Wall St falls, Fed prepares to taper, Why Breville is an outperform: ASX to fall

A mixed close across the major indexes around the globe ahead of the release of the minutes from the Federal Reserve. European markets were pressured lower as mining giant BHP fell on the U.K FTSE. Asian markets rebounded mildly despite Covid-19 concerns.
 
The Australian sharemarket is set to fall with the SPI futures pointing to a decline of 0.7 per cent.

Wall St closes in the red for their 2nd day

Wall St finished a wobbly session in the red for their second straight day as market participants waited for the highly anticipated minutes from the Federal Reserve. This comes after the S&P 500 had its biggest drop in four weeks snapping their five-day winning streak.

Investors also digested weaker than expected housing starts in July that were offset by stronger than expected building permits. The figures were not too much of a surprise following yesterday’s homebuilder confidence report after the reading tumbled to a 13-month low on surging construction and labour costs.

Fed hints tapering could start end of this year, no firm timetable though

A majority of the central bank’s policy makers discussed the notion last month that they could start tapering their bond purchases as early as this year, however a decision on a firm timetable was not to be seen according to the minutes from the July meeting.

The Fed’s meeting minutes indicated that the economic recovery was moving closer to hitting the central bank’s goals on inflation and employment. Hence the Fed sitting on the borderline towards unveiling their plans to begin tapering their asset purchases program. This was initially intended to lower interest rates to encourage borrowing and spending.

“No decisions regarding future adjustments to asset purchases were made at this meeting,” the minutes said. However most of the Fed officials “noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year.”

Booster Covid-19 jabs likely to start in September for Americans

Meanwhile, the Biden administration revealed plans to begin offering Covid-19 booster shots. This is pencilled in to start at the end of September for American adults who received the Pfizer or Moderna vaccines. The move comes as cases of the highly contagious delta variant continue to spread across the country. A final plan was still pending the official sign-off by the U.S. Food and Drug Administration. 

The recommendations are for adults who had the Pfizer or Moderna jabs to receive a booster shot eight months after their second shot, with health care workers, nursing home residents and seniors first in line. Shares in Pfizer fell 2.2 per cent while Moderna dropped 0.8 per cent.
 
Wall St deteriorates pressured by energy & technology stocks

At the close, the Dow Jones and the S&P 500 both fell 1.1 per cent while the Nasdaq shed 0.9 per cent.

Most sectors on the S&P 500 were under pressure with Consumer Discretionary and Staples along with Utilities managing to keep their gains by over 0.02 per cent. A sharp decline in Energy, down 2.4 per cent followed by Healthcare and Technology falling over 1.4 per cent didn’t help Wall St as the major indexes accelerated their losses into the close.

The yield on the 10-year treasury note was little unchanged at 1.26 per cent.

European markets mixed as BHP weighs offsetting improved U.K. inflation

Across the Atlantic, European markets closed mixed. Paris fell 0.7 per cent, Frankfurt closed 0.3 per cent higher while London’s FTSE shed 0.2 per cent despite U.K.’s inflation dropping to 2 per cent, in line with Bank of England’s target.

However, mining giant BHP weighed heavily on the market, tumbling 5.9 per cent as investors and fund managers closed out their positions following their recent deal with Woodside Petroleum. Rio Tinto fell 2.6 per cent.

Asian markets rises despite slowing economic growth

Asian stocks emerged from the red rebounding higher. Japan’s Nikkei snapped their four day losing streak adding 0.6 per cent despite extending their coronavirus state of emergency to suppress a record wave of infections a week before the Paralympics.

Shanghai composite rose 1.1 per cent while Hong Kong’s Hang Seng added 0.5 per cent as financials and tech stocks jumped.
 
ASX 200 tumbles for the third day 

Yesterday, the Australian sharemarket tumbled for the third day in a row, falling 0.1 per cent at 7,502 with investors dumping a few heavyweight giants pushing the index lower, as strong corporate earnings outlook helped minimize losses.

