Markets are stronger, home buying gets harder, Tesla makes mark in Germany and Russia oil conundrum gets more complicated

The ASX is set to open in the green as Wall St continued its reversal of form.

ASX futures were 0.4% higher at 7,344 at 7.20am AEDT.

The Dow Jones Industrial Average finished around 255 points higher, up 0.7%, near 34,807, while the S&P 500 rose around 50 points, or 1.1%, to close near 4,512. The Nasdaq Composite ended near 14,109, jumping 2%.

Here’s what we saw (source Commsec):

• The Euro rose from lows near US$1.0960 to highs near US$1.1045 and was near US$1.1025 at the US close.
• The Aussie dollar rose from lows near US73.77 cents to highs near US74.67 cents and was near session highs at the US close.
• Craig James writes “Global oil prices fell modestly, while fluctuations in the US dollar were monitored by traders as they affect the cost of oil for buyers in Europe and Asia. Gains in crude oil prices were capped by news that EU finance ministers were split over whether to ban Russian oil imports.”
• The Brent crude price fell by US14 cents a barrel or 0.1% to US$115.48 a barrel.
• The US Nymex crude price fell by US36 cents or 0.3% to US$111.76 a barrel.
• Base metal prices fell by as much as 10.9% on Tuesday with nickel down the most. Other metals fell by as much as 1.1%. Lead bucked the trend, up 1.6%.
• The gold futures price fell by US$8.00 or 0.4% to US$1,921.50 an ounce.
• Spot gold was trading near US$1,922 an ounce at the US close.
• The iron ore futures price fell by US$1.75 or 1.2% to US$148.48 a tonne.

Australian market

We don’t usually talk about house investing as our focus is mainly on share markets, but as a legitimate form of long-term investment, it is concerning that it will now take even longer to save a 20% deposit for an entry-level home.

Time blew out by an extra 11 months in 2021 – nearly three times longer than the additional time recorded in the previous year – as house prices continued to rise. According to Domain’s annual First Home Buyer report, it will now take an average of five years and eight months to save a deposit.

There is a light at the end of the tunnel for first home buyers with the market expected to slow this year, but the time it takes to save will continue to draw out.

“Low interest rates have improved the affordability of mortgage repayments, but they have also been a key driver of rising property prices, making it harder to save a deposit,” Domain senior research analyst Nicola Powell said.

“Ultimately the wage growth and personal tax cuts that filtered through this year were no match for the rapid house price growth in the past 12 months. This means we are likely to continue to see the timeline for saving a deposit lengthen as prices continue to rise,” she said.

First home buyers may have to look at different regions or property types to buy into to start their homeownership journey.

“Those who are willing to purchase a unit rather than a house will find the savings period significantly shorter compared to last year,” she said.

“Opting for a smaller property, or further from the CBD, generally means a lower purchase price and quicker entry to the market.”

US markets

Banks were the beneficiaries of the Federal Reserve’s announcement that it will aggressively raise interest rates to combat rising inflation.

Banks were up 2.5% on the news. Shares in Wells Fargo rose 4.4%.

Communication services rose 2% with information technology up 1.4%. Shares in Alibaba rose 11% after it raised its share buyback program to a record US$25 billion.

Nike shares advanced 2.2% as it beat quarterly profit and revenue expectations. Shares in Tesla rose 7.9% after it sold its first German-produced vehicle (more on that shortly).

US will pull UK steel tariffs

The US and the UK have come to an agreement to end Trump-era tariffs on steel and aluminium imports imposed on national security grounds.

“By allowing for a flow of duty-free steel and aluminium from the UK, we further ease the gap between supply and demand for these products in the US.

“And by removing the UK’s retaliatory tariffs, we reopen the British market to beloved American products,” US commerce secretary Gina Raimondo says.

Mixed results for Adobe

Adobe has reported solid earnings in its FQ1 earnings report.

eToro analyst Josh Gilbert says, “Adobe announced its FQ1 earnings today of US$3.37 per share on revenue of US$4.26 billion, compared to analyst expectations of US$3.34 per share on revenue of US$4.23 billion.

“Like most companies within the tech sector, Adobe has had an arduous start to 2022. Its share price has fallen by 20% year-to-date as rate hikes, inflation and geopolitical tensions continue to sprout high levels of volatility in the markets.  

“Adobe’s shares tumbled more than 10% last quarter after it had provided weak guidance for FQ1. Now its forecast has seemingly let investors down again. In FQ2, Adobe anticipates revenue of US$4.34 billion, below analysts’ expectations of US$4.4 billion.

“Despite this, Adobe beat expectations on both the top and bottom lines, and its revenue climbed by 9% year-over-year, a record for the digital media business.

