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ASX closes 0.3% higher on energy stocks and miners

Daily Market Update (32)

Risk reduced, Evergrande default delayed, Zip’s expansion
 
Amid growing concerns that the S&P/ASX200 (ASX: XJO) was set for a significant sell off, positive news from China saw the market rally throughout the session.
 
The market ultimately finished 0.3% higher with materials and mining adding 2%, starting to recoup the losses of the last few weeks.
 
Yesterday’s losers were today’s winners, with Champion Iron (ASX: CIA) jumping 5.8% and Fortescue (ASX: FMG) gaining 4.5%. The energy and property sectors also gained over 2 and 1% respectively as the risk on mood returned.
 
The positive sentiment came from news that Chinese property developer Evergrande had reached a deal with bondholders and would not be defaulting on their upcoming repayments, whilst this may only be a temporary reprieve it is a positive sign for a more orderly process.
 
The People’s Bank of China also allayed fears over liquidity providing an $120 billion yuan injection into the banking sector.
 
Retailer Premier Investments (ASX: PMV) was the biggest detractor down 4.5% despite any new market release, with investors seemingly concerned that the retail ‘snapback’ may not be as strong as predicted post lockdowns.
 
Westpac’s PNG deal culled, Zip expands to India, RBA worried about house prices
 
Zip Co (ASX: Z1P) garnered the headlines on a generally slow news day, with the company announcing the acquisition of a minority share in Indian BNPL player ZestMoney.
 
It marks their first entry into the massive Indian market with the company having 11 million users, 10,000 merchants and a point of presence in some 75,000 stores.
 
The investment will cost just US$50 million with an option to increase their stake over time as they seek to dominate the potentially US$300 billion market.
 
The CEO highlighted the unique position of India, noting that “while buy now, pay later is emerging as a preferred mode of payment globally, in India it also plays a crucial role in driving access to credit,” they suggest many Indians will skip the traditional sources of credit.
 
Westpac’s (ASX: WBC) deal to sell its PNG business to ASX-listed Kina Securities (ASX: KSL) was rejected by the competition authority yet shares in KSL finished 3.5% higher regardless.
 
The RBA also raised concerns about speculative activity in housing markets with the risk of significant falls should prices continue to diverge from fundamentals.
 
Rebound continues, taper date nears, Facebook advertising hit
 
US staged a strong recovery overnight with the tech sector pushing the Nasdaq over 1% higher.
 
Both the S&P500 and Dow Jones gained around 1% with materials and mining rallying on positive news around Evergrande’s potential default.
 
But all eyes were on the Federal Reserve with Chair Jerome Powell making no change to the US$120 billion per month bond buying program but flagged it may begin tapering before the end of this year.

Historically, this would see a selloff in markets, however, the communication has been consistent whilst the economy appears to be on a much stronger footing than in previous attempts.
 
In addition, the dot plot chart now suggests as many as four rate hikes in 2022, albeit a loose forecast, which would likely be a boon for the AUD.
 
The debt ceiling issue has raised its head again with politicians showing faux concern about the prospect of default. There is little doubt the debt ceiling will be extended hence why the market barely reacts.
 
Shares in Robinhood (NASDAQ: HOOD) jumped over 10% after announcing they would be launching a crypto wallet, with the cheap trading app doubling down on the sector.
 
Facebook (NYSE: FB) shares on the other hand fell as much as 4% after the company highlighted growing issues with their advertising platform following Apple’s (NYSE: AAPL) recent privacy update.

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