As it happened: ASX ignores Capitol turmoil, gains 1.6% on Blue Wave

ASX has best day in almost two months
January 7, 2021
Photos: Satellite at West Shore girls soccer
January 7, 2021
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As it happened: ASX ignores Capitol turmoil, gains 1.6% on Blue Wave

Thanks for joining us at Markets Live today – hopefully we’ve managed to keep you on top of the events directing the ebb and flow of equities.

Alex Druce has been your editor today. He’ll be back in the morning to check in on how the events over in the US unfolded.

Until then, stay safe, and good luck.

Before we sign off for the day, here’s the latest on the situation unfolding in the US.

  • The death toll from the riots in Washington has grown to four people. Washington Police Chief Robert Contee said the dead included a woman who was shot by the Capitol police, as well as three others who died in “medical emergencies”.

Supporters of President Donald Trump climb the West wall of the the US Capitol.Credit:AP

  • Washington Mayor Muriel Bowser has extended the 6pm-6am curfew for 15 days, meaning it will be in place until the day after President-elect Joe Biden’s inauguration on January 20. She has also asked locals to stay out of the downtown area and to avoid “demonstrators who come to our city seeking confrontation”.
  • Police said 52 people were arrested after the riots, including for breaching curfew orders, with 26 arrested on Capitol grounds.
  • Facebook has now joined Twitter in taking the unprecedented step of banning President Donald Trump from posting to his accounts for 24 hours. Earlier today Facebook, YouTube and Instagram took down Trump posts, and Twitter locked the avid user out of his account for 12 hours.
  • The House may have rejected an objection to President-elect Joe Biden’s Arizona win, but Republican Congressman Scott Perry of Pennsylvania and Senator Josh Hawley of Missouri nonetheless objected to the counting of Pennsylvania’s electoral votes.

Follow our live US election blog here

Investors brushed aside the spectacle of a Trump-supporting mob storming the US Capitol building and instead focused on the Democrats’ dual victory in the Georgia Senate run-off – a win that effectively handed the party control of all three major US legislative organs and opened the door for a larger stimulus response to the coronavirus.

The ASX 200 bounded out the gates on Thursday thanks to a strong Wall Street lead and added as much as $39 billion to its market cap as it surged 1.9 per cent to a peak of 6733.4.

Supporters of President Donald Trump are confronted by US Capitol Police officers. Credit:AP

The local index eventually closed off its session high at 6712.0 – still a gain of 1.6 per cent, and its best close since December 17 – with the mining giants Rio Tinto, BHP, and Fortescue Metals hitting fresh highs and the major banks booming.

Improved ion ore prices helped BHP rise 6.1 per cent to $46.90, Rio Tinto add 8.6 per cent to $125.66, and Fortescue Metals close 3.5 per cent ahead at $25.92.

For the big lenders, Commonwealth Bank added 2 per cent to $84.58, NAB rose 2.8 per cent to $23.04, Westpac finished 3.2 per cent ahead at $19.99 and ANZ climbed 3.8 per cent to $23.64.

The Aussie dollar remained near 30-month highs of 78 US cents for most of the day before cooling late in the local session to 77.85 US cents.

ThinkMarkets Australia analyst Carlos Capolingua said the market largely ignored the Washington riots and instead celebrated the Democrats claiming the final two seats in the US Senate and therefore effective control of both houses of Congress.

“The moves today were very much in line with those we saw shortly after the Presidential Election back in November, when it became clear that the Democrats would have a greater influence on the US economy for the next four years,” Mr Capolingua said.

“Longer-term bond yields are on the rise in response to a pervasive increase in inflation expectations. The theory is that the Democrats are going to be bigger spenders, and this is going to cause inflation. Higher inflation requires higher bond yields.

“On one hand, it’s good for financial stocks. On the other hand, higher growth stocks, particularly those that have used debt to supercharge their growth, tend to struggle when rates go up.

