Wall St gains, Afghan withdrawal threatens Biden's plan, Why Evolution Mining is a buy: ASX to rise

Wall St rallied though closed lower over the week as investors bought the dip. European markets tracked the U.S following mixed economic data. Asian shares closed in the red on uncertainty around the Chinese government’s next moves. 

The Australian sharemarket is set to start the week on a positive note with the SPI futures pointing to a 0.5 per cent gain.

Wall St rise, lower over the week

On Friday, Wall St rallied though not enough to reverse losses earlier in the week. Stocks hit turbulence marked by uncertainty, as weaker-than-expected economic data amid the uptick in Covid-19 cases led to investor indecision.

Wild week fuelled by uncertainty on Fed, China’s “common prosperity”

Retail sales fell more than expected with the resurgence of Covid-19 cases casting doubts on whether the economy can fully reopen. The Fed also released their minutes from last month’s meeting creating trepidation. The minutes showed some of the members wanting to start tapering the bond buying program as early as this year, with only four months left before 2021 ends.

Investors were also faced with a selloff in Asia sparked by regulators in China clamping down on tech giants. This hurt U.S.-Chinese listed stocks. China’s president also forewarned the country’s super rich that the state plans to redistribute wealth for “common prosperity”.

According to China’s state media reports, President Xi Jinping told officials that the government should “regulate excessively high incomes and encourage high-income groups and enterprises to return more to society”.

America's withdrawal from Afghanistan shakes spending honeymoon

Uncertainty also grew over whether America’s withdrawal from Afghanistan could make it even more difficult for the Democrats to get their spending program through the Congress. The administration had just a week-long victory-run on the Senate’s approval for the US$1 trillion bipartisan infrastructure bill, before the Taliban takeover of Afghanistan shifted attention.

House lawmakers return to Washington on Monday with plans to vote on a budget resolution which is set to pave the way for the US$3.5 trillion package. Bucking the momentum is the imminent threat of congressional investigations on the move in Afghanistan, along with heated talks over evacuations and refugees which will likely shift the focus away from Biden’s spending bill.

Meanwhile, the yield on the 10-year treasury note stayed under 1.3 per cent and commodities were the only asset which had a strong direction, with oil and iron ore prices falling throughout the week amid the corporate earnings season.

Wall St gains as investors flocked to technology stocks

At the closing bell, Wall Street closed higher on Friday. The Dow Jones added 0.7 per cent at 35,120, the S&P 500 gained 0.8 per cent to 4,442 and the Nasdaq rose 1.2 per cent at 14,715.

The tech heavy Nasdaq was supported by investors buying into tech giants like microchip maker Nvidia. Their shares surged 5.1 per cent on the back of broker upgrades. Microsoft jumped 2.6 per cent after they announced a price hike for those subscribing to their Office 365 commercial solutions.

Across the S&P 500 sectors, all sectors advanced led by Technology shares, up 1.3 per cent with Consumer Staples marginally adding 0.2 per cent.

The yield on the 10-year treasury note rose 1 point to 1.26 per cent.

European markets rose but sharply lower for the week

Across the Atlantic, European markets tracked U.S. markets closing higher but sharply lower for the week.

London’s FTSE added 0.4 per cent as retail spending in July fell below consensus expectations. UK retail sales fell by 2.5 per cent in July from June, against a rise of 0.3 per cent.

Paris gained 0.3 per cent while the DAX staged a recovery also closing 0.3 per cent higher. Investors digested a bigger-than-expected jump in producer prices in July. It rose 1.9 per cent in July from the month before.

In London trade, miners BHP added 0.9 per cent and Rio Tinto rose 0.7 per cent.

Red Asian markets as Covid-19 cases flare up

Asian markets closed lower, Tokyo’s Nikkei lost almost 1 per cent to its lowest level since December last year, on the extension of the state of emergency to curb covid-19 cases ahead of the Paralympics.

Hong Kong’s Hang Seng slumped 1.8 per cent into bear market territory, now taking losses from its recent February peak to more than 20 per cent.

China’s Shanghai Composite closed 1.1 per cent lower on Friday on the moves mentioned earlier.

On the Nikkei, auto vehicle makers pressured the index lower while defensives shined. Toyota led losses tumbling 4.1 per cent after slashing global production for September by 40 per cent from its previous plan.

