Wall St rises, Tencent tumbles on crackdown fears, Why Resolute's rating got a hike: ASX to rise

Market Reports

by Melissa Darmawan

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

Major indexes closed mixed around the globe amid earnings season as fears crept in on Covid-19 concerns. In China, investors' jitters surged on renewed clampdown fears that Chinese regulators have their eyes set on the gaming industry.

Stocks closes higher shrugging off a slow start

Stocks on Wall Street shrugged off a slow start and closed higher as the S&P 500 hit record highs amid earnings results. More company earnings took the spotlight reporting mixed results featuring Ralph Lauren, jumped 6.1 per cent and cleaning products company Clorox, sunk 9.5 per cent as consumers pullback on buying cleaning products.

Despite recent above expectation figures on the top and bottom line, Wall St have been cautious as investors watch the spread of the delta variant of Covid-19 play out amid a reopening economy.

S&P 500 hit new highs, Communication Services lag due to gaming stocks

At the close, the Dow Jones added 0.8 per cent to 35,116, the S&P 500 also rose 0.8 per cent to 4,423 while the Nasdaq gained 0.6 per cent to 14,761.

Across the S&P 500 sectors, gains were mainly across the board with Communication Services as the outlier, down 0.2 per cent due to weakness in gaming stocks which I will touch on shortly. Technology, Financial, Healthcare and Industrial stocks led the rally with Energy as the best performer, up 1.8 per cent.

US treasury yields were relatively stable with the 10-year near 1.175 per cent.

June factory orders stronger than expected on order demand

June factory orders rose 1.5 per cent in June after its 2.3 per cent jump in May beating economist’s expectations on surging order demand as Americans stayed at home. This saw a boost in manufacturing which contributes 11.9 per cent to their economy. The demand though is putting a strain on the supply chain yet those signs are set to ease.

As the economy continues to reopen and more people getting vaccinated, spending has shifted to services rather than goods as Americans venture their way out to travel, dine and attend sporting events which was at a standstill at the start of the pandemic where these numbers are likely to shift in the future.

European markets closes mixed as miners advance

Across the Atlantic, European markets closed mixed. Paris gained 0.7 per cent, Frankfurt closed 0.1 per cent lower while London’s FTSE added 0.3 per cent led by upbeat earnings and continued investor optimism. Miners Rio Tinto added 1.0 per cent and BHP rose 0.7 per cent.

Asian markets fall spooked by online gaming likened to as a drug

Asian stocks fell after Chinese state media called online gaming as “spiritual opium” and likened it to taking drugs. Shares in Tencent closed over 6 per cent lower after dipping as low as 11 per cent, while fellow online gamer NetEase closed over 7 per cent lower in Hong Kong.

Tencent then responded by announcing new limits on how much time minors can play video games in China. Investors are worried that Chinese authorities could crack down in the gaming sector as it has done in the property, education and technology space last week in a bid to maintain equality.

Tokyo’s Nikkei fell 0.5 per cent, Hong Kong’s Hang Seng lost 0.2 per cent and China’s Shanghai Composite closed 0.5 per cent lower.

ASX takes a breather while tech continues to rally

Yesterday the Australian sharemarket closed 0.2 per cent lower at 7,474 taking a breather from record highs as miners and banks pressured the index. Oil stocks also dragged after a 3 per cent plunge in global oil prices on Monday.

Technology sector climbed for another day, up 4.4 per cent after rising 6.5 per cent on Monday on the monster splurge from Square to takeover Afterpay news. Contributing to the gains was Utilities adding 0.9 per cent followed by Healthcare. The biggest decliner was Energy, down 1.4 per cent.

RBA holds rates, sticks to plan to taper while property prices surge

On the economic front, the RBA kept rates steady at 0.1 per cent and stuck to its original plans to wind down stimulus starting in September as outlined last month, though reaffirmed that it wasn’t going to take away its support form the economy anytime soon.

“The economic recovery in Australia has been stronger than was earlier expected. The recent outbreaks of the virus are, however, interrupting the recovery and GDP is expected to decline in the September quarter,” governor Philip Lowe said in his monthly statement.

“The economic outlook for the coming months is uncertain and depends upon the evolution of the health situation and the containment measures.”

“The experience to date has been that once virus outbreaks are contained, the economy bounces back quickly”.

It is positive news for homeowners but not those looking to step foot into the property market with low rates driving property prices higher.

Property prices have surged 16.1 per cent in the last 12 months according to CoreLogic with the median property price in Sydney now over $1 million versus $875,749 a year ago.

"Housing markets have continued to strengthen, with prices rising in all major markets," said Dr Lowe.

Local economic news

Today the Bureau of Statistics is set to release retail trade figures for June.

Preliminary estimates show a 1.8 per cent decline in retail sales led by a 3.5 per cent drop in Victoria and a 2 per cent fall in NSW, both impacted by lockdowns and flooding on parts of the east coast. Food is expected to rise 1.5 per cent, likely boosted by stockpiling with all other segments set to post significant declines.

Reporting season

There are a number of companies reporting today, BWP Trust (ASX:BWP), GUD Holdings (ASX:GUD), ALE Property (ASX:LEP) and Alliance Aviation (ASX:AQZ).

Broker moves

Macquarie upgrades Resolute Mining (ASX:RSG) to outperform with a price target of $0.60. The gold miner’s June quarter production was softer than the broker expected though their Syama sulphides were solid despite power interruptions and an extended shutdown of the mill. The upgrade in its rating to outperform from neutral is due to recent weakness in the share price. Shares in Resolute Mining (ASX:RSG) closed 5.5 per cent higher at $0.58 yesterday.

Ex-dividend

AMCIL (ASX:AMH) is paying 4.5 cents fully franked.

Commodities

Iron Ore has gained 0.1 per cent to US$184.67.
Iron Ore futures are pointing to 1.8 per cent fall.
Gold has lost $8.10 to US$1814 an ounce.
Silver has added $0.01 to US$25.58 an ounce.
Oil was down $0.70 to US$70.56 a barrel.

Currencies

One Australian Dollar at 7:45 AM has strengthen from yesterday 73.95 buying US cents, 53.16 Pence Sterling, 80.65 Yen and 62.35 Euro cents.

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