Dow Jones resets record high, Yellen clarifies inflation remark: ASX to edge higher


The Australian share market is to edge higher following a mixed lead from Wall St. The Dow Jones reset record highs as optimism on the reopening of the economy saw investors continue to buy into cyclical shares amid the positive company earnings results. Energy and materials shares were the best performers with financials and industrials advancing as heavyweight technology shares weighed on the market with the likes of Facebook, Amazon and Microsoft swimming in the red. Treasury Secretary Janet Yellen also clarified on her comment on interest rates yesterday saying that it wasn’t something that she was "predicting or recommending". On the data front, 742,000 new jobs were added to the economy last month which is the most since last September further adding to optimism on the labour market recovery though the U.S. services industry grew at a slightly slower pace in April as per the Institute for Supply Management dropping from its record high reading in March with hope the vaccine rollout will boost demand for services. Over the Atlantic, European markets closed higher as positive economic data and company profit results increased, as investors saw strong gains in close to two months. Meanwhile oil prices softened as gold prices lifted as investors keep an eye out for the National Australia Bank’s half year results.

Figures from around the globe

Wall Street closed mixed yesterday: the Dow Jones Industrial Average added 0.3 per cent to 34,230, the S&P 500 gained 0.1 per cent to 4,168 and the NASDAQ closed 0.4 per cent lower at 13,582 points.

European markets as mentioned before closed higher: London’s FTSE gained 1.7 per cent, Paris added 1.4 per cent and Frankfurt closed 2.1 per cent higher.

Asian markets: Hong Kong’s Hang Seng fell 0.5 per cent while Tokyo’s Nikkei and China’s Shanghai Composite were closed.

Taking all of this into equation, the SPI futures are pointing to 0.1 per cent gain.

Yesterday, the Australian share market closed 0.4 per cent higher at 7,096.

Local economic news

Today, Deputy Governor Guy Debelle is to deliver the “Monetary Policy during Covid” speech before the release of its quarterly Statement on Monetary Policy tomorrow. Despite the RBA reaffirming their stance on keeping rates steady amid the improvement in the unemployment rate, investors will be on the look-out for updates on the bank’s bond purchasing and their yield curve control program. Why this is important is that the yield curve control program indicates which level the bank wants interest rates to be as this will dictate the buying or selling of bonds to achieve it. Westpac chief economist Bill Evans believes that the bank will wait till its August meeting for an update, though expects that the yield curve control program to be brought forward to May which would see an extension of this program. That means if there is an extension, it provides investors a view on how dovish their position is. Economists also expect further quantitative easing with another tranche of between $50-$100 billion. We will find today out what their position will be around this.

In company news that broke after market close

SeaLink Travel (ASX:SLK) is set to acquire 100 per cent of the WA-based Go West Tours for $84.7 million plus an earnout component of up to $25.0 million. In addition, SeaLink will purchase strategic property assets comprising of three depots for $3.8 million. Go West is a bus operator company serving the resources sector with contracts under the WA government delivering regional public school bus services. The acquisition is expected to complete in early July this year. Shares in Sealink Travel Group (ASX:SLK) closed 1.7 per cent lower at $9.83 yesterday.

Broker Moves

Citi rates Flight Centre (ASX:FLT) as a neutral with a raised price target of $17.30 from $16.80. The upgrade from a sell is based on the broker expecting company earnings to normalise by FY25. The company’s firm liquidity enabled Citi to look through its earnings downgrades and expects profit to breakeven in the first half of FY23 rather than the second half of FY22. Shares in Flight Centre Travel Group (ASX:FLT) closed 5.39 per cent lower at $15.27 yesterday.

Ex-Div

Australian Pharmaceutical Industries (ASX:API) is paying 1.5 cents fully franked.
Jupiter Mines (ASX:JMS) is paying 2 cents unfranked.

Currencies

One Australian Dollar at 8:00 AM was buying 77.49 US cents, 55.72 Pence Sterling, 84.60 Yen and 64.52 Euro cents.

Commodities

Gold has gained $8.30 to US$1784 an ounce.
Silver has fallen $0.04 to US$26.52 an ounce.
Oil has lost $0.06 to US$65.63 a barrel.
 

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