Wall St sinks on bond rally as investors flee stocks, Why Westpac is bearish: ASX to fall


The Australian sharemarket is set to fall with the SPI futures pointing to a 0.9 per cent drop.

A market meltdown across the globe was seen as resurging fears of the delta variant accelerates. Rising cases are causing international stocks to skid as it threatens the pace of the economic recovery. Oil prices tumbled after OPEC+ agreed to boost supply to pre-pandemic levels.

US treasury yields tumble as investors flee stocks

Wall Street sunk overnight as investors seek refuge in government bonds on worries a surge in coronavirus cases will put a dent in the reopening of the economy.

Investors sheltered into bonds pulling the yield on the closely watched 10-year treasury to its lowest since February.

US 10-year treasury yields plunged 11 basis points to 1.19 per cent as investors scrambled from equity markets into safe haven assets.

Cyclicals swims in red sea, Dow falls 700+ points

All sectors closed in negative territory led by cyclicals, falling the most.

Energy sector got slammed, down 3.6 per cent after OPEC+ agreed to increase oil output to pre-pandemic levels. Heavier losses were seen in Financials, down 2.8 per cent followed by Materials, down 2.2 per cent. Consumer Staples shed the least, down 0.3 per cent.

This saw the Dow Jones slump 2.1 per cent to 33,962, the S&P 500 fall 1.6 per cent to close at 4258 and the Nasdaq closed 1.1 per cent lower at 14,275.

Cruise lines, travel stocks fall as stay-at-home stocks rise

Travel and airline stocks got hit following the trend seen in the early days of the Pandemic last year. United Airlines sunk 5.5 per cent while cruise operator Carnival fell 5.8 per cent.

Though on the other hand, stocks which reap from virus fears soared.

Online fitness provider Peloton jumped 7.1 per cent, DoorDash rose 5 per cent, though Zoom fell 2.1 per cent after announcing a US14.7 billion acquisition of call center software provider Five9 which rose 5.9 per cent.

US-China listed stocks wallops

Ride hailing Didi Global eroded 7.1 per cent while Alibaba sunk 3.2 per cent after a Shanghai court highlighted "typical unfair competition cases".

FTSE hits 2 month low on “Freedom Day”

The selling pressure was also seen across the Atlantic. Paris lost 2.5 per cent after a minister warned curfews would be imposed if case numbers continue to climb. London’s FTSE fell 2.3 per cent as fears overshadow optimism after restrictions were scraped, while Frankfurt closed 2.6 per cent lower. BHP and Rio fell over 3 per cent in UK trade.

Asia retreats on covid woes

Asian markets felt the covid blues. Tokyo’s Nikkei lost 1.3 per cent, China’s Shanghai Composite closed flat while Hong Kong’s Hang Seng fell 1.8 per cent.

ASX 200 slumps on covid concerns

Yesterday, the Australian sharemarket closed 0.9 per cent lower at 7,286 as worries on the lockdown played on investors.

The construction industry shutdown across Greater Sydney and extended lockdown in Victoria saw investors dump cyclical stocks as they weigh up the economic implications.

Construction in New South Wales’ is the third largest contributor to the state’s GDP. With the unprecedented move from the NSW government, investors are concerned about the flow on effects to the greater economy.

Heavyweight miners, energy and financial stocks led the decline while Healthcare outperformed the index. Biotech CSL (ASX:CSL) added 1.8 per cent while Sonic Healthcare (ASX:SHC) and ResMed (ASX:RMD) hit fresh highs.

Mining giant to release Q4 update

Looking ahead, BHP is set to release their fourth quarter update.

Local economic news

Today the weekly ANZ-Roy Morgan’s consumer confidence index followed by the Reserve Bank meeting minutes from its July meeting are due.

From their July meeting, the cash rate was left unchanged but the central bank announced it will begin tapering bond purchases to $4 billion per week from $5 billion per week in September under its quantitative easing program.

Company news

Australia and New Zealand Banking (ASX: ANZ) have revealed a buy-back worth up to $1.5 billion of shares on-market as part of its capital management plan after market close yesterday. The banking giant also mentioned that its capital position may allow future capital returns to be considered. Shares in ANZ Banking Group (ASX:ANZ) closed 1.02 per cent lower at $27.15 yesterday

Insurance provider IAG (ASX:IAG) has commenced the sales process to divest its 49 per cent interest in their Malaysian venture, AmGeneral Holdings, the general insurance arm of AmBank Group for a deal that could be valued at $340 million. They are looking to dispose of its portion to the owner of the remaining 51 per cent, Liberty Insurance conditional on approval from the country’s central bank and Minister of Finance. Shares in Insurance Australia Group (ASX:IAG) closed 2.03 per cent lower at $4.83 yesterday.

Stock watch

Our weekly stock to watch this week is Westpac (ASX:WBC). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Westpac as a sell or trim. From a technical angle, Westpac is bearish for several reasons.

An area of resistance was respected between $26.50 and $27.02 as shown by the orange arrow in June. This area of resistance is known as a Fibonacci cluster. In simple terms, where a number of retracements meet to form a potential reversal zone.

At the end of June, a bearish doji had formed, which is suggestive of a rotational shift favouring the downside.

Downward momentum has gathered traction over the course of July, therefore increasing the probability of further downside over the near term.

Should this bearish case evolve, then a layer of support is indicated between $21.56 and $21.91, as illustrated by the light-blue rectangle.

Shares in Westpac (ASX:WBC) closed 0.9 per cent lower at $24.69 yesterday.




Ex Dividend

Tilt Renewables Ltd (ASX:TLT) is paying 6.11 cents unfranked.

Given the backdrop, commodities have taken a dip.

Iron Ore has lost 0.2 per cent to US$221.04.
Iron Ore futures are pointing to 1 per cent fall.
Gold has lost $5.80 to US$1809 an ounce.
Silver has dropped $0.65 to US$25.14 an ounce.
Oil crashed over 7 per cent at $5.39 to US$66.42 a barrel.

Currencies

One Australian Dollar at 7:50 AM has dipped against the greenback buying 73.42 US cents, 53.71 Pence Sterling, 80.43 Yen and 62.26 Euro cents.
 

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