Wall St rises, Marley serves mixed results, Why Flight Centre is a hold: ASX poised to edge higher

Market Reports

by Melissa Darmawan

The Australian sharemarket is poised to open higher with the SPI futures pointing to a 0.1 per cent gain.

Global stocks rallied as the earnings season continued amid positive economic data in Europe though mixed numbers in the U.S. Asian markets climbed after their recent panic selling.

U.S economy grows 6.5% for 2Q, jobless claims fell as businesses struggle to find staff

Wall St flashed green across the board with the S&P 500 and Dow Jones back at record highs, shrugging off somewhat disappointing economic figures. GDP growth came in lower than expected with jobless claims falling but still in a higher range.

The U.S. economy grew at an annual rate of 6.5 per cent last quarter, surpassing pre-pandemic levels. This GDP growth figure fell short of economists’ expectations of 8.5 per cent.

Despite its growth, lingering concerns around the delta variant and any moves from the government to enforce restrictions could minimize or stop business activity, sending consumers and employees back home impacting on the economic recovery. If this was to occur, we might see Americans filing for unemployment benefits along with a dent to the pace of the economic recovery.

Jobless claims fell 24,000 to 400,000 last week amid the growing economy though businesses are struggling to find workers as per the jobs report last month, enticing new recruits with higher wages.

Biden set to push federal workers to get jabs

President Biden announced a vaccine requirement for Federal workers as they return to the office. The alternative is to comply with wearing masks, regular screening and travel restrictions. Also with tech giants now mandating vaccinations, those who don’t want to be vaccinated, might leave which could also impact jobless claims numbers.

This saw the Dow Jones add 0.4 per cent to 35,085, the S&P 500 also added 0.4 per cent to 4,419 while the Nasdaq gained 0.1 per cent to 14,778.

The 10-year treasury note remained stable at 1.27 per cent.

Across the S&P 500 sectors, defensives continued to decline. Communication Services fell to the worst performer, down 0.9 per cent following Facebook’s revenue outlook, Utilities down 0.7 per cent with losses seen across Industrials, Consumer Discretionary and Real Estate. Materials led, up 1.1 per cent with Financials just behind while Technology added 0.5 per cent ahead of Healthcare. Consumer Staples added 0.6 per cent.

Yum, Pinterest & Robinhood making moves

Yum Brands rose over 6 per cent on better-than-expected second quarter results with revenue of US$1.6 billion, with worldwide sales of 23 per cent and KFC leading, up 30 per cent compared to Taco Bell and Pizza Hut.

Pinterest shares dived over 16 per cent after the company reported a decline in monthly users last quarter. They reported a loss of 24 million monthly active users.

Online brokerage Robinhood let down its official appearance on the Nasdaq, falling below its offer price of US$38. The stock was trading lower by 0.9 per cent within its first hour of trade after raising US$2.3 billion.

European markets boosted by confidence sentiment

Across the Atlantic, European markets closed higher as the Eurozone's confidence index rose to 119.0 in June, beating consensus expectations while Germany’s unemployment rate fell better-than-expected.

Paris gained 0.4 per cent, Frankfurt added 0.5 per cent while London’s FTSE closed 0.9 per cent higher as positive earnings and large dividend payouts, offset worries around rising inflation and Covid-19 cases. Rio Tinto spiked 2.6 per cent while BHP rose 2 per cent.

Shell added 3.7 per cent after the oil and gas producer boosted its dividend and launched a $2.2 billion share buyback programme on bumper profit numbers, their highest in more than two years, thanks to a sharp rise in oil and gas prices.

Asian markets crawls back from tumble

Asian markets closed higher, Tokyo’s Nikkei gained 0.7 per cent, China’s Shanghai Composite added 1.5 per cent while Hong Kong’s Hang Seng jumped 3.3 per cent, after closing 1.5 per cent the day before. The index has been recovering its footsteps after tumbling more than 8 per cent over two days at the start of the week.

The crawl back into positive territory was on a report that China’s securities watchdog told brokerages that the country will allow Chinese firms to go public in the U.S. as long as they meet listing requirements, as per sources at CNBC.

China’s education players and tech giants rise again

Chinese tech stocks listed on the Hang Seng continued its climb. Shares in Tencent punched 10.1 per cent higher while Alibaba soared 7.4 per cent. In the education space, New Oriental Group spiked 13.5 per cent while Koolearn propelled by 19.9 per cent.

ASX bounces back as miners hit record highs

Yesterday, the Australian sharemarket rose 0.5 per cent at 7,417 as investors sent funds back into mining stocks. Iron ore miners took the spotlight as each hit record highs setting the mood for reporting season, which is set to go into full throttle next week.

Technology outperformed the sectors adding 2.6 per cent followed by Materials, up 1.5 per cent thanks to the mining giants. Defensives retreated with Property down 1.3 per cent followed by Utilities and Consumer Staples. All other sectors advanced.

Local economic news

Today the Australian Bureau of Statistics is set to issue the producer price indexes report for June.

Trading update

Origin Energy (ASX:ORG) have slated their Q2 sales and revenue release.

Company news

Marley Spoon (ASX:MMM) have fed investors with a mouthful of earnings as their net revenue grew 10 per cent on the prior corresponding period at $129.3 million (€80.6m), with 37 per cent more people subscribing to the meal-kit solution year-over-year.

Their European sector showed the biggest appetite with revenue expanding at 43 per cent compared to the same time last year. Its Aussie and American counterparts on the other hand, both grew at 7 per cent for the quarter.

The healthy meals provider attributes their single digit growth in America due to labour shortages and supply chain bottlenecks. As for its Sydney operations, outgoings were realised due to the move to a bigger fulfilment centre along with establishing a new one in Perth.

On the flip side, the meals provider revealed that they recorded an operating loss driven by its marketing spend and talent recruitment. This led to a half-year operating loss of $23.8 million (€14.8 million) or $14.6 million (€9.1 million) for the quarter.

Looking ahead, the company has downgraded its contribution margin guidance to 27 per cent from 28 per cent despite remaining optimistic that annual net revenue will be between 30 to 35 per cent for the year.

Shares in Marley Spoon (ASX:MMM) closed 2.2 per cent higher at $2.79 yesterday.

Broker moves

UBS rates Flight Centre (ASX:FLT) as hold with a reduced price target of $16.10. The pace of the vaccine roll out across the US and UK looks set to drive a re-opening of travel industries though back home, Australia is lagging amid further lockdowns in NSW.

The broker favours stocks with greater exposure to a faster-re-opening, domestic travel and/or specific tailwinds. Therefore, lowers the target price for Flight Centre to $16.10 from $17.70.

Shares in Flight Centre Travel (ASX:FLT) closed 0.9 per cent higher at $14.60 yesterday.


Iron Ore has dropped 3.3 per cent to US$196.06.
Iron Ore futures are pointing to 2.5 per cent fall.
Gold has gained $31.20 to US$1836 an ounce.
Silver has added $0.91 to US$25.78 an ounce.
Oil was up $1.23 to US$73.62 a barrel.


One Australian Dollar at 7:45 AM was buying 73.95 US cents, 53.01 Pence Sterling, 80.98 Yen and 62.21 Euro cents.

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