further gains in global stocks this year, according to JPMorgan Chase & Co strategists, reports Bloomberg.

“Stay bullish - positive catalysts are not exhausted,” strategists led by Mislav Matejka wrote in a note to clients on Tuesday. Downside risks - including a hawkish turn by central banks, a slowdown in China’s economy, or more significant coronavirus restrictions - will either fail to materialise or are already priced in to stocks, they said.

The positive outlook comes as benchmark indexes in both the US and Europe trade at record highs, following last year’s ferocious rally on the back of unprecedented fiscal stimulus and a solid rebound from the pandemic-induced slump.

US markets

US stocks traded mixed on Tuesday. The Dow Jones added more than 200 points and extended the record rally boosted by financial stocks gains amid expectations of higher yields, while investors kept betting on stocks that would benefit from a robust economic recovery despite the rise in covid cases and fresh lockdowns, reports Trading Economics.

Meanwhile, the S&P swung between gains and losses, to finish little changed around a record high. On the other hand, the tech-heavy Nasdaq Composite dropped 1.2% as tech losses dragged down the index amid a spike in bond yields.

On the corporate front, Ford surged almost 12% after the company said will start accepting purchase orders this week for the electric F-150 Lightning pickup truck GE jumped more than 7% after it was upgraded to “outperform” from “neutral” at Credit Suisse.

 On the other hand, Tesla fell 4.1% after increasing 13% on Monday, while Nvidia erased 3%.

US manufacturing slowed in December amid a cooling in demand for goods, but supply constraints are starting to ease and a measure of prices paid for inputs by factories fell by the most in a decade.

The Institute for Supply Management’s index of national factory activity fell to a reading of 58.7 last month, the lowest level since January 2021, from 61.1 in November. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9 per cent of the US economy.

Economists polled by Reuters had forecast the index would fall to 60.1.

Metaverse

South Korean giant Samsung is among companies that will use this week’s Consumer Electronics Show in Las Vegas to stake out territory in the metaverse, reports The Australian.

Samsung already has its own virtual reality world called My House – built in collaboration with fellow Korean corporation Naver Z – but it will use CES to showcase metaverse-type applications accessed through its TVs and phones, according to conference organiser the Consumer Technology Association.

Brian Comiskey, CTA senior manager of industry intelligence, said the show would highlight companies involved with three facets of the metaverse: the hardware, software, and the blockchain-based cryptocurrencies and tokens that will fuel its economy.

“We’ll really be looking at Samsung. Their smartphone advancements at the show will be an interesting area to watch from the hardware metaverse side. Their televisions are even going to be showcasing what they can do for the metaverse.

“Right now this concept is a space decorating experience; people can decorate their own metaverse homes using Samsung products.”

Canadian stocks start 2022 higher

The S&P/TSX Composite Index edged 0.1% higher to close at 21,237 on Toronto’s first trading day of the year, as investors' optimism on global economic recovery continues to grow, writes Trading Economics. On the corporate front, energy stocks soared 3.7%, lifted by higher oil prices, while financials jumped 2.4% amid prospects of higher yields.

Commodities

WTI crude futures extended gains to trade above $US76.5 per barrel on Tuesday, after OPEC+ agreed to maintain a steady pace in raising supply. Major oil producers said they would increase oil output by 400,000 barrels per day in February as they see a mild and short-lived impact on fuel demand from the omicron variant.

OPEC+ also projected an oversupply in every quarter of 2022 if it maintains its monthly production hikes, though the full-year surplus estimated at 1.4 million bpd is lower than last month’s forecast of 1.7 million bpd. Elsewhere, investors continued to monitor developments around the coronavirus pandemic amid rising global infection rates, while Libya has begun maintenance on a ruptured pipeline that will shut 200,000 bpd of production.

Brent crude futures climbed to above $US79.50 per barrel on Tuesday, following a 1.5% gain in the previous session.

US was world’s top LNG exporter in December

The US became the world’s No. 1 exporter of liquefied natural gas for the first time ever last month, as deliveries surged to energy-starved Europe.

Output from American facilities edged above Qatar in December after a jump in exports from the Sabine Pass and Freeport facilities, according to ship-tracking data compiled by Bloomberg. Cheniere Energy said last month that a new production unit at its Sabine Pass plant in Louisiana produced its first cargo.

Goldman Sachs strategists expect a tourism revival in the second half of 2022, with the Thai baht, New Zealand dollar and Egyptian equities among their top bets.

The firm predicts that the manufacturing-led economic recovery will shift to one driven by leisure and tourism as foreign visitors return to beaches and mountains after enduring nearly two gruelling years of the coronavirus pandemic. “We think you’re going to see a transition to a recovery driven by services and travel, and leisure would be an important part of that once the latest omicron wave fades,” Kamakshya Trivedi, Goldman’s co-head of global foreign exchange, rates and emerging-market strategy research, said in an interview with Bloomberg.

Goldman is bullish too on the currencies of oil exporters including the Canadian dollar, Mexican peso and Russian rouble, and prefers to go short on the Australian dollar and euro.


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