Wall St climbs on earnings, Broker ratings for IAG & Hub24: ASX to rise

Market Reports

by Melissa Darmawan

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

Major indexes on Wall St and across Europe continued its rally as nerves eased on the rising Covid-19 cases. Investors turned their attention to company earnings results which helped boost optimism. A rally was seen in oil prices and in treasury bond yields while Asian markets were mixed.

Wall St closes higher for second straight session

U.S. shares continued to rally, erasing losses from Monday as investors saw a broad-based gain across the three major indexes.

The bullish run in the past two days has been driven by better-than-expected results from big name companies. Traditionally, this time in Wall St sees slower trading volumes as market participants take a break during their Summer. If more positive results are posted along with future positive economic data, investors could expect the market to continue its rally.

All three indexes are tracking green for the week. The Dow Jones Industrial Average gained 0.8 per cent to 34,798. The S&P 500 added 0.8 per cent to close at 4,359 while the Nasdaq closed 0.9 per cent higher at 14,632.

Across the S&P 500 sectors, Energy rose 3.5 per cent and Technology powered up as the best performers, though the gains were almost across the board. Oil stocks like Chevron and Exxon Mobil rose over 3.2 per cent as oil prices rose around 4.5 per cent despite an unexpected increase in U.S. oil inventories. Utilities was the biggest loser, down 1.1 per cent followed by Real Estate and Consumer Staples.

After investors sought refuge in bonds on Monday, the yield on the 10-year treasury note recovered to 1.29 per cent, up from 1.20 per cent the day before.

Flight stocks took-off on the dampening of pandemic fears. United Airlines flew 3.9 per cent higher after better-than-expected earnings results while American Airlines soared 4.1 per cent. Southwest Airlines gained 3.3 per cent ahead of tomorrow’s results.

United, J&J, Coca-Cola & Chipotle gains, Netflix tumbles

On the earnings front, beverage giant Coca-Cola gained 1.3 per cent after posting sales results and boosting their outlook. Verizon jumped 0.7 per cent after wireless subscriber growth beat expectations.

Pharmaceutical giant, Johnson & Johnson added 0.6 per cent on strong sales growth despite being slammed with a US$5 billion settlement on claims around the opioid epidemic. Fast food Mexican chain, Chipotle Mexican Grill soared 11.6 per cent after posting strong sales growth attributed to digital sales. Netflix tumbled 3.3 per cent after mixed earnings results.

Reopening trade leads in Europe, miners rise

Across the Atlantic, investor confidence boosted indexes higher. London’s FTSE added 1.7 per cent led by travel and cyclical stocks. Paris gained 1.9 per cent and Frankfurt closed 1.4 per cent higher.

In London trade, fund manager Bridgepoint soared 29.1 per cent after making its debut while Royal Mail fell 2.7 per cent, on lowered parcel delivery demand as the economy continues to reopen. Shares in Rio Tinto rose 2.3 per cent while BHP added 2.7 per cent.

Mixed closed in Asia as Japan's exports rose

Asian markets closed mixed. Hong Kong’s Hang Seng fell 0.1 per cent and China’s Shanghai Composite closed 0.7 per cent higher while Tokyo’s Nikkei added 0.6 per cent.

Japan’s exports rose 48.6 per cent in June on U.S. demand for cars and chip-making equipment for China.

ASX bounces back from two day lull

Yesterday, the Australian sharemarket closed 0.8 per cent higher at 7,309 as the index bounced back from pandemic woes which triggered a sell-off the prior two days.

All sectors advanced with Industrials and Technology as the only outliers, down 0.7 and 0.5 per cent respectively. Materials and Healthcare came equal first, up 1.1 per cent.

Despite the week’s first gain, Prime Minister Scott Morrison said that the current lockdowns will have a “significant impact” on the nation’s GDP.

Australia’s two largest cities, Sydney and Melbourne are in an extended lockdown while South Australia announced a snap lockdown this week.

“What we’re seeing in this current quarter, you will, of course, see a hit to GDP because of the lockdowns,” Mr Morrison said.

“That is impossible to avoid, and it is impossible to ignore.”

Local economic news

The Australian Bureau of Statistics has scheduled international trade for June and the weekly payroll and jobs data for the fortnight ending 3 July.

Local quarterly results

Today there are a number of companies set to release their quarterly results.

Key companies to mention are Newcrest Mining (ASX:NCM), Coronado Global Resources (ASX:CRN), Iluka Resources (ASX:ILU), Santos (ASX:STO), Megaport (ASX:MP1) and Galaxy Resources (ASX:GXY).


Today Victory Goldfields (ASX:1VG) is scheduled to make their debut on the ASX.

Broker moves

Citi rates IAG (ASX:IAG) as a buy with a price target of $5.60. The company is set to sell its 49 per cent stake in the Malaysian joint venture for $340 million and expects a loss of $90 million on the sale. Although the price looks a tad light, Citi feels investors may still welcome the cash from the likely sale. Shares in Insurance Australia Group (ASX:IAG) closed 0.4 per cent higher at $4.85 yesterday.

Macquarie rates Hub24 (ASX:HUB) as a hold with a price target of $25.75. The wealth platform provider reported a very strong June quarter with funds under administration rising $7.2 billion to $56.8 billion. Though the broker’s upgrade in earnings forecast is overshadowed by the company's commitment to invest in scale and innovation. Trading volumes are also normalising with uncertainty around costs. With the stock now trading near its new target price of $25.75, up from $25.50, the broker downgrades its rating to a hold. Shares in Hub24 (ASX:HUB) closed 3.9 per cent lower at $24.42 yesterday.


Iron Ore has lost 2.8 per cent to US$214.79. Its futures are pointing to 4 per cent fall.
Gold has lost $8.00 to US$1803 an ounce while silver added $0.26 to US$25.25 an ounce.
Oil was up $3.10 to US$70.30 a barrel.


One Australian Dollar at 7:45 AM has soften against the greenback buying 73.60 US cents, 53.68 Pence Sterling, 81.19 Yen and 62.40 Euro cents.

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