BHP (ASX:BHP) shares dived over seven per cent pulling the Materials sector down as the worst performing sector. The mining giant revealed their plans to dedicate the ASX as their primary exchange as they simplify their corporate structure away from the dual-listing on the London’s stock exchange.

Biotech giant CSL (ASX:CSL) dropped 1.5 per cent after their lowered profit forecast for FY22. This pushed the Healthcare sector into the red. Rio Tinto (ASX:RIO) fell 2.3 per cent as the iron ore price took a dip.

Across the sectors, outside of Materials and Healthcare, Energy declined 0.5 per cent while Consumer Discretionary closed flat. Property performed the best, up 1.9 per cent followed by Utilities and Technology.

Woodside, Promedicus & Domino's release earnings

Woodside Petroleum (ASX:WPL) slid 2.1 per cent despite a $317 million profit from a deep red $4 billion loss the year before. Investors sold out of their positions on fears of dilution of shares following their monumental deal.

Promedicus (ASX:PME) soared 15.6 per cent after the debt-free business posted a 19.5 per cent rise in their full year profit.

Domino's (ASX:DMP) jumped over 7 per cent to a record high after lifting their dividend. Management also said that FY22’s success will be buoyed by store expansion flagging a record year in sight.

Local economic news

The Australian Bureau of Statistics have slated two reports today. The labour force figures for July and average weekly earnings for May.

Commonwealth bank economists expect the unemployment rate to remain unchanged at 10.5 year lows of 4.9 per cent in July with 10,000 jobs added and the participation rate steady at 66.2 per cent.

In their view, the damage to the labour market will most likely show up in the August and September job reports. They have also forecast that hours worked and workforce participation are both expected to fall sharply with underemployment lifting due to lockdowns.

Reporting season

Another mammoth day in earnings to be released today with over 17 companies set to release figures. A few big names include ASX (ASX:ASX), Evolution Mining (ASX:EVN), IPH (ASX:IPH), IRESS (ASX:IRE), Newcrest (ASX:NCM), Origin (ASX:ORG), Orora (ASX:ORA), Perpetual (ASX:PPT), South32 (ASX:S32), The Star Group (ASX:SGR) and Treasury Wine (ASX:TWE).

Broker moves

Morgan Stanley rates Breville Group (ASX:BRG) as overweight with a price target of $36. The kitchen appliance maker’s FY21 results beat the broker’s expectations in sales while their earnings figures met their guidance.

The sell-off in the shares following the result suggest that the market had bullish expectations, though the broker does note that the outlook looks highly unpredictable.

Gross margin headwinds in FY22 are anticipated from a weaker US dollar, cost increases and inflation in logistics. The company will look to offset these concerns through price increases. Morgan Stanley has raised their target price to $36 from $35.

Shares in Breville Group (ASX:BRG) closed 1.55 per cent higher at $30.83 yesterday.
 
Ex dividend

GPT Group (ASX:GPT) is paying 13.3 cents unfranked.
G.U.D. Holdings (ASX:GUD) is paying 32 cents fully franked.
Korvest (ASX:KOV) is paying 20 cents fully franked.
QBE Insurance Group (ASX:QBE) is paying 11 cents 10 per cent franked.
Steadfast Group (ASX:SDF) is paying 7 cents fully franked.
Zimplats Holding (ASX:ZIM) is paying 107.34 cents unfranked.

Commodities

Iron ore has lost 4.6 per cent to US$153.39 after BHP warned about China's potential rein in steel output this year. Their futures are pointing to 5.5 per cent fall.

Gold has lost $3.40 to US$1784 an ounce while silver has fallen $0.24 to US$23.47 an ounce.

Oil was down $1.13 to US$65.46 a barrel.

Currencies

One Australian Dollar at 7:35 AM was buying 72.38 (Yesterday’s price 72.54) US cents, 52.65 Pence Sterling, 79.48 Yen and 61.81 Euro cents.

Investor event

Please join us at our next online investor event on Tuesday 24 August at 12.30pm with CEOs presenting from 5 different companies from resources to healthcare. Make your way to fnn.com.au to register for your free spot.