US stocks tread water ahead of inflation figures, Why Altium is a buy: ASX to open flat


The Australian sharemarket is set to open flat this morning following Wall St closing in the red. The three indexes slipped at the close as the market continued to trade in a narrow range, ahead of inflation figures due out tomorrow.

The S&P 500 was dragged down by Financials and Materials as the worst performers with Utilities as the biggest gainer followed by Healthcare and Real Estate. Health care was propped up by pharmaceutical company, Merck added 2.3 per cent after the medical giant inked a US$1.2 billion supply deal for its Covid-19 pill with the US government.

The index struggled to find direction over the past few sessions, as investors ponder on the inflation readings to determine if the hotter than usual inflation figures are transitory or if the central bank are behind the curve. Yesterday, China’s inflation gauge rose above economist’s expectations.

The tech-heavy Nasdaq was boosted by megacap tech shares with Amazon added 0.6 per cent while Microsoft lifted by 0.4 per cent.

Treasury yields slipped as the banks continued to decline with the likes of Bank of America and JP Morgan, down over 1.2 per cent. A fizzle in talks on infrastructure spending between President Joe Biden and a Republican senator could have contributed to the fall in yields as traders position themselves for a large auction of 10-year notes.

Across the Atlantic, investors await the meeting of European central bank while BHP and Rio Tinto dropped over 2 per cent despite the rise in iron ore prices. Elsewhere, price of gold firmed while oil remains flat.

Figures from around the globe

Wall Street closed lower yesterday: The Dow Jones Industrial Average lost 0.4 per cent to 34,447. The S&P 500 fell 0.2 per cent to close at 4220. The Nasdaq closed over 0.1 per cent lower at 13,912.

European markets closed mixed, London’s FTSE lost 0.2 per cent, Paris added 0.2 per cent and Frankfurt closed 0.4 per cent lower.

Asian markets closed mixed, Tokyo’s Nikkei lost 0.4 per cent, Hong Kong’s Hang Seng fell 0.1 per cent and China’s Shanghai Composite closed 0.3 per cent higher.

ASX futures

Taking all of this into equation, the SPI futures are pointing to a 0.04 per cent fall.

ASX 200

Yesterday, the Australian sharemarket closed 0.3 per cent lower at 7,270, as the index hit record highs before pulling back on China’s inflation news amid disappointing local economic data. In early trade, the index touched 7,335 till investors switched gears into buying Utilities and Materials stocks which were the biggest gainers.

China’s factory gate inflation price rose at its fastest pace since September 2008. Their producer price index, which reflects the prices that factories charge wholesalers for their products rose nine per cent from a year earlier. Meanwhile China’s official consumer price index rose 1.3 per cent in May from last year. On the local front, Westpac’s consumer confidence fell 5.2 per cent which was more than expected.

The best-performing stock was Brickworks (ASX:BKW) spiked 11.3 per cent as the company announced a $100 million revaluation profit within its Joint Venture Industrial Property Trust.

The worst-performing stock was Altium (ASX:ALU), down 7.5 per cent as investors mull on the rejected Autodesk proposal the other day.

Local economic news

The Melbourne Institute will issue the consumer inflation expectations for June. This survey measures the percentage that consumers expect the price of goods and services to change during the next 12 months.

In May expectations rose to 3.5 per cent from 3.2 per cent.

IPOs

Argenica Therapeutics (ASX:AGN) & Salter Brothers Emerging Companies (ASX:SB2) are scheduled to make their debut on the ASX today.

Broker moves

Citi rates Altium (ASX:ALU) as a buy with a price target of $33.50. The broker believes the takeover offer from US based Autodesk is recognising the value of bringing design, parts and manufacturing together on the Altium 365 platform. The bid price of $38.50 is considered opportunistic, given the broker's view that Altium is nearing the end of the pandemic-induced downgrade cycle with demand expected to accelerate over the course of the year. Citi also suspects that Altium’s electronic design capabilities could be attractive for other electronic design peers. Shares in Altium (ASX:ALU) closed 7.5 per cent lower at $34.30 yesterday.

Credit Suisse rates Woolworths (ASX:WOW) as a sell with a price target $37.98. The broker assessed the de-merger of the retail liquor & hotels business, Endeavour Group as an important catalyst for Woolworths and removed the business from its forecast from FY22 onwards. The rating is downgrade in rating is mainly on valuation lowered its target price to $37.98 from $38.05. Credit Suisse notes that Endeavour Group has a varied profit history and reinvestment rates have been much lower than Woolworths supermarkets, while the hotels have received higher levels of investment despite achieving low returns. Shares in Woolworths Group (ASX:WOW) closed 1.89 per cent lower at $42.63 yesterday.

Currencies

One Australian Dollar at 7:45 AM was buying 77.33 US cents, 54.78 Pence Sterling, 84.75 Yen and 63.49 Euro cents.

Commodities

Iron Ore has gained 1.5 per cent to US$212.67.
Iron Ore futures are pointing to 1.02 per cent gain.
Gold has gained $1.10 to US$1896 an ounce.
Silver has added $0.27 to US$28.00 an ounce.
Oil was down $0.09 to US$69.96 a barrel.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.