Wall St closes in the red as inflation jitters continue: ASX to fall

Market Reports

by Melissa Darmawan

The Australian share market is to open lower following Wall St closing in the red on continued fears around rising inflation rates on overpriced stocks. Despite the continued reassurance from the US Federal Reserve, rising commodity prices and labour shortage numbers in April played on investor's nerves. The volatile session was led by the technology sector followed by a broad-based decline, as investors pondered on the potential outcome of rising interest rates on the debt-heavy tech shares and its future earnings, ahead of inflation numbers due out tomorrow. Though in the afternoon, the race to the closing bell saw the Nasdaq rebound with investors buying back into video streaming companies with the likes of Netflix up 1.7 per cent and Amazon adding over 1 per cent leaving its technology peers in the red. Meanwhile the rally in cyclical shares linked to the reopening of the economy took a breather. On the commodities front, oil prices edged higher on the back of OPEC raising its forecast for oil demand with expectations on increased travel in the second half of the year. Amid this, fears on gas shortages continues following the cybersecurity attack on one of the largest pipelines in the US which remains non operational for the rest of the week.

Figures from around the globe

Wall Street closed lower yesterday, the Dow Jones Industrial Average lost 1.4 per cent to 34,269, the S&P 500 fell 0.9 per cent to 4,152 and the NASDAQ closed 0.1 per cent lower at 13,389 points.

European markets closed lower: London’s FTSE fell 2.5 per cent, Paris lost 1.9 per cent and Frankfurt closed 1.8 per cent lower.

Asian markets closed mixed: Tokyo’s Nikkei dropped 3.1 per cent, Hong Kong’s Hang Seng fell over 2 cent while and China’s Shanghai Composite added 0.4 per cent.

Taking all of this into equation, the SPI futures are pointing to 0.6 per cent fall.

ASX 200

Yesterday, the Australian share market closed 1.1 per cent lower to 7,097 pulling back from its record high at the start of the week. All sectors closed in the red with Consumer Staples as the only sector advancing. Following the lead from the US, technology shares dived with Afterpay (ASX:APT) tumbling 8.7 percent followed by Nearmap (ASX:NEA) down 7.8 per cent. Iron ore giants snapped their winning streak with Fortescue Metals (ASX:FMG) shedding 2.8 per cent followed by Rio Tinto (ASX:RIO) down 1.8 per cent with BHP closing lower. The standout was Woolworths (ASX:WOW) which gained 1.1 per cent after its announcement of the demerger of its beverages and hospitality division with Coles (ASX:COL) closing 0.6 per cent higher. Meanwhile, Boral (ASX:BLD) spiked up by 3.4 per cent after Kerry Stokes’ Seven Group Holdings (ASX:SVW) announced their takeover to increase their stake and board representation in the company.

Economic news

The Federal Government has unveiled its “recovery budget plan” to steer the country out of the pandemic with new funding on the table. Among the biggest winners is the aged care sector receiving an extra $17.7 billion of funding over five years, first home buyers to receive additional incentives and a rise to the voluntary contribution cap of $50,000 from $30,000 under the First Home Super Saver Scheme. On the other hand, low to middle income earners will see another tax offset of up to $1,080 in their refunds. These initiatives could boost consumer spending. On the data front, there are no economic news scheduled today.

Broker moves

Macquarie rates infant milk formula company A2 Milk (ASX:A2M) as an underperform with a target price of $5.60. The downgrade follows the company’s reduced FY21 guidance with expected revenue to be 28-31 per cent lower than last year which has changed four times. The broker expects the fourth quarter will be impacted by insufficient improvement in pricing, sales and inventory and notes excess inventory levels across their daigou and cross-border e-commerce channel. The broker believes the outlook remains uncertain and reduced its target price from $9.75. Shares in A2 Milk (ASX:A2M) closed 6.39 per cent lower at $5.71 yesterday.

Company news

Online donor management tool for churches PushPay (ASX:PPH) has released their full year results. Keep an eye out for the story today.

IPOs

Energy efficiency software company EP&T Global (ASX:EPX) is pencilled in to ring the bell at 11am today.

Ex-Div

ResMed Inc (ASX:RMD) is paying 3.50 cents unfranked

Currencies

One Australian Dollar at 7:50 AM was buying 78.45 US cents, 55.47 Pence Sterling, 85.24 Yen and 64.56 Euro cents.

Commodities

Iron Ore has lost 0.7 per cent to US$228.93.
Iron Ore futures suggest a 0.4 per cent gain.
Gold has lost $1.50 to US$1836 an ounce.
Silver has added $0.18 to US$27.67 an ounce.
Oil has gained $0.44 to US$63.66 a barrel.
 

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