Wall St hits new high ahead of earnings season, Why Challenger is a buy again: ASX to rise

The Australian sharemarket is set to rise with the SPI futures pointing to a 0.3 per cent gain.

Investors started the week in the black with major global indexes posting gains on Monday. US stocks edged higher ahead of earnings season. Asian markets rose as China is to pump $206 billion in liquidity. Europe and UK markets advanced as defensive sectors led.

Banks kick off 2Q earnings season tomorrow

US stocks edged higher ahead of the second quarter earnings season with banks to take their marks, get so and go. JPMorgan Chase & Co and Goldman Sachs are slated tomorrow. The yield on the 10-year Treasury note rose to 1.37 per cent.

The S&P 500 rose 0.4 per cent to a record high at 4,385, Dow Jones added 0.4 per cent at 34,996 while the Nasdaq gained 0.2 per cent at 14,733.

Across the sectors in the S&P 500, the gains were mainly across the board with Consumer Staples and Energy as the only losers. Materials led by 2.3 per cent while Financials, rose 1 per cent as banks charged ahead.

JP Morgan added 1.4 per cent, Bank of America and Citigroup both gained 1.5 per cent.

Biden calls for green energy, J&J drips lower, Virgin plummets

Ride-hailing Didi Global tumbled 7.2 per cent after China’s cybersecurity watchdog forced the removal of the company’s 25 other apps from local app stores.

On the green energy front, President Joe Biden calls for 80 per cent of U.S. power to come from green energy. This saw stateside’s renewable energy shares power higher. Lithium makers Albemarle soared 7.5 per cent while Lithium Americas jump 10.7 per cent.

Johnson and Johnson fell 0.3 per cent as the Food and Drug Administration are expected to announce a new warning on the company’s Covid-19 vaccine. The regulator claims that the shot has been linked to a rare autoimmune disorder, Guillain-Barré syndrome.

Richard Branson’s Virgin Galactic plummeted 17.3 per cent after the company filed to sell US$500 million of shares. This followed news of their first fully crewed test flight into space with billionaire founder Richard Branson on board.

Eurozone rises thanks to defensive shares

Across the Atlantic, London’s FTSE added 0.1 per cent led by Technology and Financials. Miners offset gains with BHP down 0.2 per cent and Rio Tinto lost 0.1 per cent. Paris gained 0.5 per cent and Frankfurt closed 0.7 per cent higher.

In London news, the controlling shareholder of Daily Mail and General Trust jumped 6.1 per cent after receiving a takeover bid for 70 per cent of the company by Lord Rothermere, the largest shareholder.

Europe's Stoxx added 0.7 per cent helped by gains in real estate, utilities and healthcare, while travel and leisure dipped 1.3 per cent as the World Health Organisation announced that the Delta variant had become the dominant strain of Covid-19.

Asia grows as China releases liquidity

Asian markets closed higher. China’s Shanghai Composite closed 0.7 per cent higher while Hong Kong’s Hang Seng added 0.6 per cent after the People’s Bank of China cut the amount of cash banks hold, releasing $206 billion in liquidity as mentioned earlier. In Japan, the Nikkei gained 2.3 per cent.

ASX rises on commodity surge

Yesterday, the Australian sharemarket added 0.8 per cent or 60 points higher at 7,334 as heavyweight mining stocks drove the local bourse higher. BHP (ASX:BHP) and Fortescue (ASX:FMG) rose by more than three per cent as investors responded to the People's Bank of China decision late last week.

Making headlines was Wesfarmers' (ASX:WES) closing 0.5 per cent higher at $58.29 on their $687 million bid for Priceline Pharmacy owner, Australian Pharmaceutical Industries.
A2 Milk (ASX:A2M) dropped 0.7 per cent at $7.15 after a shake-up of their management team and their plans for the Asia Pacific division to be split into three key business units.

Meanwhile, financial support from the federal government is on the cards to help support hard hit businesses and workers forced to stay at home from the greater Sydney lockdown.

Iron ore gains, gold & oil drops

In commodities, iron ore gained 1.4 per cent to US$217.85. Its futures are pointing to 0.7 per cent gain.
Safe-haven gold dropped $4.70 to US$1806 an ounce while silver has added $0.01 to US$26.24 an ounce.
Crude oil dipped $0.46 to US$74.10 a barrel.

Local economic news

NAB business conditions in May is pencilled in today. Operating conditions hit a record high for the second straight month with growth spread across the industries and the country.

Also, ANZ and Roy Morgan will release their weekly consumer confidence figures. Consumer sentiment is expected to be lowered by Covid-19 events.

Stockwatch

For those that missed out in early June, you now have another opportunity to get in on the investment manager today.

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

A zone of support was respected between $5.00 and $5.10 as shown by the orange arrow during the month of May. This area of support is significant for a number of reasons, being structural support between April to June 2020, psychological $5.00 round number, along with the 50 per cent and 61.8 per cent Fibonacci retracement cluster.

At the end of May, a bullish doji formed, which is suggestive of a resurgence in positive sentiment. Upward momentum has gathered traction over the course of June and early July, therefore increasing the probability of further upside over the near term. Should this bullish case come to fruition, then resistance (i.e. target level) is evident at the February 2021 high of $7.37 over the broader horizon.

Shares in Challenger (ASX:CGF) closed 0.85 per cent lower at $5.83 yesterday.



Ex – Div

Katana Capital (ASX:KAT) is paying 0.5 cents fully franked.
Turners Automotive (ASX:TRA) is paying 5.6345 cents 85 per cent franked.

Turning to currencies

One Australian Dollar at 7:45 AM was buying 74.82 US cents, 53.89 Pence Sterling, 82.58 Yen and 63.06 Euro cents.

Commodities

Iron Ore has gained 1.4 per cent to US$217.85.
Iron Ore futures are pointing to 0.7 per cent gain.
Gold has dropped $4.70 to US$1806 an ounce.
Silver has added $0.01 to US$26.24 an ounce.
Oil was down $0.46 to US$74.10 a barrel.

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