Wall St mixed, U.S inflation rose at a slower pace, Bumble rose as Virgin Galatic falls, Why James Hardie is a buy: ASX poised to open higher


Major indexes around the globe continued its trend as investors' nerves eased on the lower-than-expected rise of the U.S consumer price index. M&A activity in Europe helped their climb while the earnings season on the local bourse heats up.

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

Wall St closed mixed as the Dow Jones and S&P 500 hit record highs as optimism continues to linger following the bipartisan infrastructure deal, amid core inflation numbers coming in lower-than-expected.

U.S consumer prices rose in July with signs of inflation cooling down

Consumer prices rose 0.5 per cent in July, down 0.9 per cent from the month prior. From a year-over-year perspective, it’s sitting at 5.4 per cent.

This figure looks at what Americans pay for goods and services, including groceries, clothes, meals when you eat out, recreation, and vehicles as inflation spreads in everyone’s lives when factoring your spend versus your wages.

Gas prices rose 2.4 per cent in July while grocery prices picked up 0.7 per cent, both categories rising at a slightly slower monthly pace than in June.

Diving deeper into supermarket items, prepared salads and pork roasts and ribs climbed over 4 per cent. However, prices for fruits and vegetables fell after rising in June with orange prices falling 6.8 per cent.

New car prices rose 1.7 per cent while used car prices which soared over the past three months ticked up just 0.2 per cent in July on the back of the semiconductor shortage we are seeing. Airline fares which took-off in June slowed down at 0.1 per cent.

Techs lag as Nasdaq closes in red

At the closing bell, record closes again were seen with the Dow Jones added 0.6 per cent to 35,485, the S&P 500 gained 0.3 per cent to 4,448 while the Nasdaq continued to lag, closing 0.2 per cent lower at 14,765.

Across the S&P 500, the rally was almost seen across the board. Materials, Industrial and Financials sector made solid gains, up over 1.2 per cent and helped counter the only losing sector, Healthcare shed 1 per cent.

Bond yields eased back while gold rose after reaching 1.36 per cent intraday with the yield on the 10-year treasury slipped to 1.33 per cent from 1.34 per cent.

Infrastructure stocks continued to climb for the second day with heavy machinery maker Caterpillar, surged 3.5 per cent while Deere and Co rose 2.5 per cent.

Caterpillar & Bumble surges, Virgin crashes

Dating app Bumble rose 2.2 per cent ahead of their earnings results. Revenue came in after market close above expectations, up 55 per cent to US$127 million with a surge in paid users in the quarter.

Virgin Galactic crashed 12.7 per cent after a broker downgraded the stock due to a prolonged period of no flights despite its successful space flight with Richard Branson on board in July. Investors realised how deep their pockets need to be and the impact on demand at their US$450,000 ticket price on a 1h space trip.

European markets hit new highs on M&A activity

Across the Atlantic, the major indexes rose with a new peak seen. Paris gained 0.6 per cent, Frankfurt rose 0.4 per cent and London’s FTSE added 0.8 per cent to an 18-month peak with further mergers and acquisition action in play. Miners were mixed, BHP rose 0.5 per cent while Rio Tinto shed 1 per cent.

Aerospace supplier Meggitt skyrocketed 16.1 per cent before closing in the red, following a US$9.7 billion takeover offer from US rival, TransDigm Group.

Cyber security company Avast surged 2.3 per cent after Nasdaq listed NortonLifeLock’s bid to acquire Avast for US$8.6 billion.

Asian markets

Asian markets rose, Tokyo’s Nikkei closed higher for the fourth consecutive session underpinned by stronger than expected earnings figures adding 0.7 per cent, Hong Kong’s Hang Seng rose 0.2 per cent and China’s Shanghai Composite gained 0.1 per cent as real estate and banks offset losses by healthcare and consumer staple shares.

China's second-largest property developer Evergrande revealed they were in talks with several third-party investors on spinning off certain assets. The stock surged as much as 12 per cent in Hong Kong.

