More record finishes on Wall Street on Friday means a solid opening for the ASX today with the futures market showing a 22-point gain ahead of the start of trading.
The better-than-expected US jobs report for October and the Fed’s decision to start ending its bond buying but not do anything else seems to have left US and other investors in good spirit.
That optimism will be tested by readings on US Consumer Price Inflation, – which is forecast to show a sharp rise – and Producer Price Index data – which is also expected to rise – but the markets are more likely to shrug that off than flap about, as they did earlier in the year when cost pressures rose sharply.
While some central banks have started to reduce their economically-supportive spending measures (such as bond and asset purchases) in small steps, the markets and investors do not seem to be disturbed by these announcements.
Several of them, such as the Dow, Nasdaq, S&P 500, the Stoxx Europe 600 and the CAC 40, have set new all-time records.
Helping on Friday to provide a bullish acceleration to Wall Street was the announcement of the effectiveness of the anti-Covid pill from Pfizer. It saw shares in rival drug companies fall, but shares in cruise and travel companies make good gains.
That helped Friday to boost the S&P 500 and the Nasdaq to record high closes for their seventh straight session, while the Dow also finish at a record. All three indexes posted weekly gains for the fifth straight week in a row.
The Dow 203.72 points, or 0.56%, to 36,327.95, the S&P 500 gained 17.47 points, or 0.37%, to 4,697.53 and the Nasdaq added 31.28 points, or 0.2%, to end at 15,971.59.
For the week, the S&P 500 rose 2%, the Dow added 1.42%, while the Nasdaq gained 3.05%.
A trial of Pfizer Inc’s experimental antiviral pill for COVID-19 was stopped early after the drug was shown to cut by 89% the chances of hospitalisation or death for adults at risk of developing severe disease.
Pfizer shares jumped 10.8% on the day and just over 11% for the week.
Travel stocks rose following Pfizer’s announcement, with the S&P 1500 airlines index climbing 7%, and cruise operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise rising between about 8% to 9%.
The Pfizer news weighed on shares of competitors such as Merck, which fell nearly 10%, and Covid vaccine makers such as Moderna, which slumped 16.6%.
Shares of so-called “stay-at-home” names fell, with Zoom Video Communications down 6.2% and Netflix shares were off 3.4%.
The gain forecast for today in the ASX 200 will come after a 0.39% rise on Friday to 7,456.9 which left it up 1.8% for the week.
But local investors will be paying attention to yet more troubles in the huge, unsafe Chinese property sector and another fall in iron ore prices on Friday to new 20-month lows.
Last week saw the Nikkei gain 2.5%, the Shanghai Composite 0.3% while the Hang Seng went it alone and lost another 2.1%, helped lower by the renewed Chinese property crisis.
Friday Chinese developer Kaisa Group suspended trading in its Hong Kong-listed shares after a media report said it was offloading assets to help pay debts of more than $US10 billion.
Kaisa has put 18 Shenzhen property projects covering 1.45 million square metres (15.6 million square feet) with a combined value estimated at $12.8 billion up for auction, according to a catalogue seen by the South China Morning Post newspaper (which is owned by the huge Alibaba group controlled by Jack Ma).
Hong Kong-listed shares of Kaisa, which has a market value of about $US1bn, plunged more than 15% on Thursday to an all-time low before being halted on Friday.
Kaisa’s woes come amid renewed speculation over the weekend about whether China Evergrande would make an $US83.5 million coupon payment on foreign debt.
It mysteriously repaid a similarly-sized coupon payment around October 23, on the final day of a 30-day grace period for the payment.
Saturday was the final day on the latest grace period on the latest missed payment.
Kaisa has reportedly missed payments on wealth management products that it has guaranteed. Chinese media reports said the company admitted to ““unprecedented pressure on its liquidity” while pledging to work out a repayment plan.
Fitch downgraded Kaisa’s credit rating to CCC which is close to default, saying the company had “limited funding access and uncertainty over the refinancing of a significant amount of US-dollar bond maturities and coupon payment”. S&P Global also downgraded its rating on the company as well.
Reuters reported that while Kaisa is only China’s 27th biggest property developer by sales it has been one of the largest dollar debt borrowers among developers, with more than $US11 billion of bonds outstanding.