Tech was a major casualty on Thursday, with Afterpay down 4.2 per cent to $108.85, Xero down 5.1 per cent to $140.53, and Altium dropping 4.1 per cent to $31.71.

CSL was also a laggard, down 1.2 per cent to $275. ResMed and Fisher and Paykel also weighed the health sector down.

Energy stocks gained a collective 4.5 per cent on improved oil prices, with Santos up 7.4 per cent to $6.95, Oil Search adding 6.9 per cent to $4.16, and Woodside Petroleum finishing 5.1 per cent ahead at $24.35.

Wesfarmers, Woolworths, Coles, and Amcor also rose.

US futures were ahead at 4.40pm AEST and pointing to further gains on Wall Street tonight.

“Assuming we don’t get any major negative news events surrounding the handover of power in Washington, there’s a very good chance we can push though overhead resistance around 6766 and target our all-time highs at 7197,” Mr Capolingua said.

The ASX 200 added 104.9 points, or 1.6 per cent, to finish Thursday’s session at 6712.0 points – its best close since December 17.

The Democrats’ dual victory in the Georgia Senate race will see the party effectively attain wall-to-wall control in Washington, increases the likelihood of a heftier coronavirus stimulus package.

The local miners and banks were strong while energy stocks joined the party after an oil price rise. Tech, property, and health stocks fell.

The Australian sharemarket is 120.8 points, or 1.8 per cent ahead, at 6726.9 with about 15 minutes to run in Thursday’s session, earlier touching a pre-Christmas high as it heads for its best session since early November.

The mining titans BHP, Rio Tinto and Fortescue Metals have surged to record highs – adding nearly 50 points on their own – while the big banks are booming in the wake of the Democrats’ dual victory in the Georgia Senate race.

A Blue Wave through Washington increases the likelihood of a heftier coronavirus stimulus package, although it also opens the door for an unfettered Democrat policy regime.

Rio is 8.6 per cent higher at $125.73, BHP has gained 6.3 per cent to $46.99, and Fortescue Metals jumped 3.8 per cent to $26.01.

Wesfarmers, Woolworths, Coles, and Amcor are also higher, while health, tech, and property stocks are in the dumps.

US futures markets are ahead and point to gains on Wall Street tonight.

Bloomberg

There’s a great way the US and the European Union could together address two huge challenges in one policy sweep. It’s to create a transatlantic “carbon club,” which I’ll describe in a moment.

The geopolitical promise of this idea is to resurrect the notion of the “West” at a time when the US and Europe are drifting apart but still hoping to rejuvenate their alliance after Joe Biden becomes president. The even bigger goal is to win the struggle against global warming, which both Biden and the EU cite as their priority.

Countries with a price on carbon emissions have delivered far higher greenhouse gas reductions than countries without a carbon tax. Credit:PA

The only way to slow climate change is to dramatically reduce our planet-wide emissions of greenhouse gases. And the best approach to that is to put a price on carbon that’s both high and rising. This signal will make producers and consumers adopt behaviours and technologies to pollute less.

Within a given jurisdiction, we already know how to set such a carbon price. You can tax emissions directly. Or you can limit their overall amount by law, then issue carbon allowances which firms can buy and sell in an open market, at a price that constantly changes. This way emissions will be cut fastest wherever it’s easiest and cheapest to do so.

Of these cap-and-trade systems, the EU, Norway, Iceland and Liechtenstein jointly have the world’s largest. Still, it only covers sectors – from power generators to steelmakers and airlines – that account for 40 per cent of European emissions, so the system must be expanded. Even then it still faces a bigger problem.

Full column here

The US Capitol in Washington DC was locked down after supporters of President Donald Trump clashed with police and stormed the building. Authorities have since secured the building.

Here’s what we know so far.

Trump supporters gather outside the CapitolCredit:AP

The US Congress was meeting today to certify Joe Biden’s victory in the November election, with more than 100 Republican congress members vowing to object to the results in several states.

Around the same time, Trump addressed thousands of demonstrators who had amassed outside the Capitol to cheer his baseless claims of voter fraud and to protest the results.