In Japan, Bridgestone jumped over 5 per cent after the tyre company upgraded its annual forecast after reporting strong quarterly earnings.Japanese conglomerate Softbank added 1 per cent after their quarterly results were pressured 39 per cent lower by its exposure to Chinese companies like Alibaba and DiDi. The $7.1 trillion conglomerate said they have pressed the pause button on making Chinese investments until the regulatory action against the country’s tech companies plays out.

ASX 200 bulls hit fresh highs fuelled by earnings & miners

Yesterday the Australian sharemarket closed 0.3 per cent higher at 7,584 closing once again with another record high. The ASX bulls rallied near the 7600 mark fuelled by earnings results from a few big players on the index.

The nation’s largest bank Commonwealth Bank (ASX:CBA) surged 1.5 per cent after posting a boost to their dividend and a $6 billion share buyback on a 20 per cent jump in cash profit.

Heavyweight miners rose on optimism of increased demand for materials after the US$1.2 trillion infrastructure bill passed the senate. Rio Tinto (ASX:RIO) snapped its four straight days of losses to close 1.3 per cent higher.

Insurance Australia (ASX:IAG) fell 2.7 per cent after disappointing results despite squeezing out a dividend amid its loss.

Trading platform provider IRESS (ASX:IRE) jumped 5.8 per cent after EQT raised its offer to $15.91 per share after Iress knocked back two offers just not long ago. Talks are still on the go.

Utilities was the best performer, up 1.9 per cent followed by gains in Materials, Energy, Financial coming in 0.9 per cent higher with Consumer Staples adding 0.2 per cent. Communication Services fell 0.8 per cent with Technology just behind while the other sectors closed in the red.

Local economic news

Today the Melbourne Institute has scheduled their consumer inflation expectations figures for August where we will get a gauge of household views on food, fuel and dwelling price pressures.

Reporting season

Today we have 9 companies reporting along with trading updates from ANZ (ASX:ANZ) and National Australia Bank (ASX:NAB) following Commonwealth Bank’s bumper earnings result yesterday, so investors will keep an eye out for any clues.

Today AGL (ASX:AGL), AMP (ASX:AMP), Charter Hall Social Infrastructure REIT (ASX:CQE), Downer EDI (ASX:DOW), Goodman Group (ASX:GMG), Mirvac (ASX:MGR), PM Capital Global Opportunities Fund (ASX:PGF), QBE (ASX:QBE) and Telstra (ASX:TLS) are slated.

Broker moves

Citi upgrades building product supplier James Hardie (ASX:JHX) as a buy with a price target of $56.20. Citi expects earnings momentum will remain in the company's favour amid a multi-year recovery in US housing after their first quarter result revealed a strong uptake of high-value products along with volume growth.

While expectations are running high, the broker still considers the stock attractive on a price earnings relative basis and upgrades to buy from neutral, raising its target price to $56.20 from $46.20. The medium-term prospects of Colorplus and textured panels underpin forecasts for average selling price growth of 6.8 per cent and 6.3 per cent in FY23 and FY24, respectively.

Shares in James Hardie (ASX:JHX) closed 1.4 per cent higher at $50.00 yesterday.

Ex-dividend

Two companies are going ex-dividend, so we might see a dip in the share price today in ratio to their dividend.

Rio Tinto (ASX:RIO) is paying $7.60 fully franked.
Mayfield Childcare (ASX:MFD) is paying 2.47 cents fully franked.

IPO

Cannon Resources Limited (ASX:CNR) is set to list on the ASX today.

Commodities

Iron Ore has gained 1.9 per cent to US$165.48. Its futures are pointing to 1 per cent fall.

Gold has added $21.60 or 1.3 per cent to US$1753 an ounce while silver has gained $0.10 or 0.4 per cent to US$23.49 an ounce.

Oil was up $0.96 or 1.4 per cent to US$69.25 a barrel after the Biden administration said OPEC+’s decision to gradually ease production cuts is “simply not enough” during a “critical moment in the global recovery.”

Currencies

One Australian Dollar at 7:45 AM a touch weaker from yesterday buying 73.78 US cents, 53.21 Pence Sterling, 81.45 Yen and 62.88 Euro cents.
 
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