ASX jumps to seven-week high, Westpac and CBA hike mortgage rates

Australian shares lifted to its highest level since mid-September, as investors took comfort from the US Federal Reserve signalling it was in no hurry to lift interest rates, while the Bank of England left its benchmark rate at a record low.

The ASX 200 finished trading 0.4 per cent higher at 7,457 points on Friday.

The benchmark index jumped 3.1 per cent in the past five days, marking its best weekly performance since late-May.

Some of the best performing stocks were gold miners like Northern Star Resources (+6.3pc), Evolution Mining (+4.8pc), St Barbara (+3.6pc) and Newcrest Mining (+3.6pc).

This was after the price of spot gold rose 0.2 per cent to $US1,795.64 per ounce — taking its weekly gain to 0.7 per cent.

Stocks in News Corp (+6.9pc), Cromwell Property (+4.9pc) and Pro Medicus (+3.9pc) also rose sharply.

REA Group jumped 5.6 per cent and hit a record closing high ($176.81). This was after the real estate advertiser said its quarterly EBITDA (earnings before interest, tax and depreciation) jumped 24 per cent to $158 million.

At the other extreme, Clinuvel Pharmaceuticals (-12.5pc), Virgin Money UK (-11.3pc), Afterpay (-5.5pc) and Inghams (-2.8pc) suffered heavy losses.

Westpac no longer Australia's second largest bank

Westpac's share price has fallen to a nine-month low, after shedding another 2.8 per cent on Friday (to $22.55). It was also the only "big four" bank which closed in the red. 

In total, its shares have plunged by 12.2 per cent this week (or $11 billion). Following this correction, its market value has plunged to $82.7 billion.

This means Westpac is no longer Australia's second most valuable bank. It trails Commonwealth Bank ($187.2b) and NAB ($95b), and is marginally higher than ANZ ($82b).

Westpac's shares were dumped after it reported big cuts in margins, high expenses, and full-year results which missed market expectations.

Sigma abandons Priceline takeover

Shares in Sigma Healthcare rose 1.8 per cent. This was after it decided to abandon its takeover bid for Australian Pharmaceutical Industries (which owns the Priceline pharmacy chain).

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It comes nearly a month after retail conglomerate Wesfarmers picked up a large stake in its own pursuit of API.

Sigma, which also runs pharmacies and other medical services, said it was scrapping its $773 million proposal in the face of a "competitive bid process".

Wesfarmers in October defended its approach by purchasing the entire stake held by API's largest shareholder (Washington H Soul Pattinson), a move that made it potentially more challenging for Sigma to secure enough votes for its bid.

"After further assessment, and in the context of the competitive bid process with its changing transaction and economic considerations, Sigma has made the decision not to proceed with this current proposal," Sigma's chairman Ray Gunston said.

Link attracts $2.8b takeover bid

Shares in Link Administration surged 8.6 per cent to $4.70, after the company said it would consider a $2.8 billion buyout from US private equity firm Carlyle Group.

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This is Carlyle's second attempt at buying the Sydney-based shareholder registry firm.

Its first attempt was in late-2020, when Carlyle made an approach  as part of a consortium with Pacific Equity Partners. After lobbing improved bids, the private equity duo withdrew earlier this year.

At the heart of a flurry of interest for Link is its stake in online conveyancing firm PEXA Group, which listed on the Australian stock market in July.

In total, Carlyle has offered to buy Link at $5.38 per share (a 24.2 per cent premium to its closing price on Thursday). This comprises a cash bid of $3 per share, and a distribution of its stake in PEXA worth $2.38 a share.

Major banks lift home loan rates

Australia’s biggest lender Commonwealth Bank has raised its fixed rate mortgages to 0.5 per cent (an increase of 0.1 percentage points).

This marks the second time in just over three weeks that CBA has lifted the price of its home loans.

On Thursday, Westpac lifted its rates for the second time in a fortnight, by up to 0.21 per cent.

A total of 33 lenders have hiked at least one fixed rate in the past month, according to comparison website RateCity.

It comes as the Reserve Bank abandoned its efforts to keep three-yield bond yields at record lows on Tuesday, as market interest rates have been rising sharply on expectations of higher inflation and sooner-than-expected rate hikes. 

Aussie dollar and British pound tumble

The Australian dollar fell to a three-week low of 73.9 US cents, after a 0.7 per cent slump overnight.

