Wall St closed, European manufacturing soars to 15-year high, Why Monadelphous is bullish: ASX to rise ahead of RBA meeting


The Australian sharemarket is set to rise with the SPI futures pointing to a 0.2 per cent or 14 point gain. Wall St was closed on Monday as the nation celebrates Independence Day, so today we look to European markets for our lead.

European manufacturing soars, UK to live with virus

The Stoxx 600 added 0.3 per cent at 458 but dipped by 0.2 per cent in early trade after investors digested business activity data. The activity reading showed the manufacturing and services sector grew at its fastest pace in 15-years amid the easing of restrictions around the region. Banks were the best performer, gaining 1.7 per cent followed by Industrials, and Travel and Leisure stocks.

Paris CAC edged 0.2 per cent higher at 6,568 after Health Minister Olivier Veran urged people of France to get vaccinated against Covid-19. He said the country might be heading towards a fourth wave of Covid-19 cases due to the highly infectious Delta-variant.

London’s FTSE added 0.6 per cent at 7,165 ahead of Prime Minister Boris Johnson’s press conference where he sets out plans to lift restrictions and reopen the economy. Travel stocks rose ahead of the announcement.

UK’s fourth largest supermarket chain Morrisons soared 11.6 per cent after Apollo Global Management announced its interest in buying the supermarket chain. The news came after its board recommended shareholders approve a £6.3 billion takeover offer from Fortress Investment Group.

China targets ride-sharing Didi amid wider data crackdown

In Asian markets, China’s Shanghai Composite added 0.4 per cent while Hong Kong’s Heng Seng fell 0.6 per cent after the Chinese Communist Party pledged continued policy support for its growing technology sector while probing in on US-listed Chinese-base companies.

Investors reacted by dumping Chinese tech stocks in Hong Kong by sending shares of SoftBank Group, a backer of both ride-sharing Didi and Full Truck to a seven-month low in Tokyo. Japan’s Nikkei lost 0.6 per cent.

Mining giants and gold rise, OPEC cancels meeting

In commodities, BHP and Rio Tinto both added 1.4 per cent. Iron ore futures point to a 3.5 per cent rise. Safe haven gold is trading $8.70 higher at US$1,792 an ounce while silver is trading 10 cents higher at US$26.60 an ounce.

Crude oil is trading $1.20 higher at US$76.36 a barrel after OPEC+ called off its meeting without a deal. OPEC were scuttled by the United Arab Ermirates which blocked a plan to lift production from the second half of the year and beyond. This left investors concerned about tight supplies versus demand.

ASX 200 - Mon wrap

Yesterday, the Australian sharemarket closed flat at 0.09 per cent at 7,315 as investors held back on the eve of the RBA meeting. Sydney Airport (ASX:SYD) took off with a surge of 34 per cent to $7.78 after a $22.3 billion offer from a conglomerate of investors.

On the sector front, Industrials, Energy and Utilities advanced while Consumer Staples and Property closed flat. Technology was the worst performer shed 1 per cent.

Woodside (ASX:WPL) rose 2.8 per cent to $23.60 while Santos (ASX:STO) added 2 per cent to $7.27. The big four banks fell by less than one per cent while the mining giants closed mixed. BHP (ASX:BHP) lost 0.2 per cent to $48.45, Fortescue (ASX:FMG) added 0.5 per cent to $23.69 while Rio Tinto (ASX:RIO) notched up 0.3 per cent to $126.13.

Local economic news

Today the Reserve Bank is to meet today with eyes on what the policymaker will announce. The Board has given us the head’s up around making changes to the 3-year government bond yield target and bond buying program

On the data front, ANZ and Roy Morgan are to issue the weekly consumer confidence survey. Sentiment has taken a dip due to the pockets of Covid-19 cases flaring up around the country.

The Australian Bureau of Statistics is set to issue the weekly payroll jobs and wages figures for the fortnight to 19 June. Payrolls dropped in early June due to Victoria’s lockdown.

Stock watch

Our weekly stock to watch this week is Monadelphous Group (ASX:MND). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates construction engineering company Monadelphous Group as a buy. From a technical angle, Monadelphous is bullish for several reasons.

Taking a step back, the share price has declined by almost 40 per cent. This is measured from the December 2020 high of $15.55 down to the June 2021 low of $9.37. Breathing a sigh of relief, support held at the 78.6 per cent Fibonacci retracement of $9.43 which is indicated by the horizontal blue line in mid-June. A bullish doji also formed, which is indicative of seller exhaustion.

The current month of July has seen additional buying support come through. This is a positive development, and suggestive of higher levels to follow over the coming weeks.

Should this ideal scenario unfold, then the next upside target zone is expected between $12.17 and $12.46 as illustrated by the orange rectangle. This area of resistance is made up of the 78.6 per cent which is seen by the horizontal green line and 50 per cent Fibonacci retracement level, horizontal grey line respectively.

Lastly, the MFI 'money flow index', which measures the inflow and outflow of money into an asset over a certain time period, by taking into account both price and volume.

This oscillator has risen from oversold territory which you can see in the purple line on the lower pane signalling momentum to be biased to the upside.

Shares in Monadelphous Group closed 1.3 per cent higher at $10.48 yesterday.



IPOs

Today we have companies pencilled in to arrive on the ASX including fintech credit provider Butn (ASX:BTN), Gold 50 (ASX:G50) Resource Base (ASX:RBX) and Monger Gold (ASX:MMG).

Ex div

One company is going ex-dividend today. Ricegrowers (ASX:SGLLV) are paying 33 cents fully franked.

Currencies

One Australian dollar at 7am this morning was buying 75.34 US cents, 54.45 Pence Sterling, 83.62 Yen and 63.52 Euro cents.
  

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