Wall St closes lower on growth worries, Why Michael Hill is a hold: ASX to fall


The Australian sharemarket is set to dip with the SPI futures pointing to a 0.7 per cent fall. Wall St closed in the red as investors grew cautious on the outlook of the economic recovery, sending bond yields to fall.

Profit taking on economic recovery worries 

The S&P 500 index fell 0.9 per cent to 4,321 a day after it hit its eighth all-time high in nine sessions. The Dow Jones Industrial Average fell 260 points or 0.8 per cent to 34,422 and the Nasdaq closed 0.7 per cent lower at 14,560 snapping a three-day run of posting record highs.

Across the sectors, the sea of red was across the board with Industrials as the only sector to edge 0.06 per cent higher. Technology, banks and Materials accounts for the majority of the sell-off.

Plunge in treasury yields

The yield on the 10-year Treasury note fell to 1.29 per cent, the lowest level since February, after slipping to 1.32 per cent yesterday. It dipped as low as 1.25 per cent. The 10-year treasury, which is the benchmark yield is used to set rates on mortgages and other loans, has been on a steady decline in recent weeks as investors shift money into bonds. The 10-year yield traded as high as 1.74 per cent at the end of March.

Jobless claims rises by surprise

The weekly jobless claims, so the number of people filming for unemployment benefits rose unexpectedly last week despite figures showing the economy and the job market to be on the rebound.

Thursday’s report from the Labor Department showed that jobless claims increased by 2,000 to 373,000. Weekly applications, which generally track the pace of layoffs, have fallen steadily this year from more than 900,000 at the start of the year.

Europe revises inflation target,  UK slides as banks & miners weigh

Across the Atlantic, the sea of red transcends. Paris fell over 2 per cent, Frankfurt closed 1.7 per cent lower and London’s FTSE closed 1.7 per cent lower dragged down by major banks, miners and homebuilders. Lloyds Banking Group dropped 2.5 per cent after receiving a fine of £91m by the Financial Conduct Authority for misleading customers over an eight year period.

UK data showed less homes were up for sale and buyer demand slowed down ahead of the end of a tax break in September. Homebuilder Persimmon tumbled 4.8 per cent and was the third biggest pressure on the index despite reporting higher half-year revenue. The company also said it expected housing demand to remain robust.

The European Central Bank revised its inflation target to 2 per cent and said it would allow consumer prices to overshoot when deemed necessary.

Asian markets decline

The sea of red was surrounded around Asian shares, which also closed lower on China’s crackdown on technology companies and Tokyo's state of emergency lowered optimism.

Hong Kong’s Hang Seng was dropped 2.9 per cent pressured down by heavy losses in the tech space. The Shanghai Composite fell 0.8 per cent while Japan's Nikkei lost 0.9 per cent.

Crude oil and gold gains, iron ore falls

In commodities, China stepped up efforts to curb skyrocketing raw material costs and emissions. BHP (ASX:BHP) fell 1.5 per cent while Rio Tinto (ASX:RIO) dropped 2.8 per cent on the FTSE. The iron price lost 1.9 per cent to US$218.04. Its futures point to a 2.6 per cent fall.

Gold has gained $0.70 to US$1803 an ounce while Silver has fallen $0.13 to US$26.00 an ounce.

Oil was up $1.04 to US$73.24 a barrel after US crude inventories fell by 6.9 million barrels last week to 445.5 million barrels according to US government data.

ASX 200 - Thurs wrap

Yesterday, Australian sharemarket continued to climb for its second straight day to close 0.2 per cent or 14.5 points higher at 7,341 led by the Technology bulls.

Afterpay (ASX:APT) leapt 3 per cent on reports of Swedish buy-now-pay-later competitor Klarna taking a 4 per cent stake in rival Zip Co (ASX:Z1P) which soared 13.7 per cent rubbing off on its larger rival, taking home first as the best performer. The worst-performing stock was Magellan Financial Group (ASX:MFG) closing 3.9 per cent lower at $51.73.

In other news, Kerry Stokes Seven Group Holding (ASX:SVW) takeover bid with Boral (ASX:BLD), the building and materials company closed 0.2 per cent lower at $7.39 as Seven Group’s interest crept over 41 per cent with the takeover bid set to close on the 15 July. Seven West Holdings (ASX:SWM) closed 1.2 per cent lower at $0.405 after trading as high as 4.8 per cent intra-day.

Sydney Airport (ASX:SYD) rose 2.9 per cent on speculation that Macquarie Group (ASX:MQG) is canvassing interest from potential partners in a rival takeover bid for the airport operator.

Broker moves

Citi rates Michael Hill (ASX:MHJ) as a hold with a price target of $0.93. The broker sees downside risk for upcoming trading updates for store based retailers from recent lockdowns. The outlook sees retailers cycling strong comparatives from their prior corresponding period along with reduced disposable income given the ending of the government stimulus.

Citi believes Michael Hill International is leveraged to the improving housing cycle and has a strong balance sheet which could support a merger and acquisition offer. The analyst forecasts FY21 core profit to increase by 186 per cent to $43m.

Shares in Michael Hill International (ASX:MHJ) closed 4.09 per cent lower at $0.82 yesterday.

Currencies

One Australian Dollar at 7:40 AM was buying 74.26 US cents, 53.91 Pence Sterling, 81.51 Yen and 62.71 Euro cents.

Commodities

Iron Ore has lost 1.9 per cent to US$218.04.
Iron Ore futures are pointing to 2.6 per cent fall
Gold has gained $0.70 to US$1803 an ounce.
Silver has fallen $0.13 to US$26.00 an ounce.
Oil was up $1.04 to US$73.24 a barrel.
 

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