Wall St mixed, Robinhood jumps +50%, Why Xero's rating got a look over: ASX to edge lower

Major indexes around the globe closed mixed with Wall Street reacting to disappointing jobs data amid further earnings results. In Europe, business activity impressed investors and in Asia, the tech sector helped the region along.

The Australian sharemarket is to edge lower with the SPI futures pointing to a 0.2 per cent dip.

Weak jobs growth, rising services shakes Wall St

The tech heavy Nasdaq was the only bright spot with the other indexes closing lower as investors digested further earnings results amid disappointing jobs data fuelling concerns the pandemic rebound might be losing steam.

The Automatic Data Processing, ADP report which handles payroll for about a fifth of America showed that the new hires slowed down significantly last month amid a rise in Covid-19 infections. The ADP jobs’ numbers missed economist’s expectations by almost half with 330,000 new workers in July, down from 680,000 in June ahead of the July jobs report due at the end of this week. 

As mentioned yesterday, with the country reopening despite the spread of the delta-variant, consumers have shifted their spending to services from buying goods as seen in the ISM services index which rose from 60.1 to a record 64.1 in July, though Americans are paying more due to the supply chain bottleneck. 

Nasdaq hangs on its gains, stocks close lower

At the close, the Dow Jones fell 0.9 per cent to 34,793, the S&P 500 lost 0.5 per cent to 4,403 and the Nasdaq just hung in there up 0.1 per cent to 14,781.

In bond markets, US 10-yr treasury yield ended at 1.17 per cent after reaching as high as 1.215 per cent in volatile trade.

Across the S&P 500 sectors, the decline was across the board with Communication Services and Technology rising in tandem, up 0.2 per cent given the results on device sales and streaming services recently with Energy, making a U-turn as the worst performer, down 3 per cent on falling oil prices, which has declined for a third day on rising inventory according to the Energy Information Administration.

General Motors & Uber report earnings, Robinhood surges

On earnings, General Motors fell 9 per cent after their EPS missed expectations pressuring Wall St lower. The auto vehicle company reported record pre-tax profit in the second quarter due to a surge in demand despite high vehicle prices but its EPS fell short amid rising costs due to the global chip shortage.

Uber shares fell over 7 per cent after hours as they turned an unexpected one-time profit during the second quarter beating estimates on the top and bottom line. Though Uber said it had 101 million monthly active-platform consumers during the quarter, falling short of analysts’ expectation of 108.9 million. 

Online broker Robinhood surged 50.4 per cent, talk about a huge pivot following its sluggish start after listing. It was named the worst IPO of its size after trading 8.4 per cent below the issue price in the company’s first day of trade.

Europe post record high as business activity grows

Across the Atlantic, European markets closed higher. Europe's Stoxx climbed 0.6 per cent  to a record high as a survey after Eurozone business activity in July expanded at the fastest pace in 15 years. 

While in Paris, the CAC gained 0.3 per cent, Frankfurt added 0.9 per cent while the London FTSE added 0.3 per cent, helped by financial stocks and strong corporate earnings updates, although investors tread with caution due to rising Covid-19 cases and inflation concerns. Shares in Rio Tinto and BHP jumped 2 per cent.

Asian markets closes mixed on recovery in consumption

Asian stocks were mixed with Japan bucking the trend edging lower by 0.2 per cent, Hong Kong’s Hang Seng and China’s Shanghai Composite closed 0.9 per cent higher as a bounce in tech shares helped lift the indexes higher. 

Providing a boost in investor sentiment, a private survey showed that growth in China’s services sector accelerated in July, helped by a recovery in consumption though a rise in Covid-19 cases remains a threat to the growth outlook.

ASX 200 hits over 7,500 for the first time in history

Yesterday, the Australian sharemarket closed 0.4 per cent higher at 7,503, above 7,500 points for the first time in its history as investors look beyond the current lockdowns. Mining giant BHP rose 2.1 per cent giving a lift to the Materials sector. 

Across the sectors, Materials performed the best up 1.2 per cent followed by Energy added 0.9 per cent. The outliers was Healthcare, down 0.5 per cent followed by Industrials and Consumer Discretionary. All other sectors advanced.

Local economic news

Today the ABS is set to release June international trade and weekly payroll jobs and wages data for the period ending 17 July. Job losses are expected following the lockdowns.

Reporting season

Today we have Centuria Industrial REIT (ASX:CIP) and Nick Scali Retail (ASX:NCK) set to release earnings figures today.

Broker moves

Morgan Stanley rates Xero (ASX:XRO) as overweight with a price target of $137. The broker read over the U.S. payment giant’s Square's proposed acquisition of Afterpay (ASX:APT).  It views US/global players' interest in scalable technology and software out of Australia as a fundamentally positive move for stocks such as Xero. However, the broker concludes every M&A situation is unique, and there is no need to alter existing earnings/valuation or base case scenarios. Shares in Xero (ASX:XRO) closed 1.8 per cent higher at $145.88 yesterday.

Ex div

Djerriwarrh Investments (ASX:DJW) is paying 5.75 cents fully franked.
Flagship Investments (ASX:FSI) is paying 4.75 cents fully franked.

Commodities 

Iron Ore has lost 0.5 per cent to US$183.69.
Iron Ore futures are pointing to 2.2 per cent fall.
Gold has added $0.40 to US$1814.50 an ounce.
Silver has lost $0.12 to US$25.46 an ounce.
Oil was down $2.41 to US$68.15 a barrel.

Currencies

One Australian Dollar at 7:50 AM is a tad lower buying 73.83 US cents, 53.17 Pence Sterling, 80.79 Yen and 62.36 Euro cents.

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