Wall St retreats, NAB in talks to buy Citi's Aussie arm, Why Platinum is a hold: ASX to rise

Market Reports

by Melissa Darmawan

The Australian sharemarket is poised to rise with the SPI futures pointing to a gain of 0.1 per cent.

Markets around the globe closed mixed on Tuesday as the US earnings season kicked off. Wall St started strong then failed to get momentum closing in the red. Asian markets led gains on China’s upbeat export news. European, UK and the ASX closed flat.

Caution looms on Wall St,  Apple to break into BNPL space

Wall St started its day on a positive note as gains in mega-cap technology stocks offset losses in cyclicals amid the wider drop across the board. Banks fell broadly. This followed a day after the three indexes set record highs.

Speculation in the world of Apple is that the tech giant is looking to break into the buy now pay later market according to Bloomberg. The upcoming service, known internally as Apple Pay Later will allow consumers to pay for any Apple Pay purchase in instalments.

Surprise consumer surge, sharp spike in 13-years

A surge in US consumer prices in June took economists by surprise. Inflation has been front of mind for investors as they look to see how it will be received by the Federal Reserve amid the outlook for economic recovery.

Despite the recent hike in rates, the central bank has reassured that inflation pressures are transitory. Chairman Jerome Powell’s appearance to congress on Thursday, to present the semi-annual Monetary Policy Report is expected to reaffirm this point.

The latest report showed that consumer prices in June rose 0.9 per cent from May and 5.4 per cent over the past year, the sharpest 12-month inflation spike in 13 years.

Excluding volatile oil and gas prices, core inflation rose 4.5 per cent in the past year, the largest increase since November 1991.

Prices for trucks and used cars surged 10.5 percent in June and a record 45.2 percent in the last 12 months. There is an increased demand for used vehicles due to the shortage of new ones. An international semiconductors shortage has been a major force behind the disruption in the supply chain.

30-year Treasury bond yields rise

Following this, weak demand for a $24 billion sale of 30-year Treasury bond auction saw yields rise. The bonds sold at a high yield of 2 per cent, more than two basis points above where the debt had traded before the auction.

The 10-year was up 4.6 basis points to 1.42 per cent having dropped to 1.33 per cent earlier which saw stocks fall.

Wall St's performance dips

The Dow Jones Industrial Average lost 0.3 per cent to 34,889, the S&P 500 fell 0.4 per cent to close at 4,369 and the Nasdaq closed 0.4 per cent lower at 14,678.

Across the sectors, Consumer discretionary added 0.6 per cent followed by Technology, up 0.4 per cent and Industrials as other sectors closed in the red. The biggest loser was Real Estate, down 1.3 per cent.

JPMorgan Chase fell 1.5 per cent and Goldman Sachs dropped 1.2 per cent despite releasing strong earnings updates.

PepsiCo, Boeing & Mastercard breaks news

In headlines, PepsiCo rose 2.3 per cent after raising its earnings forecasts. Boeing fell 4.2 per cent after the Federal Aviation Administration said the 787 Dreamliners have a manufacturing quality issue. MasterCard rose 2.2 per cent on news of a strategic partnership with Verizon Communications to use 5G and wireless technology to provide an autonomous checkout for retail stores.

Flat finish across Europe and UK

Across the Atlantic, UK’s FTSE closed little changed as concerns over rising Delta cases kept investors cautious. Rio Tinto and BHP both fell 0.4 per cent.

Banks dipped after surging early in session on news the Bank of England ended restrictions on dividend payments and buyback offers. The decision to end the restrictions was made after stress testing showed that the banking sector was strong enough to handle any further economic shocks from the pandemic.

Paris and Frankfurt also closed flat. In Europe, Central Bank President Christine Lagarde has pledged they will be "persistent" and not repeat its past mistake of tightening policy too early.

Optimism on Asian markets on upbeat export jump

Tokyo’s Nikkei gained 0.5 per cent, Hong Kong’s Hang Seng added 1.6 per cent and China’s Shanghai Composite closed 0.5 per cent higher. China’s exports in June jumped 32.2 per cent as compared with a year earlier.

ASX fades as commodity rally takes a breather

Yesterday the Australian sharemarket closed 0.2 per cent or 1 point lower at 7,332. On Monday, investors piled into materials stocks which saw commodities soar, though its surge slowly faded to close little unchanged.

BHP (ASX:BHP) dropped by 0.7 per cent to $50.70 while Fortescue (ASX:FMG) added 2 per cent to $25.18 and Rio Tinto (ASX:RIO) advanced by 0.6 per cent to $128.36.

The winner of the session was aerial imagery provider Nearmap (ASX:NEA) soared 14.4 per cent to $2.27 after reporting strong sales in North America. This boosted the company’s full-year sales by 26 per cent to about $133.8 million, ahead of the forecast of $132 million.

Kerry Stokes' Seven Group (ASX:SVW) continued buying shares in Boral (ASX:BLD) and gained almost 45 per cent in the takeover bid set to finish this week. Shares in Seven Group (ASX:SWM) closed up 1.3 per cent higher at $22.08 while shares in Boral (ASX:BLD) closed flat at $7.39.

Gold, oil and iron ore rises

In the precious metals space, gold has gained $4.00 to US$1810 an ounce while silver lost $0.10 to US$26.14 an ounce.

Crude oil was up $1.15 to US$75.25 a barrel on news about tight supply in the market.

To iron ore, up 0.3 per cent to US$218.48. Its futures are pointing to 0.9 per cent gain.

Local economic news

Today Westpac/Melbourne Institute consumer sentiment is due. Confidence fell by 5.2 per cent to a 5 month low in June.

Other things to watch today include the Australian Bureau of Statistic’s building activity for the March quarter and overseas travel figures for June as well.

Building activity approvals have soared following the start of construction work and the pause on the trans-tasman bubble is expected to weigh on numbers.

Company news

National Australia Bank is in talks with Citi over the potential purchase of the US banking giant’s Australian consumer banking division.

Citi put up its Aussie retail operations up for sale in April so they could pivot their focus on businesses with more growth potential. NAB says that there is no certainty these discussions will lead to a transaction.

Shares in National Australia Bank (ASX:NAB) closed 0.1 per cent higher at $26.24 yesterday.

Broker moves

Ord Minnett rates Platinum Management (ASX:PTM) as a hold with a price target of $4.50. In June funds under management was up 11.9 per cent at $24.5 billion compared to same time last year though largely flat month on month.

Outflows have continued its downward trajectory for 30 months in a row. Outflows were down -$167 million in the month, bringing second-half FY21 outflows to -$1.27 billion with -$805 million leaking from retail trust funds.

The broker remains cautious regarding the outlook for flows in the near term, as the majority of funds are meaningfully underperforming their respective benchmarks. The analyst retains the hold rating and the target rises to $4.50 from $4.25.

The broker expects FY21 underlying net profit pre outside equity interests of $139.4 million, down 4.7 per cent on FY20, driven by marginally lower average funds under management and a meaningful reduction in performance fees.

Shares in Platinum Asset Management (ASX:PTM) closed 8.26 per cent lower at $4.22 yesterday.

Currencies

One Australian Dollar at 7:45 AM was buying 74.62 US cents, 54.02 Pence Sterling, 82.45 Yen and 63.25 Euro cents.

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