Wall St hits all-time high, Inflation & Fed talks this week, Why Newcrest Mining is a buy: ASX to rise

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

U.S shares moved into record territory while European indexes rallied on better than expected earnings results. Tech shares took the spotlight as cyclical stocks lagged.

Strong earnings push U.S indexes into new record highs

Wall St’s session on Friday saw all three major indexes close at new all-time highs. A familiar position when compared to a few weeks ago where the indexes posted new record highs. We saw concerns work themselves out of the market with confidence coming back in last week.

What pullback?

To recap, the volatile week started on Monday where we saw a market meltdown as investors sought refuge in bonds, spooked by the highly contagious Delta variant and its potential slowdown on the pandemic rebound. The Dow Jones plunged 740 points or 2.1 per cent - its worst day since October 2020, the S&P 500 fell 1.6 per cent and the Nasdaq closed 1.1 per cent lower. On Tuesday, investors came in to buy-the-dip and by hump day, all losses were erased driven by better-than-expected earnings results. From there, the major indexes climbed to close out the week with a clean sweep at new highs.

Dow closes above 35,000 for the first time

The blue chip Dow closed above 35,000 for the first time to add 0.7 per cent at 35,062 having touched 34,000 points in mid-April. The S&P 500 tapped its seventh gain in nine weeks, adding over 1 per cent to 4,412 while the tech-heavy Nasdaq gained 1 per cent at 14,837.

Over the week, the Dow rose by 1.1 per cent, the S&P 500 gained 2 per cent while the Nasdaq spiked 2.8 per cent.

U.S. business activity cools in June

The economy continues to recover but at a cooler pace with concerns on the future outlook. PMI figures from IHS Markit on Friday indicated U.S. manufacturing growth fell to a four-month low of 59.7 from 63.7 in June amid labour and supply chain shortages. A reading above 50 indicates expansion.

U.S. treasury note responds ahead of Fed talks

The yield on the 10-year treasury note gave up part of its gains following the report, but still rose to 1.28 per cent from 1.25 per cent. Over the week, US 10-year yields fell by 2 basis points with US 2-year yields down 3 basis points.

Across the S&P 500 sectors, the gains were mainly across the board with Energy and Industrials as the only losers, down 0.4 per cent. Communication Services was the best performer on Twitter news, up 2.7 per cent followed by Consumer Discretionary and Consumer Staples.

Tech shares impresses, Intel disappoints

Twitter shares rose over 3 per cent after popping its fastest revenue growth since 2014.

In other news, social media giant Snap soared 24 per cent on better-than-expected earnings and user growth results. The company posted 293 million daily active users in the latest quarter, up nearly 5 per cent from April of 280 million while on the revenue front, they raked in US$982 million vs US$846 million forecast by Refinitiv.

Facebook leapt 5.3 per cent at a new high after riding on the coattails of Snap. Snap’s revenue acceleration could mean that Facebook might also see acceleration in its growth rate when their results come out on Wednesday.

Microsoft and Google also hit record highs on Friday.

Intel sunk 5.3 per cent after the semiconductor giant said supply chain constraints could persist into 2023. "While I expect the shortages to bottom out in the second half, it will take another one to two years before the industry is able to completely catch up with demand," said CEO Patrick Gelsinger.

Europe bounces back, miners lead

Across the Atlantic, European markets closed higher after bouncing back.

The Stoxx rose 1.1 per cent on their company earnings. The European Central Bank also reassured market participants that they’ll keep interest rates low for now.

Looking to Paris, added 1.4 per cent while Frankfurt gained 1 per cent.

London’s FTSE rose 0.9 per cent pushed forward by miners and consumer staples. Rio Tinto added 1.4 per cent while BHP added 1.3 per cent.

Markets reacted favourably to Vodafone’s better-than-expected trading statement with the telecommunications provider advancing 2.4 per cent on service revenue growth.

U.S. Chinese listed stocks comes under fire, crackdown continues

Asian markets closed lower, Japan’s Nikkei was closed ahead of the opening ceremony for the Tokyo Olympics.

