Wall St closed, iron ore rebounds, why Webjet is a buy: ASX to fall

Market Reports

by Melissa Darmawan

The Australian share market is to open lower as US futures slipped while European markets closed in the red amid public holidays in both UK and US markets, as investors digested inflation data on a low trading day. The pan-European STOXX 600 index retreated from record highs down 0.5 per cent while the German Dax led the decline as the Deutsche Bank share price pressured the index after reports from the U.S. Federal Reserve said it was concerned about the German largest lender’s anti-money laundering controls. By the end of the day it closed 1.3 per cent lower. In the backdrop, investors had inflation figures front of mind with Germany hitting its highest rate in consumer prices since 2018, up 2.5 per cent while in Spain, it rose 2.4 per cent over the year. In Asian markets, China’s official manufacturing Purchasing Managers’ Index for May came in at 51 with a reading above 50, showing expansion. While in Japan, retail sales rose 12 per cent in April as compared with a year earlier. Meanwhile oil prices edged higher ahead of the OPEC meeting as gold prices firmed while the price of iron ore climbed 4.4 per cent.

Figures from around the globe

Wall Street was closed yesterday

European markets: London’s FTSE was closed while Paris and Frankfurt both fell 0.6 per cent.

Asian markets closed mixed: Japan’s Nikkei lost almost 1 per cent, Hong Kong’s Hang Seng gained 0.1 per cent while China’s Shanghai Composite closed 0.4 per cent higher.

ASX Futures

Taking all of this into the equation, the SPI futures are pointing to 0.4 per cent fall.

ASX 200 Monday Wrap

Yesterday, the Australian share market closed 0.3 per cent lower at 7,162 after the index hit an intra-day record of 7,203, a point not achieved since 2007. The index continued its winning streak for the 8th straight month despite the decline into the red. The index was led by Healthcare as the winning sector of the day, up 0.5 per cent while the worst performer was Energy down 1.6 per cent ahead of the OPEC meeting. The worst performing stock was analytics software company Nuix (ASX:NXL) plummeted 17.8 per cent after lowering its full-year earnings forecast while the best performing stock was Resolute Mining (ASX:RSG) gained 4.3 per cent.

Local economic news

It’s a rather big day today with the Reserve Bank Board to meet with no policy changes expected. Meanwhile CoreLogic is to release May home dwelling prices which are expected to show a 2.2 per cent rise nationally driven by Sydney tracking towards a 3 per cent rise.

The Australian Bureau of Statistics is to also release April building approvals which is expected to show a 10 per cent fall after a 17.4 per cent rise in March driven by HomeBuilder. Also due are March quarter’s business indicators and balance of payments.

Elsewhere we will see ANZ and Roy Morgan issue the weekly consumer sentiment while AIG and IHS release manufacturing index for April and May respectively.

Stockwatch

Our weekly stock to watch this week is travel booking company Webjet (ASX:WEB). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Webjet as a buy. From a technical angle, Webjet is bullish for a number of reasons.

A zone of support was held between $4.29 and $4.58 as shown by the orange rectangle during the month of May. By mid-May, a bullish doji formed, suggesting an emerging positive sentiment. Upward momentum has gathered traction over the past week, therefore it increases the probability of further upside over the near term.

Should this bullish case unfold, the next target zone will be the resistance level, as shown by the horizontal grey lines, which is seen between $6.33 and $6.44. This is made up of the 38.2 per cent and 50 per cent fibonacci retracement levels.

Adding to the bull case is the divergence between the share price and the money flow index which is shown by the blue arrows. This occurs when the share price forms a lower low, and the money flow index indicator forms a higher low. Shares in Webjet (ASX:WEB) closed 2.5 per cent lower at $5.06 yesterday.



Ex-Div

Iselect Ltd (ASX:ISU) is paying 1 cent unfranked.
NB Global Corporate Income Trust (ASX:NBI) is paying 0.6963 cents unfranked.

Currencies

One Australian Dollar at 7:40 AM was buying 77.36 US cents, 54.46 Pence Sterling, 84.79 Yen and 63.29 Euro cents.

Commodities

Iron Ore has gained 4.4 per cent to US$198.83.
Iron Ore futures suggest a 4.5 per cent gain.
Gold has added $4.20 to US$1910 an ounce.
Silver has gained $0.13 to US$28.14 an ounce.
Oil has added $0.59 to US$66.91 a barrel.

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