Trump falsely said he won the election as he spoke on an outdoor stage framing the White House. He urged his supporters to march to the Capitol, telling them to “get rid of the weak Congress people” and said “this is the time for strength”.

“We’re going to cheer on our brave senators and congressmen and women, and we’re probably not going to be cheering so much for some of them,” Trump said.

Read the full explainer here

Housing approvals rose for the fifth consecutive month in November and, seasonally adjusted, were at the highest recorded level since December 1999, according to data released by the Australian Bureau of Statistics today.

Federal and state housing stimulus measures and low interest rates have resulted in strong demand for detached dwellings.Credit:Janie Barrett

Daniel Rossi, Director of Construction Statistics at the ABS, said approvals for private houses have surged 40 per cent since June.

“Federal and state housing stimulus measures and low interest rates have resulted in strong demand for detached dwellings,” Mr Rossi said.

“Approvals for private houses rose 6.1 per cent in November, while dwellings excluding houses remain at subdued levels, falling 3.9 per cent,” he said.

The total number of dwellings approved rose 2.6 per cent in November, in seasonally adjusted terms.

The rise in total dwellings was led by South Australia (18.8 per cent), followed by Queensland (6.5 per cent) and New South Wales (1.5 per cent). Falls were recorded in Western Australia (5.4 per cent), Victoria (4.6 per cent) and Tasmania (0.4 per cent).

Approvals for private sector houses rose in all states in November; Queensland (17.0 per cent), Western Australia (7.5 per cent), South Australia (2.8 per cent), Victoria (1.5 per cent) and New South Wales (0.7 per cent).

The value of total building approved fell 8.4 per cent in November, in seasonally adjusted terms. The value of non-residential building drove the decrease, falling 27.4 per cent after a strong October result (the highest since August 2019).

The value of total residential building increased 5.7 per cent, comprising a 5.7 per cent rise in new residential building, and a 5.6 per cent increase in alterations and additions. The value of residential alterations and additions reached an all-time high in November.

The ASX 200 rose by as much as 1.9 per cent to a pre-Christmas high of 6733.4 on Thursday afternoon as local investors chased an overnight Wall Street rally.

US stocks moved higher on the prospect of a stimulus boost following the Democrats’ dual win in the Georgia Senate run-off. Turmoil at the US Capitol building – where Donald Trump supporters stormed the premises and clashed with police – does not appear to have impacted local sentiment.

Victories for both Reverend Raphael Warnock and Jon Ossoff in Georgia mean the Democrats have effective control of the Senate, as well as the White House and Congress, giving them a solid platform to enact their policy agenda, including increased pandemic support.

In local markets, the iron ore giants BHP, Rio Tinto and Fortescue Metals all hit new record highs as the bulk metal continued its bright start to the year with a 0.5 per cent lift to $US168.72 a tonne.

By 1pm, BHP had risen 6.1 per cent to $46.89, while there was a 6.7 per cent gain for Rio Tinto to $123.51, and a 4 per cent surge for Fortescue to $26.05.

The major banks were also buoyant. Commonwealth Bank was 2.7 per cent ahead at $85.09, NAB rose 3.3 per cent to $23.15, Westpac climbed 4.9 per cent to $20.31, and ANZ added 4.8 per cent to $20.32.

Futures markets for the main US indices are up by between 0.5 per cent and 0.9 per cent, hinting at further gains on Wall Street tonight.

The ASX 200 has built on its bright start to the day to move 1.6 per cent ahead and further above 6700 at lunch. The market was last 102.3 points higher at a session peak of 6709.4.

Investors have largely brushed aside the turmoil unfolding at the US Capitol building in Washington DC, where Trump supporters clashed with police and stormed the building. Trump has called on the rioters to ‘go home’.

There were new record highs for the trio of iron ore giants – BHP, Rio Tinto, and Fortescue Metals – while the major banks and energy firms are also surging. Tech, health and property stocks are lower.

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