Market Update - 25 October 2021

On Friday, the Dow hit a record high as investors rotate out of tech, ahead of the big names reporting this week. Shares in Snap tumbled over 26 per cent after its revenue for the third quarter came in below expectations. Snap said that Apple's recent privacy changes limited digital advertising sales. Apple now offers users the ability to opt into target ads. With the option to not participate, these new features hindered the way Snap tests and measures their campaigns. The company also flagged that the supply chain disruptions are prompting their partners to reduce ad spend. The reason for this is that the supply chain constraints are inhibiting the ability to fulfil customer demand and therefore, hit sales targets. This means that instead of seeing the next quarter be the beneficiary of holiday spending, it's likely not going to be the case. Shares in Facebook and Alphabet fell over 5.0 and 3.0 per cent respectively.

The Dow was pushed higher thanks to American Express posting better-than-expected third quarter earnings. This was helped by Americans traveling and spending on entertainment and meals. However, there was a bit of pull back across the major indexes on Fed Chair Powell's remarks. The Fed signaled they are on track to announce their formal tapering timeline, however, the economy still has five million jobs to fill, to be back at 2020 levels. This suggests that rate hikes to kick start immediately after tapering is done could be a bit too bullish.

Adding to the lift was the PMI figures which showed the economy is on firm grounds. The Markit Services Purchasing Managers Index came in at 58.2 for October, beating estimates of 55.5. While, the Markit Manufacturing PMI read 59.2, just below the expected 60.5. Any reading above 50 indicates growth and these readings came in the high 50's. The results showed that even though companies are paying more for materials, the cost is being passed down amid strong demand. It appears that investors are still cautious about inflation despite the earnings results we are seeing. The tune around inflation being transitory is starting to be questioned as to whether it is more persistent instead. With the figures from the PMI readings, to the news from Snap on the supply chain constraints, some of the figures are starting to reinforce the persistent note on inflation. And if so, investors have every right to be nervous amid the surging commodity prices.

On Friday, the Australian sharemarket closed flat at 7,416, though lifted 0.7 per cent higher over the week. The local bourse closed at one-month high's as losses in the materials and energy sectors offset gains or flat performances across the other sectors. Woodside Petroleum (ASX:WPL) dropped 2.8 per cent on the back of a number of broker downgrades. The oil and gas producer's target price got cut due to its sharply lower output at its Wheatstone project in Western Australia following its update on Thursday..

Inflation is set to take the spotlight this week after the RBA jumped into the 3-year bond market buying $1 billion of bonds on Friday. The move helped bring down yields after the three-year bond rate rose past its 0.1 per cent target. Traders appeared to start pricing in a rate hike despite multiple reassurances the cash rate won't lift until 2024. The price that consumers are paying for food, alcohol, clothes and petrol for the September quarter is due on Wednesday. On Friday, we will find out what inflation figures are for businesses.

RECENT INDIAN OCEAN SECURITIES TRANSACTIONS

This information has proudly been provided by Indian Ocean Securities - www.indianoceansecurities.com. Indian Ocean Securities is a Boutique Australian Financial Services licensee firm (AFSL: 336409), providing tailored strategic advice and corporate finance solutions to a select, high net-worth/ wholesale, Institutional and corporate clients, throughout the Asian and Australian Financial markets.

Disclaimer:

The information provided was based on information available at the time of publishing. We believe that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. To the extent permitted by law, neither Advanced Share registry (ABN 14 127 175 946) nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this report. The report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual's objectives, financial situation and needs and, if necessary, seek appropriate professional advice. This report does not purport to be a complete statement or summary.

Public link

Please use the above public link if you want to share this noodl on another website.