S&P 500 sets fresh high on jobs report, Credit Suisse cuts Netwealth rating: ASX to open flat


The Australian sharemarket is set to open flat this morning following Wall St closing in the black on Friday on the back of a mixed job’s report for June. 

US jobs jump in 10-month to start Independence Day long weekend

There were 850,000 jobs were added in the US, stronger than expected according to the US Labour Department. These numbers showed an acceleration in the economic recovery, it’s biggest gain in 10 months.

Though other parts of the report came in soft with the participation rate steady at 61.6 per cent and the unemployment rate up 5.8 per cent from 5.9 per cent. In addition to the jobs growth, employers are desperate to hire as the economy reopens enticing prospects with higher wages in the leisure and hospitality sector. Average hourly wages rose 0.3 per cent for the month to 3.6 per cent year over year, matching expectations.

Tech shares gains as bond yields drop

The 10-year treasury yields sank 2 basis points to 1.44 per cent which helped the Technology-growth sector rise 1.4 per cent boosted by Apple, up 2 per cent and Microsoft gained 2.2 per cent. Financials and Energy both dipped 0.2 per cent.

The tech heavy Nasdaq rose 0.8 per cent at 14,639, the S&P 500 hit another record high at 0.8 per cent at 4,352 while the Dow Jones added 0.4 per cent at 34,786.

For the week, the Nasdaq stepped up 1.9 per cent, the S&P 500 rose 1.7 per cent while the Dow Jones added 1.0 per cent. On the government bond’s front, US 2-year yields dipped 3 points while the US 10-year yields fell 9 points.

Energy offset gains in Technology in Eurozone

Across the Atlantic, European markets closed mixed. Frankfurt closed 0.3 per cent higher with semiconductor provider ASM International added 2.5 per cent on news of increased demand in its second quarter. London's FTSE closed flat, at 0.03 per cent lower as Energy offset gains in Technology. Paris also closed flat, 0.01 per cent lower.

Asian markets fall on Communist party celebrations 

In Asian markets, China’s Shanghai Composite fell 2 per cent while Hong Kong’s Hang Seng dropped 1.8 per cent on the back of Chinese President Xi Jinping’s statement at the 100th anniversary of their Communist Party. President Jingping said foreign forces won't "bully, apprise or subjugate us". In Japan, the Nikkei added 0.3 per cent.

Iron ore futures, gold rise on steady oil price 

BHP and Rio Tinto both rose 0.4 per cent in London trade with the iron ore futures pointing to a 1.7 per cent gain.

Crude oil is largely unchanged trading $0.07 lower at US$75.16 a barrel. While gold is trading $6.50 higher at US$1783.30 an ounce and silver is trading $0.40 higher at US$26.50 an ounce.

ASX 200

On Friday, the Australian sharemarket closed 0.6 per cent or 43 points higher at 7,309 buoyed by global oil prices. Crude oil climbed to a near three-year high on signs that producers of oil exporting countries could increase output slower than expected in coming months. Energy stocks led the gains on Friday added 1.8 per cent with Australia’s largest oil and gas production operator Woodside Petroleum (WPL) gained 3 per cent. Technology was the worst performer, shed 0.1 per cent.

A couple of standouts was IDP Education (ASX:IEL) jumped 17.1 per cent following news of the language testing company inking a deal on a major acquisition. The language testing and student placement company is set to acquire 100 per cent of Indian International English Language Testing System operations for $240 million. The deal means that Melbourne based provider IDP Education is set to be the sole distributor of english language testing in India.

Biotech company Alterity Therapeutics (ASX:ATH) soared 30 per cent after it was granted a new composition of matter patent by the US Patent and Trademark Office. The patent secures a monopoly over a new class of iron chaperones, a technology that allows for the redistribution of excess iron in the central nervous system.

Over the week, the local bourse closed flat at 0.01 per cent or 6 points higher.

Local economic outlook

This week, the RBA’s July board meeting will take the limelight on Tuesday. The Board has given us the head’s up around making changes to the 3-year government bond yield target and bond buying program so investors will be keen to watch this space.

On the data front, today the Australian Bureau of Statistics is to release the retail sales and building approvals for May. Westpac group economists expect a 0.1 per rise in retail sales and a 10 per cent drop in building approvals.

Lockdown effects saw Victoria record a 1.5 per drop despite panic buying ahead of the 14-day lockdown in June with food retail sales up 4 per cent in the State.

In April, building approvals saw a 8.6 per cent fall, a pull-back from a high starting point up around 60 per cent since mid-2020. The flow on effect from the HomeBuilder scheme and the lag time between contract signing to construction is uncertain. Even with a 10 per cent drop, approvals would be 30 per cent above pre-pandemic levels.

The Melbourne Institute inflation gauge and the ANZ job advertisements for June are also due today.

Earnings season

Netwealth (ASX:NWL) is set to release a quarterly update on Thursday.

International economic outlook

Overseas, US Federal Reserve Open Market Committee’s meeting minutes for June will be the focus while China’s inflation figures are due on Friday.

Wall St is closed due to Independence Day so we will look to European markets for our lead tomorrow.

Broker moves

Credit Suisse downgrades Netwealth (ASX:NWL) to a sell with a price target of $16. The company’s share price has soared 25 per cent over the last quarter and therefore lowered its rating solely on valuation grounds. Due to this, the target price rises to $16 from $14.40. The wealth platform provider continues to attract significant flows and grow market share which expects it will continue. On Friday, Netwealth Group (ASX:NWL) closed 2.99 per cent lower at $16.25.

IPOs

There are 13 companies set to arrive on the ASX this week. Today Lumos Diagnostics Holdings (ASX:LDX) and OZZ Resources (ASX:OZZ) are slated.

On Tuesday, we have companies pencilled in Butn (ASX:BTN), Gold 50 (ASX:G50) Resource Base (ASX:RBX) and Monger Gold (ASX:MMG). On Wednesday there are two companies scheduled, Askari Metals (ASX:AS2) and Burley Minerals (ASX:BUR).

On Thursday, Charger Metals (ASX:CHR), Pacgold (ASX:PGO) and DRA Global (ASX:DRA) and Silk Logistics (ASX:SLH) are set to debut. Friday sees Locksley Resources (ASX:LKY) pencilled in.

Ex-dividends

Two companies are going ex-dividend today. Clime Capital (ASX:CAM) is paying 1.25 cents fully franked. Morphic Ethical Equities Fund is paying 2.5 cents fully franked.

Currencies

One Australian dollar at 7am this morning was buying 75.25 US cents, 54.43 Pence Sterling, 83.56 Yen and 63.46 Euro cents.

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