Struggles on Wall St as World Bank says 1% inflation hike, Citi says holds NAB as Ords buy Whitehaven: ASX to edge higher


The Australian sharemarket is set to edge higher following Wall St’s almost flat close to the session. US stocks see-sawed as investors struggled for direction on a resurging economic recovery against signs of an inflation hike, as pent-up demand continues to pressure the supply chain.

The S&P 500 followed a similar pattern to yesterday’s trade to close about flat. The index dropped almost 0.4 per cent after it rose to its second highest intraday level on record earlier in the session. The Dow Jones edged lower while the tech heavy Nasdaq firmed up.

Consumer discretionary took the spotlight on the S&P 500 up 0.96 per cent as companies that rely on direct consumer spending just outperformed the Utilities sector. Energy companies rose as the price of oil jumped over 1 per cent on news that if US and Iran are to reach a deal, sanctions would be in place restricting oil supply in the near term.

Financials recovered from an earlier slide and closed in the red as bond yields. Government bond yields provide a benchmark for bank lending.

The World Bank raised its outlook for global growth this year to 5.6 per cent due to Covid-19 vaccines and government stimulus marking the fastest worldwide expansion in nearly five decades.

The World Bank also noted risks with rising inflation pressures and said that it’s likely one percentage point will be added to global inflation rate this year. Investors have been navigating through volatile markets on inflation concerns as they await further figures in tomorrow’s trade.

Figures from around the globe

Wall Street was closed mixed yesterday: The Dow Jones Industrial Average fell 0.1 per cent to 34,600, the S&P 500 added 0.02 per cent to 4227 and the NASDAQ closed 0.3 per cent higher at 13,925 points.

European markets closed mixed: London’s FTSE added 0.3 per cent, Paris gained 0.1 per cent and Frankfurt closed 0.2 per cent lower.

Asian markets closed lower: Tokyo’s Nikkei fell 0.2 per cent, Hong Kong’s Hang Seng lost 0.02 per cent while China’s Shanghai Composite closed 0.5 per cent lower.

ASX futures

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

ASX 200 - Tuesday wrap up

Yesterday the Australian sharemarket closed 0.2 per cent higher at 7,293 after the index touched fresh highs intra-session. Information technology sector was the top performer, up 1.5 per cent for its second straight day following lead to its US counterpart.

Gains in Property, Healthcare, Energy, Utilities and Industrials offset losses in Materials and Consumer Staples. Gold miners rose with the likes of Northern Star Resources (ASX: NST) added 1.1 per cent following the surge in gold prices.

The best-performing stock in the S&P/ASX 200 was Mesoblast (ASX:MSB) spiked 8.8 per cent while the worst-performing stock was Collins Foods (ASX:CKF) fell 2.6 per cent with no major company news released for both.

Local economic news

Today Westpac and Melbourne Institute is set to publish their monthly consumer confidence survey and the Reserve Bank Assistant Governor Christopher Kent is pencilled in to deliver an online speech on Wednesday at 9.30am (EST).

In May, consumer sentiment index fell 4.8 per cent in May but remains the second-highest result in 11 years. Economists expect sentiment in June to be dampened by the 14-day snap lockdown in Victoria. Despite this, rising house prices, stronger job market and the new record high’s on the local sharemarket are factors which are likely to remain supportive.

Broker moves

Ord Minnett rates Whitehaven Coal (ASX:WHC) as a buy with a price target of $3. The broker noted the company had been oversold due to a series of broker downgrades. With the escalating price of thermal coal, the broker believes the company now provides a buying opportunity and upgrades its rating and target price from $1.90 to $3. The broker has also made several financial model changes which include upgrading coal price forecasts in FY22 by 42 per cent to US$86 a ton. Spot prices are at US$124 a ton, and the annual Japanese benchmark was recently set at US$109 a ton compared to FY22 consensus of US$75 a ton. Whitehaven Coal (ASX:WHC) closed 3.67 per cent higher at $1.84 yesterday.

Citi rates National Australia Bank (ASX:NAB) as a hold with a price target of $26.25. The broker believes the Austrac's investigation into money laundering is borne out of frustration and is not as significant compared to prior matters with CBA or Westpac. As part of their remediation efforts, the bank has spent over $800 million over four years. Given the bank is still reporting problems, Citi suggests Austrac will unlikely give NAB a penalty though further investigation could lead to further costs. National Australia Bank (ASX:NAB) closed 0.49 per cent higher at $26.77 yesterday.

Currencies

One Australian Dollar at 7:40 AM was buying 77.39 US cents, 54.69 Pence Sterling, 84.74 Yen and 63.56 Euro cents.

Commodities

Iron Ore has gained 3.5 per cent to US$209.50.
Iron Ore futures suggest a 4.1 per cent gain.
Gold has lost $4.40 to US$1894 an ounce.
Silver has fallen $0.29 to US$27.73 an ounce.
Oil has gained $0.82 to US$70.05 a barrel.
 

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