Wall St posts record highs, Westpac to sell Pacific arm, Why Stockland is a trim: ASX to rise

Market Reports

by Melissa Darmawan

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

Major indexes across the globe closed mixed on muted trade. Investors were cautious ahead of the 2-day Federal Reserve meeting this week. European markets closed mixed while Asian markets slid on regulatory crackdown sending education and tech stocks plummeting.

Wall St closes higher ahead of Fed meeting

Wall St celebrates green across the board as the majors closed at record highs. We are now looking at five straight days of gains on the major indexes. The Nasdaq was looking ready to settle, then eked out another record high ahead of big earnings expectations for large tech giants.

We got an insight into it last week with ad revenue on the climb with tech titans like Snap and Twitter propelling expectations for Facebook, Amazon and Alphabet, the parent company of Google which are all set to report, with advertising as key components of those businesses.

We also have Apple and Microsoft due to release earnings with investors expected to digest further results, which could push stocks to record highs even as valuations look lofty, as these titans make up most of the indexes.

Dow, S&P 500, Nasdaq record close

The blue-chip Dow added 0.2 per cent to 35,144, the S&P 500 also gained 0.2 per cent at 4,422 while the tech-heavy Nasdaq eked up 0.03 at 14,841.

Across the S&P 500 sectors, gains were mainly across the board with Healthcare down 0.6 per cent and Tech closed flat. Energy continues to power up at 2.5 per cent as the best performer, with Materials following along with consumer-based stocks.

The yield on the 10-year treasury rose to 1.30 per cent ahead of the Fed meeting.

U.S. new home sales hit 14-month low 

While in eco news, sales of new single-family homes tumbled to a 14-month low in June, below expectations. A telltale sign that expensive lumber and building material shortages are hurting the housing market.

China continues its crackdown

U.S listed Chinese stocks took a tumble. Tencent down 7.7 per cent after orders by regulators to end exclusive contracts with music copyright holders. Alibaba down 6.4 per cent and Baidu closed 6.9 per cent lower on increased restrictions.

China’s industry ministry announced a 6-month campaign to clean up what it says are serious problems with internet apps violating consumer rights, cyber security and “disturbing market order.”

Ride hailing giant Didi shares dropped 0.3 per cent on the continued crackdown. The stocks are down around 50 per cent struggling to perform after its IPO last month.

Hasbro, Tesla jumps on earnings 

On the earnings front, Hasbro jumps 12 per cent on strong results with sales up 54 per cent for the quarter.

Electrical vehicle company Tesla pops 2.2 per cent after reporting US$1.1 billion in profits shrugging off the global chip shortage which has constrained the industry.

European and Asian markets closes mixed

Across the Atlantic, Paris added 0.2 per cent, Frankfurt closed 0.3 per cent lower while London’s FTSE finished flat as declines in healthcare and consumer stocks offset gains in resources. BHP and Rio Tinto both closed 3.1 per cent higher.

In Japan, the Nikkei rose over 1 per cent. Hong Kong’s Hang Seng plunged 4.1 per cent and China’s Shanghai Composite lost 2.3 per cent after Chinese regulators forced Tencent to give up its exclusivity on music rights as mentioned earlier. The crackdown also banned education providers like New Oriental dwindling 47 per cent lower.

ASX closes flat after dancing in record territory 

Yesterday, the Australian sharemarket closed flat at 7,394 after dancing at a new record high for five minutes or so in the morning. The local bourse had a few standouts with mining giant BHP (ASX:BHP) rising 1.25 per cent to a record high at $52.19. Wesfarmers (ASX:WES) followed suit up 0.6 per cent at $62.30.

On the sectors, Materials was the best performer and the only advancer, up 1 per cent with a broad-based decline with Energy as the worst performer, down 1.4 per cent.

Local economic news

Today ANZ-Roy Morgan weekly consumer confidence is scheduled. We are also set to hear an online speech by the RBA Deputy Governor, Guy Debelle at the FX Markets U.S. conference today.

Temple & Webster (ASX:TPW) to release full year results today.

Company news

Westpac Banking Corporation (ASX:WBC) is set to divest its Pacific businesses for $420 million to Kina Securities (ASX:KSL). The banking giant reveals that Papua New Guinea’s Independent Consumer and Competition Commission has flagged their rejection for Kina Bank to acquire this part of Westpac. Shares in Westpac (ASX:WBC) closed 0.4 per cent lower at $24.62 yesterday.

Stock watch

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

Resistance was respected at the 78.6 per cent Fibonacci retracement of $4.67 in June, as shown by the orange arrow.

At the end of June, a bearish doji had formed, signalling a rotational shift of demand favouring sellers. Downward momentum has gathered traction over the course of July, therefore increasing the probability of further downside over the short to medium term.

Should this bearish case come to fruition, then a layer of support is indicated between $3.70 and $3.82, as illustrated by the light-blue rectangle. This area of support is made up of the 38.2 and 61.8 per cent Fibonacci retracement levels respectively.

Shares in Stockland (ASX:SGP) closed 0.7 per cent lower at $4.35 yesterday.


Iron Ore has gained 0.7 per cent to US$202.74.
Iron Ore futures are flat.
Gold has lost $2.50 to US$1803 an ounce.
Silver has gained $0.09 to US$25.32 an ounce.
Oil was down $0.16 to US$71.91 a barrel.


One Australian Dollar at 7:45 AM has strengthened against the greenback buying 73.85 US cents, 53.44 Pence Sterling, 81.51 Yen and 62.56 Euro cents

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