Wall St gains, US jobs data looms ahead, Ords say hold CBA, why Utilities fell 25% in 12 mths: ASX to edge higher

Market Reports

by Melissa Darmawan

The Australian share market is set to edge higher following Wall St’s advance on Friday. The S&P 500 eked up to close its fourth straight positive month while the Dow Jones notched its first weekly gain in three weeks, as the indexes shrugged off a stronger than expected inflation reading. The core personal consumption expenditures price index rose 3.1 per cent in April compared to a year ago, at a faster pace than expectations of a 2.9 per cent jump. US treasury yields fell despite the inflation gauge posting its largest annual gain since July 1992. For the week, oil rose over 4.3 per cent while iron ore fell over 5.3 per cent. On the precious metals front, gold added over 1.5 per cent while the Aussie dollar dipped against the greenback.

Figures from around the globe

Wall Street closed higher on Friday: The Dow Jones Industrial Average gained 0.2 per cent to close at 34,529 the S&P 500 added 0.1 per cent to close at 4,204 and the NASDAQ closed 0.1 per cent higher at 13,749.

European markets closed higher on Friday: London’s FTSE added 0.04 per cent, Paris gained 0.8 per cent and Frankfurt closed 0.7 per cent higher.

Asian markets closed mixed on Friday: Japan's Nikkei gained 2.1 per cent, Hong Kong’s Hang Seng added 0.04 per cent and China’s Shanghai Composite closed 0.2 per cent lower.

ASX futures

Back home, the SPI futures are pointing to a 0.1 per cent gain.

ASX 200 weekly wrap

Last Friday, the Australian share market closed 1.2 per cent higher at 7,180. Over the week, it closed 2.1 per cent higher and is on track to notch its eight straight month of gains, on the basis it doesn't drop over 2 per cent today. Recent comments from the US Federal Reserve eased concerns of rising inflation and kept treasury yields steady as investors shifted their focus to reopening stocks, so companies that benefit from the reopening of the economy. As you can see, Over the last 12 months, Consumer Discretionary has soared 41.9 per cent followed by Financials with Information Technology and Materials both coming in at 31.2 per cent. Utilities have lagged, down 25.5 per cent. Whilst Investors have toyed with this defensive sector that generally pays strong dividends, with bond yields rising, these steady income stocks may be under pressure. Investors are in a pendulum to pick which investment will provide their returns in the defensive space, which is either the safe-haven treasury bonds or a listed company when it comes to where they put their faith in. Now to the standouts from last week. The best performing stock last week was wealth platform provider Hub 24 (ASX:HUB) climbed 18.5 per cent with no major company announcements to market while the worst performing stock was Costa Group (ASX:CGC) plummeted 21 per cent following the company’s AGM. Despite its positive performance during the first half, it was below market expectations.

Local economic outlook

The focus this week is the March quarter GDP figures on Wednesday marking a year since the economy started its path into a recession. Also the Reserve Bank is set to meet on Tuesday with no policy or rate changes expected.

It kicks off today with the private sector credit data from the Reserve Bank expected to show a 0.4 per cent rise in April driven by accelerating housing credit. Also the Melbourne Institute’s monthly inflation gauge is due. It’s a rather big day of economic data for Tuesday. CoreLogic is to release home dwelling prices while the Australian Bureau of Statistics is to release April building approvals as well as March quarter’s business indicators and balance of payments. Elsewhere ANZ and Roy Morgan are set to issue the weekly consumer sentiment while AIG and IHS release manufacturing index for April and May respectively. On Thursday the ABS will publish the final international trade report for April while on Friday April lending indicators are due.

International economic outlook

On the momentum of a locally jammed pack week, the focus abroad is the employment figures in the US on Friday along with the manufacturing and services indexes on Thursday.

The May US labour market update is anticipated to show a rise of 800,000 jobs and unemployment falling to six per cent as per Westpac bank economists. Meanwhile the manufacturing and services indexes are expected to remain strong in excess of 60 on the backdrop of high price pressures, with any reading of 50 signaling expansion. On Tuesday, OPEC is due to meet which will dictate supply, production and oil price indications going ahead as well as talks on the US-Iran nuclear deal. Across the Atlantic, Eurozone’s unemployment figures for April along with inflation data for May are due.

Public holiday calendar

It’s a public holiday in both the US (Memorial Day) and in the UK (Bank holiday) today so the European and Asian markets will be our focus tomorrow morning.

Mini earnings season comes to an end 

WorleyParsons (ASX:WOR) pencilled in their investor day on Wednesday while Wesfarmers (ASX:WES) slated Thursday for their strategy day.

IPOs

On Tuesday Lunnon Metals (ASX:LM8) is set to make their debut while on Wednesday, Keypath Education International (ASX:KED) is expected to stage their arrival with a market capitalisation of over $770 million after raising $212.5 million at $3.71 per share underwritten by Macquarie. The global tech education company runs online university courses and is partnered with 32 universities across Australia, North America, Britain and Malaysia. On Thursday, Torque Metals (ASX:TOR) is scheduled in.

Broker moves

Ord Minnett rates Commonwealth Bank (ASX:CBA) as a hold with a price target of $91. The broker believes the bank has a meaningful advantage over peers in both digital facing and back-bone technology to sustain competitive advantage and drive faster revenue growth. Even so, the bank’s absolute valuation looks stretched and Ord Minnett retains its hold recommendation with a $91 target price. Shares in Commonwealth Bank (ASX:CBA) closed 1.61 per cent higher at $100.56 on Friday.

Morgans rates Costa Group (ASX:CGC) as a downgrade to hold from add with a price target of $3.54. The downgrade from add followed the fruit and vegetable grower’s June half-year performance to be marginally ahead of the last year. As this guidance was below expectations along with other factors, this prompted the broker to lower the rating. The target price falls to $3.54 from $5.03. Shares in Costa Group Holdings (ASX:CGC) closed 1.78 per cent lower at $3.31 on Friday.

Credit Suisse rates Fisher & Paykel (ASX:FPH) as a downgrade to neutral from outperform with a target price of $30. Following the company’s FY21 results, the broker has lowered its earnings estimates for FY22-23 as uncertainty is expected over the next six months as outlined by management. The broker notes that demand is linked to covid-related cases in hospitals where there has been insufficient evidence to illustrate sustained use of respiratory products outside of covid-19 patients. Shares in Fisher & Paykel Healthcare Corp (ASX:FPH) closed 1.72 per cent lower at $27.46 on Friday.

Ex-dividend

Fat Prophets Global Contrarian Fund Ltd (ASX:FPC) is paying 3 cents fully franked.
Incitec Pivot (ASX:IPL) is paying 1 cent fully franked.
MCP Income Opportunities Trust (ASX:MOT) is paying 0.92 cents unfranked.
MCP Master Income Trust (ASX:MXT) is paying 0.76 cents unfranked.
Orica Limited (ASX:ORI) is paying 7.5 cents unfranked.
Partners Group Global Income Fund (ASX:PGG) is paying 0.6833 cents unfranked.
WAM Capital Limited (ASX:WAM) is paying 7.75 cents fully franked.
WAM Global Limited (ASX:WGB) is paying 5 cents fully franked.

Currencies

One Australian Dollar at 7:45 AM was buying 77.17 US cents, 54.39 Pence Sterling, 84.77 Yen and 63.29 Euro cents.

Commodities

Iron Ore has gained 0.4 per cent to US$190.51.
Iron Ore futures suggest a 3.76 per cent gain.
Gold was up $6.80 to US$1905 an ounce.
Silver has added $0.07 to US$28.01 an ounce.
Oil was down $0.53 to US$66.32 a barrel.