Hong Kong’s Hang Seng dropped 1.5 per cent and China’s Shanghai Composite shed 0.7 per cent on reports the Chinese watchdog was planning to fine Didi Global for their controversial listing in the U.S. Didi plummeted 20 per cent on Wall St.

Further fears on U.S. listed Chinese stocks mounted as the Chinese government cracks down on private educators. TAL education group crashed 71 per cent in New York.

ASX 200 hit record high, shakes-off pandemic blues

On Friday, the Australian share market gained 8 points or 0.1 per cent to a new record close at 7,394 after a choppy week of trade. Pandemic blues worsened on tightening restrictions as cases continued to climb.

Healthcare was the best performing stock on Friday, up 1.3 per cent followed by Technology while the worst performer was Energy, down 1.1 per cent.

Local economic outlook

This week, the June inflation figures are set to take the spotlight with readings to cover consumer, producer, export and import prices. This will kick-off on Wednesday.

On Tuesday, ANZ-Roy Morgan weekly consumer confidence and an online speech by the RBA Deputy Governor, Guy Debelle at the FX Markets U.S. conference is pencilled in.

On Friday, the Australian Bureau of Statistic is set to publish the private sector credit data.

AGMs, reporting season

This week we will see more quarterly results coming in from the resources sector. Earnings figures are slated for Temple & Webster (ASX:TPW) on Tuesday, Rio Tinto (ASX:RIO) on Wednesday and Janus Henderson (ASX:JHG) on Thursday.

Macquarie Group (ASX:MQG) have pencilled in their AGM on Thursday.

International economic outlook

A couple of things to look out for this week. The U.S. Federal Reserve will kick-off its two-day meeting this week. Officials are set to review their approach around their asset purchase program amid an economic recovery that has been stronger than anticipated.

Fed Chairman Jerome Powell mentioned that their talks are set to focus on two important questions: when to start paring their monthly US$80 billion purchases in treasury securities, and their US$40 billion purchases in mortgage securities.
Inflation numbers are going to be a main focus behind this. We saw the Fed raise its headline inflation expectation to 3.4 per cent recently. There have been subsequent conversations and testimony from Chairman Powell as the Fed reaffirmed that hot inflation figures will be transitory. (maybe strap at start of para: Fed Reserve says inflation hike is transitory)
The U.S July consumer confidence is set to be released on Tuesday. Eyes will be on this report after the unexpected climb in inflation which grew by 5.4 per cent, the biggest monthly gain since Aug 2008. The main drivers of the rise were used cars, food and energy costs. Although the inflation readings are well above numbers in 2008 and 2009 during the GFC, the Fed views the numbers as temporary factors that will abate as the economy recovers.

Something a little different is the IPO of trading app Robinhood. It is set to trade on the Nasdaq under the code HOOD with a valuation target of US$35bn after raising US$2.3 billion.

Earnings season goes into full throttle this week with big tech names set to report.

Broker moves

Citi rates Newcrest Mining (ASX:NCM) as a buy with a price target of $30. The gold miner posted a stronger-than-expected June quarter production result than expected, with copper credits at Cadia and Telfer lowering costs.
The broker believes gold prices have now peaked but unlikely to fall rapidly.

Due to this, the price target falls to $30 from $32. Shares in Newcrest Mining (ASX:NCM) closed 0.04 per cent lower at $26.17 on Friday.

IPOs

Best & Less (ASX:BST) is set to make their debut today after raising $60 million. They will be trading under the ticker code BST.

Commodities

Iron Ore has lost 0.6 per cent to US$201.33. Its futures suggest a 0.4 per cent gain.
Gold lost $3.30 to US$1806 an ounce while Silver fell $0.15 US$25.23 an ounce.
Oil has added $0.16 to US$72.07 a barrel after plunging over 7 per cent on Monday.

Currencies

One Australian Dollar at 7:45 AM has soften against the greenback buying 73.68 US cents, 53.59 Pence Sterling, 81.46 Yen and 62.61 Euro cents.

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