Wall Street ends mixed: Aus shares to open lower ahead of a big week for economic data

Market Reports

by Anna Napoli

The Australian sharemarket looks set to open lower following a mixed result in the US on Friday. Wall Street ended a volatile session with the Nasdaq and the S&P500 managing to hold onto gains after President Donald Trump didn’t take drastic punitive action against China as investors had feared. Trump did say he would take action to eliminate special treatment towards Hong Kong, but financial markets reacted positively to the announcement reflecting overall relief he didn’t scuttle the US-China trade deal. All eyes will be on China today to see if it responds.

US Economc news

In US economic data, personal income rose by 10.5 per cent (forecast -6.5 per cent) in April, the positive outcome may have come on the back of Government’s stimulus checks. Spending went the other way, falling by 13.6 per cent while consumer confidence was slightly higher rising from 71.8 in April to 72.3 in May.

Markets

Wall Street closed mixed on Friday: The Dow Jones Industrial Average fell 0.07 per cent to close at 25,383, the S&P 500 added 0.48 per cent to close at 3044 and the NASDAQ rose 1.3 per cent to 9490.

European markets closed lower. London’s FTSE fell 2.3 per cent, Paris lost 1.6 per cent and Frankfurt closed 1.7 per cent lower.

Asian markets closed mixed, Nikkei fell 0.2 per cent, Hong Kong’s Hang Seng lost 0.7 per cent and China’s Shanghai Composite closed 0.2 per cent higher.

Returning home, the SPI futures are pointing to 0.4 per cent fall.

On Friday, the Australian share market lost 95 points (1.63 per cent) to close at 5756.

The local sharemarket has ended a second month higher on the back of improving investor sentiment as nationwide restrictions ease and optimism that the economic damage from the pandemic may not be as bad as expected. The gains came after investors piled into the banks towards the end of last week. The surprising rally from the four major banks helped to lift the financials index by over 18 per cent by close on Thursday. The bank buying comes amid optimism around the economy reopening and is a heartening sign for shareholders after the big four’s collective 44 per cent slide since the covid pandemic took hold in February. The improving economy was also flagged by Reserve Bank Governor Phillip Lowe on Thursday who said it was doing “a bit better than feared”

The loosening of lockdowns kicked off much earlier than the initial six-month period that was originally anticipated. Similar moves in Europe, the US and Japan has also helped to boost confidence. Australia’s resources companies were also among the winners in the past month as higher commodity prices boosted earnings expectations in gold, iron ore and energy. The travel sector, one of the hardest hit by the shutdown has also started to rebound, Flight Centre (ASX:FLT) rose almost 14 per cent and Webjet (ASX:WEB) gained 11 per cent over the course of the week after Treasurer Josh Frydenberg said the industry could receive further government funding.

Southern Cross Media (ASX:SXL) rose almost 68 per cent over the month reaching 24 cents after hitting a low of 11 cents last month. One reason for the bounce could be the expected increase in numbers of people using cars versus public transport to commute which could in turn see the media company’s radio audience grow.

Local economic news

The week kicks off today with manufacturing surveys from AiGroup and the Commonwealth Bank (CBA). The Melbourne Institute inflation gauge is released. And CoreLogic’s national home price index is tipped to fall by around 0.5 per cent in May.

Tomorrow the Bureau of Statistics (ABS) issues the ‘Business Indicators’ publication that includes data on profits, sales, wages and stocks. The quarterly balance of payments figures are also released with government finance, CBA credit & debit card and weekly consumer sentiment data.

Also on Tuesday, the Reserve Bank meets with the official cash rate expected be left at 0.25 per cent and the target for the yield on 3 year Australian Commonwealth Government Bonds also retained at 0.25 per cent.

On Wednesday the focus will be on the March quarter economic growth (GDP) estimates. The reading is likely to determine whether Australia suffers a ‘technical’ recession for the first time in almost 30 years.

Also on Wednesday, the CBA releases the ‘final’ May survey on services activity.

On Thursday, the April figures on exports and imports (international trade) are released with a trade surplus of around $7.5 billion tipped by CBA Group economists.

Finally on Friday, the AiGroup’s Performance of Services index is issued for May with a contraction in activity expected.

Currencies

One Australian Dollar at 7:45 AM was buying 66.71 US cents, 54.08 Pence Sterling, 71.86 Yen and 60.01 Euro cents.

Commodities

Iron Ore has gained 5.5 per cent to US$102.39.
Iron Ore futures suggest a 2.2 per cent gain.
Gold has gained $23.40 to US$1752 an ounce.
Silver was up $0.53 cents to US$18.50 an ounce.
Oil has gained $1.78 to US$35.49 a barrel.