“The accelerated growth of social media platforms such as TikTok and Instagram, and the rise of influencers and brands using Adobe’s platforms to create high-quality video and image content globally, is helping to solidify its position as a leader in the digital space. The focus on social media marketing is also set to rise by more than 45% by 2026, which is good news for Adobe as it looks to capitalise on this trend.

“Global enterprises are foreseen to spend US$1.8 trillion on shifting to digital cloud products by 2026. This suggests interest in Adobe’s suite of products, in particular, its cloud segment will continue to burgeon. Adobe’s document cloud segment demonstrated growth of 17% year-over-year as the world continues to transition into the new digital economy.”

Tesla open German Gigafactory

“Danke Deutschland!” (Thank you, Germany), Tesla chief executive Elon Musk tweeted after the red ribbon ceremony to celebrate the inauguration of his ‘gigafactory’ electric car plant near Berlin.

Tesla has shrugged off two years of bureaucracy and delays to finally make it happen.

It was an arduous two-year approval and construction process to open the factory, that saw Tesla run into a series of administrative and legal hurdles, including complaints from locals about the site’s environmental impact.

The more than €5 billion (AU$7.38 billion) factory is the biggest investment in a German car plant in recent history, with more than 3,000 of the factory’s expected 12,000 workers already hired.

Musk said: “This is a great day for the factory,” describing it as “another step in the direction of a sustainable future”.

Tesla will deliver its first 30 German-made Model Y Performance cars on Tuesday.

European markets

Were firmer on Tuesday. Banks again led the way, up 2.5%, in response to rising bond yields. Insurers rose 2.0% and autos lifted by 1.6%. Money markets are now pricing in around 50 basis points of rate hikes by the European Central Bank (ECB) by the end of the year.

The pan-European STOXX 600 index rose by 0.9%. The German Dax index rose by 1.0%. And the UK FTSE index lifted 0.5%.

In London trade, shares in Rio Tinto fell by 1.6% and BHP shares lost 1.7%.

Shell appeals Dutch climate ruling

Energy giant Shell says it wants to contribute to the clean energy transition but clearly isn’t ready to do so after it filed an appeal against a Dutch ruling to slash its worldwide aggregate carbon emissions by 45% by 2030.

“We want to be a leader in the energy transition.”

Shell had “set an absolute climate target to halve emissions from our operations by 2030, compared to 2016 levels, on a net basis.

“Shell alone cannot directly influence the energy choices made by its customers. It is for governments to put in place the policies that bring about fundamental changes in the way society consumes energy,” the company said.

In 2021, Dutch NGOs won a major district court battle in The Hague against Shell. The ruling stated Shell was contributing to the “dire” effects of climate change and was made to align its policy with the 2015 Paris climate accords – the first time a company had been forced to do so.

More sanctions against Russia

TotalEnergies will halt all oil and oil-related purchases from Russia by the end of the year.

“Given the worsening situation in Ukraine and the existence of alternative sources for supplying Europe, TotalEnergies has unilaterally decided to no longer enter into or renew contracts to purchase Russian oil and petroleum products, in order to halt all its purchases of Russian oil and petroleum products as soon as possible and by the end of 2022 at the latest,” the firm says.

The French group, which has been operating in Russia for 30 years, was criticised for not pulling out of Russia following Moscow’s invasion of Ukraine a month ago.

However, there is split sentiment in the European Union as to what to do about oil sanctions.

Germany and Hungary have said they must keep importing Russian gas (paying Russia 700 million euros a day for the gas supply) to keep their economies functioning.

On Thursday, the European Council will meet with US president Joe Biden to attend. There is increased pressure from other EU member states to implement an EU bloc ban on Russian energy imports to tighten the pressure on Vladimir Putin.

“Europe cannot give an impression of fatigue when the war in Ukraine has not ended,” Lithuania’s foreign minister Gabrielius Landsbergis said.

“We cannot get tired of imposing sanctions.”

Landsbergis tweeted: “Why should Europe give Putin more time to earn more money from oil and gas? More time to use European ports? More time to use unsanctioned Russian banks in Europe? Time to pull the plug.”

Hungary imports 25% of all its energy supplies from Russia and Germany is reliant on the supply from Nord Stream 1 gas pipeline.

Whether they take a leaf out of the Baltic states’ book in calling to impose a full ban, remains to be seen.

The Baltic states get nearly 100% of their gas from Russia and are fearful of what Moscow will do next if Russia succeeds in taking Ukraine.

Germany’s concern is that Putin will turn off the gas to Europe and cripple major industries across the continent.