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It has fallen sharply against the greenback since Tuesday (when it was trading around 75.3 US cents) when the RBA hinted it could lift Australia's cash rate in 2023.

But some of the major bank economists are predicting the nation's central bank might have to hike rates as early as November 2022.

Meanwhile, the Australian dollar has risen to 54.8 British pence (after a 0.8 per cent gain).

The British currency fell against the US dollar overnight (down 1.4 per cent).

For weeks, the UK's central bank was hinting that it would soon announce an interest rate hike.

But the BoE surprised the market with its decision to keep rates on hold overnight, which led to a sharp fall in sterling.

"Despite some hawkish hints over recent weeks from Governor Andrew Bailey, the Bank of England has voted 7-2 to keep interest rates on hold at its November meeting," said ING economist James Smith.

"Its latest statement however leaves little doubt that a rate rise is on the way – and in all likelihood, the committee will vote for a hike in December."

Mixed performance on US markets

On Wall Street, the S&P 500 closed 0.4 per cent higher at 4,680, while the tech-heavy Nasdaq Composite added 0.8 per cent to 15,940. Both indices hit record highs on Thursday (local time).

They were boosted by a surge in stocks like Qualcomm (+14pc), after the chipmaker forecast better-than-expected profits and revenue for its current quarter on soaring demand for chips used in phones, cars and other internet-connected devices.

Meanwhile, the Dow Jones index was practically flat, after it fell by nearly 0.1 per cent to 36,124 points. It was dragged down by shares of banks JPMorgan Chase and Goldman Sachs.

Financials was the weakest S&P 500 sector, falling 1.8 per cent, as US Treasury yields fell, with the market unwinding expectations of quicker Fed rate hikes a day after the American central bank signaled it was in no hurry to do so.

Oil recovers after OPEC+ holds line on supply

Oil prices rose around 1 per cent on Friday, staging a partial recovery after OPEC+ producers rebuffed a US call to raise supply and instead maintained plans for a gradual return of output halted by the pandemic.

Brent crude rose 0.9 per cent to $US81.26 a barrel, after falling nearly 2 per cent overnight.

West Texas Intermediate crude gained 1 per cent to $US79.59 a barrel, having declined 2.5 per cent in the previous session.

The OPEC+ group of major producers agreed on Thursday to stick to their plan to raise oil output by 400,000 barrels per day (bpd) from December, ignoring calls from US President Joe Biden for extra output to cool rising prices.

"This was an easy and quick OPEC+ meeting on output," said OANDA senior market analyst Edward Moya, adding "at no point did OPEC+ consider changing their output strategy, which was completely the message they had."

OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and other large producers including Russia, has been restricting supply after the coronavirus pandemic led to an evaporation of demand.

Oil prices recently touched seven-year highs, but fell earlier this week on a US stocks buildup and signs that high prices may encourage more supply elsewhere.

Brent is on track for a nearly 4 per cent decline this week, the second straight week the contract has fallen. US oil is heading for a decline this week of nearly 5 per cent.

European stocks hit record highs

European shares rose for a fifth straight session on Thursday (local time) to hit record highs.

The pan-European STOXX 600 closed 0.4 per cent higher after spending most of the day in positive territory after the Fed, as expected, said it would begin scaling back its monthly bond purchases in November with plans to end them next year.

"What we've heard from the Fed is that next year central banks are going to be easing off the accelerator, but they won't be hitting the brakes," said Hugh Gimber, global market strategist at JP Morgan Asset Management.

The European Central Bank also signalled on Wednesday that it was in no rush to tighten policy.

The Bank of England, meanwhile, caught investors by surprise, as it left its benchmark lending rate unchanged, slamming sterling and lifting London's FTSE 100 by 0.4 per cent.

"The fact the (BoE) vote wasn't even close to a majority in favour of a rate hike suggests that rates could remain on hold for some several months to come," said David Madden, market analyst at Equiti Capital.

The STOXX 600 has hit a series of all-time highs this month, driven by a relatively strong earnings season despite rising cost pressures.

Posted 4 Nov 20214 Nov 2021Thu 4 Nov 2021 at 8:33pm, updated 5 Nov 20215 Nov 2021Fri 5 Nov 2021 at 6:33amShareCopy linkFacebookTwitterArticle share optionsShare this onFacebookTwitterLinkedInSend this byEmailMessengerCopy linkWhatsApp

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