Nissan Motor plunged 7.3 per cent while Honda Motor lost 4.8 per cent. Toyota's affiliates Denso dived 8.8 per cent while Aisin lost 5.3 per cent. Food maker Ajinomoto, found in sports supplements as l-glutamine, rose 2.7 per cent, while Tokyo Electric Power Co rose 2.5 per cent.
 
ASX 200 loses for 5 straight days on lockdown blues

On Friday, the Australian share market closed 0.1 per cent lower at 7,461 posting their worst week since January. The local bourse continued its losing streak for the fifth day. The XJO is down 2.2 per cent on Covid-19 and commodities blues.

The biggest drags were mining giants BHP (ASX:BHP) crashing over 16 per cent for the week, Rio Tinto (ASX:RIO) tumbled 11 per cent while Fortescue Metals (ASX:FMG) closed almost 9 per cent lower for the week.

Utilities, Consumer Staples and Property were the best performers lifted over 1 per cent while Materials and Technology were the worst, down 0.6 and 1 per cent respectively.

Local and international economic outlook

This week, key indicators into our economy will take the spotlight with construction work and private sector capex scheduled in.

It kicks off today with lockdowns to drive a further decline in August business conditions PMIs.

Also Fed Chair Jerome Powell will deliver virtual remarks at the Jackson Hole at the end of the week. Mr Powell will speak about the economic outlook which will take place from Thursday to Saturday. The world’s top central bankers and economists will be there to discuss monetary and economic policy.

Reporting season

There are 11 companies slated to report today.

Altium (ASX:ALU), Ampol (ASX:ALD), Charter Hall Group (ASX:CHC), Chorus (ASX:CNU), Cooper Energy (ASX:COE), G8 Education (ASX:GEM), Michael Hill (ASX:MHJ), NIB Holdings (ASX:NHF), oOh!media (ASX:OML), Reliance Worldwide (ASX:RWC) and Sonic Healthcare (ASX:SHL).

Broker moves

Credit Suisse rates Evolution Mining (ASX:EVN) as an outperform with a price target of $4.30. The miner’s FY21 financial result was broadly as expected, with the final dividend of 5 cents per share, below the interim 7 cents per share but in line with the broker and consensus expectations.

The key update was their asset-level FY22 guidance with Red Lake guided to 155 to 165 thousand tonnes below expectation by 7 per cent, while Mt Rawdon was ahead with 75 to 80 thousand tonnes. Cowal and Ernest Henry were revealed as drivers of the 3 per cent year-on-year all-in cost increase to $1,220-1,280 per ounce.

Credit Suisse increases FY22 to 23 earnings multiple to 7.0x from 6.5x. This is to better reflect the company's 3-year average on less aggressive gold price forecasts.

The outperform rating is unchanged and the target price is lowered to $4.30 from $4.70. Shares in Evolution Mining (ASX:EVN) closed 0.75 per cent lower at $3.99 on Friday.

Ex dividend

Abacus Property Group (ASX:ABP) is paying 0.5 cents unfranked.
Aurizon Holdings Ltd (ASX:AZJ) is paying 14.4 cents 70 per cent franked.
Bailador Technology Investments (ASX:BTI) is paying 1.4 cents full franked.
Domain Holdings Australia (ASX:DHG) is paying 4 cents fully franked.
Ingenia Group (ASX:INA) is paying 5.5 cents unfranked.
Kelly Partners Group (ASX:KPG) is paying 0.363 cents fully franked.
MA Financial Group (ASX:MAF) is paying 5 cents fully franked.
Magellan Financial Group (ASX:MFG) is paying 114.1 cents 75 per cent franked.
OZ Minerals (ASX:OZL) is paying 16 cents fully franked.
Super Retail Group (ASX:SUL) is paying 55 cents fully franked.

Commodities

Iron Ore has added 5.9 per cent to US$140.44. Their futures suggest a 2.5 per cent gain.

Gold added $0.90 or 0.1 per cent to US$1784 an ounce while silver fell $0.12 or 0.5 per cent US$23.16 an ounce against a firmer dollar.

Oil has lost $1.36 or 2.1 per cent to US$62.14 a barrel as they cap off their biggest week of losses in more than nine months.

Currencies

One Australian Dollar at 7:25 AM has soften buying 71.28 US cents, 52.35 Pence Sterling, 78.23 Yen and 60.93 Euro cents.

Investor event

Please join us tomorrow, Tuesday 24 August at 12.30pm (AEST) with CEOs presenting from 5 different companies from resources to healthcare. Make your way to fnn.com.au to register for your free spot.