Wall St edges higher on spike in jobless claims, Why Zip Co is a sell: ASX to fall

Market Reports

by Melissa Darmawan

The Australian sharemarket is set to fall with the SPI futures pointing to a 0.2 per cent dip.

Across the globe, a rally was broadly seen across major indexes while in the UK, the benchmark fell as Unilever pressured the index.

Wall St rises for 3rd day as jobless claims spike

Wall St nudged higher continuing its third straight day of gains after a muted morning of trade. On Monday, the Dow Jones had its worst day of the year with analysts saying that the market was oversold. We then saw buyers come in and buy the dip and today, investors kept their gains as strong earnings results offset a rise in new jobless claims.

The 10-year treasury ticked lower after 419,000 Americans filed for first time unemployment benefits. The disappointing number surprised economist’s expectations as claims doubled from last week amid a job market which appears to be on the rebound.

In housing data, median home priced rose to US$363,300 as sales increased 1.4 per cent on strong demand month-on-month in June. The sharp rise in home prices at record low interest rates have sparked concerned that buyers might be priced out of the market.

This saw the Dow Jones Industrial Average added 0.1 per cent to 34,823. The S&P 500 gained 0.2 per cent to close at 4,367 while the Nasdaq closed 0.4 per cent higher at 14,685.

Big tech helps Wall St

Across the S&P 500 sectors, the winners and losers were close to even. Consumer Discretionary rose 0.8 per cent while Technology added 0.7 per cent while Energy pulled back despite gains in oil prices and Financials fell over 1 per cent.

The 10-year treasury note was trading at 1.25 per cent down from 1.29 per cent the day before.

Microsoft closed 1.7 per cent higher and Apple added 1 per cent ahead of their earnings results next week.

Airline stocks fails to impress, Dominos loses appetite

Pizza chain Domino's fell 0.4 per cent despite strong earnings results while Biogen rose 1 per cent after upgrading its full year revenue forecasts.

Southwest Airlines failed to take off, down 3.4 per cent after they reported a bigger than expected quarterly loss. American Airlines shed 1.1 per cent despite their positive figures.

European central bank calms inflation fears

Across the Atlantic, European markets closed mix as the Central Bank calmed inflation fears. They said that rate hike rates won’t happen until inflation reaches its 2 per cent target.

London’s FTSE fell 0.4 per cent, Paris gained 0.3 per cent and Frankfurt closed 0.6 per cent higher.

In UK trade, losses were pressured by energy stocks with the likes of Shell down 1.7 per cent and heavyweight Unilever tumbled 5.9 per cent after a cut in full-year forecasts due to rising commodity prices. Miners fell with Riio Tinto down 2.1 per cent followed by BHP, lost 0.8 per cent.

Asian markets echoed sentiment from Wall St closing mostly higher

Tokyo’s Nikkei was closed. China’s Shanghai Composite closed 0.3 per cent higher while Hong Kong’s Hang Seng gained 1.8 per cent.

ASX hits record high led by mining bulls

Yesterday, the Australian sharemarket clinched a new record high as the local bulls closed the session 1.1 per cent or 78 points higher at 7,386 fuelled by mining giants.

The gains were across the board with Energy and Materials as the biggest winners while Healthcare fell behind as the only outlier, down 0.3 per cent. Oil price surge of 4.5 per cent the day prior helped powered energy stocks.

Local economic news

Today we will see IHS Markit release the PMIs for July. Lockdowns are expected to weigh on business conditions.

Broker moves

UBS rates Zip Co (ASX:Z1P) as a sell with a price target of $5.60. The company released its Q4 trading update yesterday and upon initial assessment, the broker sees volume numbers are substantially below its forecasts. Australia is below 10 per cent while the U.S is 15 per cent lower expected forecasts.

UBS does acknowledge the reported growth is high in absolute terms though metrics such as total transaction volumes equally missed expectations.

Shares in Zip Co (ASX:Z1P) closed 7.8 per cent lower at $6.99 yesterday.

Commodities

Iron ore has lost 5.7 per cent to US$202.63, its futures are pointing to 1.8 per cent fall.
Gold has gained $1.80 to US$1809 an ounce while silver has gained $0.13 to US$25.38 an ounce.
Oil was up $1.61 to US$71.91 a barrel.

Currencies

One Australian Dollar at 7:50 AM lifted slightly against the greenback buying 73.83 US cents, 53.67 Pence Sterling, 81.37 Yen and 62.71 Euro cents.

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