Omnicron in the US | Lynas Surging

2 December 2021

Global markets were mixed overnight, with US markets (S&P500 -1.2%) ending the session down after after initially trading up.

Early in the session risk sentiment turned positive following str8ing economic data and as the WHO said vaccines will probably protect against new variants However gains were pared & faded from intra-day highs as CDC confirmed first case of Omicron in US. Investor sentiment took a hit as an omnicron case was detected in San Francisco, showing markets are still nervous around the uncertainty over the new strain. Most sectors were caught in the sell off with travel stocks hit hard.

The US ISM Manufacturing Index edged up to 61.1 in November from 60.8 in October and private payrolls increased by a better than expected 534,000 in November, with the solid economic data supporting the Fed's hawkish view. 

European Markets (Stoxx 600 index +1.8%) in a choppy session buoyed by European manufacturing output accelerating for the month of November, but with news that supply chain constraints continue to worsen.

Lynas (LYC:ASX)

Lynas shares have been climbing higher, hitting a 9-year high and up over 112% since the start of the year. The most recent positive sentiment has been driven after their AGM, as it said demand for its rare earths stay at elevated prices and expected to be stronger in 2022, assuming no significant release in supply from China. 

We remain BUY rated in Lynas as the largest producer of rare earths outside of China.  We have seen LYC as a great way to play the proliferation of Electric Vehicles (EV's).

Australia & New Zealand Market Movers

The Australian market fell (ASX 200 index -0.3%) down to its lowest level in two months yesterday following the hawkish tone from the US Fed.

The session recovered from a sharper fall on open helped by better-than-expected GDP numbers for the third quarter falling only -0.7% despite NSW and Victoria lockdown.

Stocks more immune to upcoming rate hikes and high inflation were high up slightly – with Material stocks leading gains, followed by healthcare and Financials, while other sectors traded lower.

The New Zealand market was flat on Wednesday, on a quiet day of trading local rates already increasing earlier result in a mild reaction to the Fed’s hawkish tone and inflation concerns.

Losses from Spark, Fisher and Paykel Healthcare, and A2 Milk offset mild gains across most of the market. Businesses in a better position to increase offload costs inflation to consumers fared better – with Resturant Brands and Sky TV both up +4.2%.

3 Things Markets will be Watching this Week

  1. Key events this week US nonfarm payroll, the latest CPI data in the Eurozone and PMI data in China.
  2. Developments around the Nu variant of covid will be dominating headlines. 
  3. Locally, Australia’s third quarter GPD numbers and ANZ’s latest Business Confidence reading in NZ. Earnings release from Oceania Healthcare and AGM”s from Lynas, Orocobre, Synlait and Premier Investments. 
Global markets were mixed overnight, with US markets (S&P500 -1.2%) ending the session down after after initially trading up.

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