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Iron ore hits seven year high

Equities

Miners push ASX higher, iron ore hits seven year high, Macquarie (ASX:MQG) on the hunt
 
The ASX200 (ASX:XJO) added 0.4% on Thursday almost entirely on the back of the iron ore and mining sectors. 
 
Fortescue Metals (ASX:FMG) and BHP Ltd (ASX:BHP) were the leaders adding 13.3% and 4.9% respectively after the price of iron ore surged to a seven year high overnight. 
 
The rally came after Brazilian producer Vale (NYSE:VALE) cut output expectations and flagged a shortage of supply sending the spot price to USD$137 per tonne. 
 
The energy sector similarly benefitted from supply cuts, with Origin Energy (ASX:ORG) heading 1.8% higher. 
 
Macquarie Group (ASX:MQG) is leveraging off its strong Australian business, announcing the acquisition of US wealth and asset management Waddell & Reid for $2.3 billion. 
 
The wealth management division will be sold for $300 million with the US$68 billion asset management division boosting Macquarie to US$465 billion. 
 
The company operates under the IVY Investments brand which offers a broad range of equity-focused investment strategies. 
 
In my view, the acquisition is a positive move, capitalising on a weak US economy and further solidifies MQG’s ‘annuity-like income; shares finished 0.2% higher.
 
Kogan (ASX:KGN) splashes the cash, trade surplus highlights China risk, Qantas (ASX:QAN) flags 80% capacity by March
 
The Australian economy saw a strong increase in its trade surplus, which ultimately reflected price movements between imports and exports, given that service trade has effectively reduced to zero with borders closed. 
 
The surplus grew to $7.5 billion for the month on the back of a 14% surge in ore shipments (primarily iron ore), which made up the entire $1.7 billion monthly gain. 
 
To this point, experts remain hopeful that our iron ore exports remain immune from the Chinese trade impasse, this result simply reflects how reliant we are. 
 
Kogan Ltd (ASX:KGN) announced the acquisition of NZ-based online retailer Mighty Ape for $122.4 million and continues to splash the cash. 
 
The company delivered earnings of just $9.9 million in 2020 so the pressure is on management to extract synergies and deliver cash flow to investors; shares rallied 7.7% on the news. 
 
Qantas Ltd (ASX:QAN) forecast that international travel would not return until at least July 2021, but that domestic capacity should reach 80% by March, despite this another 8,500 job cuts were announced. 
 
At present, I’m not confident QAN share price reflects the real underlying risks ahead. 
 
US markets hit more records, oil production cuts agreed, record one day death toll
 
US sharemarkets continue to move higher but are now facing what experts have described as ‘the most difficult time in the public health history’ of their nation. 
 
The US death toll reached a one-day record and with hospitals overwhelmed Los Angeles was the latest state to shut down their economy. 
 
Despite the news, the S&P 500 was flat, Dow Jones and Nasdaq both moved higher by 0.2%. 
 
The oil price recovered on an agreement by OPEC to increase production at a slower rate than expected, whilst beleaguered plane manufacturer Boeing (NYSE:BA) bounced after receiving a huge order from Ryanair (ETR:RY4C). 
 
President Trump has also ramped up his pressure on China as his term comes to an end, with legislation requiring US company audits set to be approved whilst travel visas for Communist Party members have been restricted. 
 
On a company specific level CostCo (NASDAQ:COST) continues to benefit from the shift to online and click and collect spending, reporting same store sales growth of 14.6% in November, with e-commerce sales 70.9% higher than 2019.

Drew Meredith

  • Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.




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