Volatility could remain the prominent theme over the coming week, with the Omicron variant, and a surprise rethink from the US Federal Reserve sparking uncertainty. Meanwhile, a sinking Australian dollar and a sell-off in tech names on Friday evening may add to the drama, particularly with inflation data due later this week.

 

Economic calendar and news

The Reserve Bank of Australia will convene for the final time this year tomorrow, with the nation’s central bank increasingly coming under pressure to outline its longer-term plans around interest rates. That comes after the US Federal Reserve last week signalled it may need to hasten the unwinding of its quantitative easing program, which could also see interest rates rise sooner-than-expected.

Nonetheless, RBA Governor Philip Lowe will no doubt be pressed on these matters when he presents at the 2021 Payments Summit on Thursday, a day after the bank releases its chart pack summarising macroeconomic and financial market trends in Australia, as well as information about developments for Australia’s main trading partners.

Job numbers in the US fell short of expectations last week, showing new hires of just 210,000 across the economy compared with expectations of closer to 600,000. However, in a positive sign, the unemployment rate managed to tumble 0.4% to a pandemic-era low of 4.2%, even as participation among the nation’s labour force increased. Job growth is decelerating in COVID-affected areas of the economy, indicating some uncertainty as the Omicron variant has businesses on edge.

Inflation data is the major watch-point on the economic calendar in the US this week, scheduled for release on Friday morning US time. Economists’ forecasts suggest the inflation rate may have accelerated once again, with predictions of inflation pointing to nearly 7% year-on-year for November, or just shy of 5% when measured as ‘core’ inflation.

 

 

Stocks on watch

With tech proving a drag on US markets during Friday’s offshore trading session, that could put local tech names under pressure when trading begins this morning. 

The likes of Afterpay (ASX: APT) and Zip (ASX: Z1P) have already shed a significant portion of their market cap over recent months, now trading at multi-month lows. It’s a similar story for former market darlings like Nearmap (ASX: NEA) and Appen (ASX: APX), which have both been hit hard on growth concerns of late. However, it hasn’t all been doom and gloom in this sector, with electronics design software firm Altium (ASX: ALU) trading near its all-time high. 

Shares in Apple (NASDAQ: AAPL) have also held up well in the face of the Omicron threat, however, the tech giant was hit by a report late last week suggesting that iPhones of at least nine US State Department employees were hacked.

China’s US-listed tech companies had a brutal finish to the week as concerns mount around their future tenure on the boards of the US stock market. DiDi Global (NYSE: DIDI) is the first of the bunch to flag its intentions to withdraw from the NYSE and move to a Hong Kong listing, just months after making its US IPO. 

At the same time, the Securities and Exchange Commission has also announced it will step up its efforts to scrutinise the compliance of US-listed foreign companies. International businesses will face the risk of being delisted if their auditors do not fulfil requests for information from US regulators, including the ability to see their books. Stocks including Alibaba (NYSE: BABA), Nio (NYSE: NIO) and Baidu (NASDAQ: BIDU) all tumbled towards a yearly low, although over the weekend Chinese regulators dismissed rumours their own regulations are pushing entities to avoid US listings.

With the Australian dollar also hitting a fresh 52-week low and dropping below 70 cents, attention may focus on some of the ASX names that tend to benefit from a stronger greenback. This includes the iron ore majors in BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG), which each recently turned the corner. Gold miners and oil producers also benefit from a weaker Aussie dollar and strong USD, but names from this sector have come under pressure lately amid softer commodity prices and demand concerns.

CSL (ASX: CSL) is another beneficiary of a stronger US dollar, and the company has been in the news lately as it confirms it is in discussion with an overseas entity, rumoured to be Swiss-based Vifor Pharma, with regards to a mega acquisition. Sources suggest CSL may be prepared to stump up more than $10 billion to acquire the firm that produces treatments for chronic kidney disease, with a capital raise potentially part of the deal.

Reddit favourite GameStop (NYSE: GME) is in front of investors this week with its latest quarterly earnings report. Although the stock has been drifting lower in recent weeks and months, the company was able to significantly increase its revenue in the June quarter, and investors will be hoping the same is replicated in the September quarter. The video game retailer won’t be the only reporting name from America this week, with Costco (NASDAQ: COST) and Lululemon (NASDAQ: LULU) also set to hand down pre-Christmas earnings.

 

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