ASX to rise, Wall Street pares early losses

Friday’s reporting calendar: Baby Bunting (BBN) | HealthCo Wellness (HCW) | Inghams (ING) | Latitude (LFS) | QBE (QBE) | Westpac (WBC)

The local currency was 0.4 per cent lower shortly after 8.30am AEDT. The Bloomberg dollar spot index edged up.

On bitstamp.net, bitcoin was 1.8 per cent higher to $US24,524 near 8.40am AEDT; it earlier briefly peaked above $US25,230.

The yield on the US 10-year note was 6 basis points higher to 3.86 per cent at 4.33pm in New York. The two-year yield was 4.64 per cent.

The producer price index for final demand jumped 0.7 per cent last month, the most since June and bolstered by higher energy costs, according to data from the Bureau of Labor Statistics. The PPI climbed 6 per cent from a year earlier.

The median estimates in a Bloomberg survey of economists called for the index to increase 0.4 per cent from a month earlier and 5.4 per cent from January 2022.

John Lynch, chief investment officer for Comerica Wealth Management, said this week’s CPI and PPI reports suggest “that the easy battles against price pressures have been won”.

Lynch said considering these pricing developments with pressure on profit margins and interest rates, investors should prepare for a retest of the October lows.

LPL Financial strategist Quincy Krosby said equity markets can gain momentum with higher rates as long as they are associated with stronger economic growth, however a move in the 10-year yield above 4 per cent would question if the economic backdrop could continue to maintain a positive outlook.

In a 10-year economic outlook, the bipartisan Congressional Budget Office forecast the US 10-year yield will hover near 3.8 per cent through 2033 even as the Fed’s key rate falls in 2024.

The CBO also said that while inflation will begin to decline this year, it won’t reach the Fed’s long-term target until 2027.

Today’s agenda

Local: Philip Lowe, RBA governor, will appear before the House of Representatives Standing Committee on Economics, Canberra at 9.30am AEDT

Overseas data: UK January retail sales; US import price index January, Leading index January

Other top stories

‘I was an investor’: Deloitte CEO was alleged victim of fraudster Deloitte Australia chief Adam Powick has admitted he invested in a scheme run by former partner Amberjit Endow that is now under investigation.

Missing zinc miners found dead The death of two miners at MMG’s underground zinc mine has again raised concerns about the safety culture within Queensland’s multibillion-dollar mining industry.

Jobs market starts to buckle under higher rates The data will prompt MPs to question RBA governor Philip Lowe whether additional rate rises are necessary.

Chanticleer: Newcrest is having a bet both ways with suitor Newmont The gold miner is keeping the US group in the tent with a ‘soft no’.

Earnings to drive shares after rates chaos: Magellan chief The second phase of stock market volatility is upon us, says Magellan’s David George.

Market highlights

ASX futures down 18 points or 0.25 per cent to 7321 near 8.30am AEDT

• AUD -0.4% to 68.78 US cents
• Bitcoin +1.8% to $US24,524 near 8.40am AEDT
• On Wall St: Dow -1.3% S&P -1.4% Nasdaq -1.8%
• In New York late: BHP +0.5% Rio +0.6% Atlassian -6.8%
• Tesla -5.7% Apple -1% Amazon -3% Microsoft -2.7%
• In Europe: Stoxx 50 +0.4% FTSE +0.2% CAC +0.9% DAX +0.2%
• Spot gold +0.5% to $US1844.31/oz at 1.57pm in New York
• Brent crude -0.5% to $US84.96 a barrel
• Iron ore +0.9% to $US124.45 a tonne
• 10-year yield: US 3.86% Australia 3.75% Germany 2.47%
• US prices as of 4.33pm in New York

United States

China imposed fines and sanctions against two US defence companies in a further escalation of tensions between the world’s biggest economies.

Lockheed Martin and a subsidiary of Raytheon Technologies were added to a list of “unreliable entities” for selling weapons to Taiwan, China’s Ministry of Commerce said in a statement on Thursday.

Apollo Global Management and HPS Investment Partners are among lenders that have offered to help provide a $US5.5 billion loan supporting the buyout of health-care tech firm Cotiviti, in what would be the largest buyout financing ever arranged by private credit firms, Bloomberg reported.

US household debt soared by the biggest amount in two decades in the fourth quarter, with younger borrowers in particular struggling to make loan payments amid high inflation and interest rates.

Households added $US394 billion in overall debt, the largest nominal increase in 20 years, bringing the total to a record $US16.9 trillion, according to data released by the Federal Reserve Bank of New York.

Commodities

Teck Resources is planning to separate its multibillion-dollar steelmaking coal business to focus more on industrial metals, Bloomberg reported.

The Canadian miner is expected to make an announcement on the spinoff as early as next week, the people said, asking not to be identified as the matter is private. Deliberations are ongoing, and no final decision has been made, the people said.

Teck, which is scheduled to report earnings next week, is one of the world’s largest exporters of metallurgical coal. The company produced more than 24 million tonnes in 2021 from four different operations in western Canada, according to its filings. The business accounted for 55 per cent of the company’s gross profit.

Teck has been exploring options for the business since at least September 2021, when people familiar with the matter said the business could be worth about $US8 billion.

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