Wall St mixed as microchips shine, Why a kick-down in Collins Foods' rating: ASX to fall


The Australian sharemarket is set to fall with the SPI futures pointing to a 0.1 per cent drop following Wall St’s mixed performance as investors digest the positive jobs report.

The S&P 500 closed at a record high, up 0.1 per cent to 4,298, the Dow Jones added 0.6 per cent to 34,503 while the Nasdaq shed 0.2 per cent to 14,504.

Jobs rose ahead of Friday figures

Cyclical stocks rose as private payrolls rose 692,000 jobs in June beating economist’s expectations, as the reopening of the economy saw job growth in the leisure and the hospitality space. Though its pace is slower than it was in May as businesses scramble to find workers.

Elsewhere, Chicago purchasing managers index came in below expectation for June though numbers showed some growth at 66.1.

Technology fell, microchips shine, bond yields dip

Growth stocks like Technology fell 0.1 per cent on the S&P 500 despite treasury bond yields slightly dipping by 0.01 per cent to 1.47 per cent. Real Estate was the worst performer down 0.8 per cent while the winner was Energy, added 1.3 per cent followed by Consumers Staples, up 0.7 per cent.

The S&P 500 has rallied over 16 per cent year to date as the economy continues to recover. Inflation worries have eased though it’s had quite a bit of attention over the quarter which has seen the Technology sector fare well. Considered shares in this space are growth stocks, its performance tends to do well when inflation is low as its profit margins aren’t likely to be squeezed.

The microchip space continues to make headlines due to the global shortage due to the Covid-19 pandemic. Microchips are used in almost every electronic device we use. As people work from home and technology is heavily relied on, the semiconductor space will continue to get some attention. On that, Advanced Micro Devices rose 5 per cent while Micron Technology added 2.5 per cent.

Flexible monetary policy keeps optimism high

Across the Atlantic, European markets closed lower. London's FTSE lost 0.7 per cent dragged down by Technology, down 0.2 per cent and Financials shed 0.6 per cent. Paris closed 0.9 per cent lower while Frankfurt dropped 1.02 per cent.

In Asian markets which closed mixed. Japan's Nikkei dipped 0.1 per cent lower, Hong Kong's Hang Seng shed 0.6 per cent while China's Shanghai Composite closed 0.5 per cent higher as Technology led while their central bank said they will make their monetary policy flexible and appropriate.

Gold and oils rise, iron ore futures up

On the precious metals front, gold edged up by $8 to US$1771.60 an ounce ahead of the jobs news on Friday. While silver is trading 29 cents higher at US$26.19 an ounce.

Crude oil added 49 cents higher at US$73.47 a barrel on data showing that supply was shrinking.

In the iron ore space, BHP and Rio Tinto fell over 1 per cent in London trade. Its futures are pointing to a rise of 1.1 per cent..

ASX 200 - EOFY Wed wrap up

Yesterday, the Australian sharemarket closed 0.2 per cent higher at 7,313 to close the end of financial year on a rather high note. The index continued its winning streak for its ninth straight month. Over the financial year, the local bourse soared 24 per cent, its best rally in 34 years. The All Ordinaries, with a longer history, had its best run in 34 years.

To the best and worst performers, Communications sector jumped 2.7 per cent with Telstra (ASX:TLS) up 4.5 per cent to $3.76 on news they sold a 49 per cent interest in Telstra InfraCo Towers to a conglomerate which consists of Future Fund, Commonwealth Superannuation Corporation and Sunsuper.

The worst-performing sector was Utilities, down 3.24 per cent as AGL (ASX:AGL) pressured the sector, tumbled 10 per cent to $8.20 after the $5.7 billion company announced their plans to create two separate ASX listed companies.

The outperforming stock was Iluka Resources (ASX:ILU) rose 11.72 per cent at $9.15 while the outlier of the session was troubled data provider Nuix (ASX:NXL) sunk 13 per cent at $2.21. They confirmed the corporate watchdog ASIC is investigating former chief financial officer Stephen Doyle and his family members.

Local economic news

Today is a big day of data. CoreLogic for June is expected to show a strong gain of 2 per cent with Sydney dwelling prices up to near 2.5 per cent.

A widened surplus of around $10 to 10.5 billion is forecast by economists when the Australian Bureau of Statistics release the international trade data. They have also pencilled in the May quarter job vacancies.

Also keep an eye out for the purchasing manager indexes for manufacturing from AI Group and IHS today.

Broker moves

Morgans downgrades Collins Food (ASX:CKF) to a hold with a price target of $12.82. Following the company’s FY21 result, Morgans' earnings forecasts are broadly unchanged. The broker believes the FY22 growth for KFC Australia will be more modest after effectively delivering two years of growth in FY21.

With the stock now trading within 10 per cent of the target (lowered to $12.82 from $13.38), they have lowered its rating from a buy to a hold.Shares in Collins Foods (ASX:CKF) closed 4.3 per cent lower at $11.47 yesterday.

Ex-dividends

Magellan Global Fund (ASX:MGF) is paying 3.66 cents unfranked, Metcash (ASX:MTS), is paying 9.5 cents fully franked and Pengana Private Equity Trust (ASX:PE1), is paying 2.5 cents unfranked.

Currencies

One Australian dollar at 7am was buying 75 US cents, 54.25 Pence Sterling, 83.34 Yen and 63.27 Euro cents. 

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