Wall St mixed, Afghanistan on brink of Taliban takeover, Why Linius is a buy: ASX to edge higher


Major indexes around the globe closed almost lower after weak data out of China pointed to a slowing economic bounce back.

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

S&P 500, Dow Jones taps out a new record high, again

Wall St clawed its way out of a choppy session with the S&P 500 and the Dow Jones tapping a new record high extending their winning streak to a fifth day. Investors were once again cautious around the highly infectious delta variant of coronavirus slowing down economic growth around the world.

China’s economic growth loses steam, oil stocks continue to hurt

Retail sales in China increase by 8.5 per cent from a year ago, lower than the estimated 11.5 per cent. The uptick in Covid-19 cases and flooding last month contributed to the economic uncertainty in the world’s second largest economy according to their National Bureau of Statistics.

These numbers come just a day before the U.S retail sales are set to be released. These are expected to drop on the back of the uncertainty of delta variant and, supply chain bottleneck issues that companies continue to face.

We are also seeing this play out in oil stocks which continue to pressure down the Energy index. Investors are worried about the spread of the coronavirus and that imposed restrictions would decrease oil demand as travel comes to a halt.

All this ahead of the Fed Reserve meeting minutes slated this week, as investors look for clues around when the central bank will consider tapering their asset purchases program and the impact to interest rates.

Afghanistan on the brink of Taliban takeover

Wall St sentiment also flickered following the political turmoil in Afghanistan after the Taliban took control of the country’s capital after the U.S. withdrew forces after decades of investment and occupation there.

The Taliban has almost gain full control in Afghanistan in a very short period. The Afghan president fled the country “to avoid bloodshed” on Sunday indicating that the government had collapse.

Wall closes mixed buoyed by Healthcare and Technology

At the closing bell, the Dow Jones and S&P 500 both gained 0.3 per cent while the Nasdaq fell 0.2 per cent at 14,794 after been down as low as 1.3 per cent earlier.

The yield on the 10-year treasury fell to 1.26 per cent from 1.28 per cent.

Across the S&P 500 sectors, Healthcare and Technology buoyed the index, up 1.1 and 0.4 per cent respectively. Energy and Material stocks continue to be the laggards, down 1.8 per cent and 0.5 per cent respectively followed by Consumer Discretionary and Financials. The rest of the sectors posted gains.

European markets fall as commodity prices dip

Across the Atlantic, European markets closed lower. Paris lost 0.8 per cent, Frankfurt shed 0.3 per cent and London’s FTSE fell 0.9 per cent as commodity prices pressured the resources sector lower. Oil majors BP and Dutch Shell fell over 2.3 per cent as oil prices declined for the third day.

Mining giant BHP dropped 1.8 per cent after announcing it was in talks to sell its petroleum business while Rio Tinto, fell 2.2 per cent.

Asian markets

Asian markets closed mixed as fears of a decelerating Chinese economy was offset by moves from their central bank. China's central bank pumped cash into the financial system to maintain liquidity in the market. The move was intended to maintain reasonable and ample liquidity in the banking system, the central bank said.

Tokyo’s Nikkei dropped 1.6 per cent, Hong Kong’s Hang Seng lost 0.8 per cent and China’s Shanghai Composite eked out a 0.03 per cent gain.

ASX 200 snaps winning streak

Yesterday, the Australian sharemarket closed 0.6 per cent lower at 7,583 snapping its winning streak after investors reacted to extended lockdowns and a clutch of earnings results which failed to leave an impression.

Across the sectors, Consumer Staples was the best performer adding 1.1 per cent with marginal gains from Property and Industrials, up 0.3 per cent followed by Technology, Communications and Healthcare. Energy fell 3.4 per cent followed by Financials and Materials. The other sectors closed in the red.

Shares in Beach Energy (ASX:BPT) tumbled over 9 per cent after reporting 37 per cent drop in full-year net profit.

LendLease (ASX:LLC) fell 7.5 per cent after they shook investors with their weak outlook despite reporting a comeback in their operating profit.

Bendigo Bank (ASX:BEN) plummeted over 9 per cent despite reporting a 51 per cent rise in cash earnings. However, low rates put pressure on the bank's margins.

There were some green shoots amid this. A2 Milk (ASX:A2M) was the best performer, catapulting by 12.1 per cent following media reports suggesting Swiss giant Nestlé is mulling a takeover of the New Zealand dairy producer.

Local economic news

Today the RBA Board is set to issue the minutes of their meeting that was held at the start of this month.

At the meeting, the Board 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 from the economy anytime soon.

This took market participants by surprise as economists expected the central bank to delay the tapering of their asset purchases program. Lockdowns were in force due to the rising cases from the highly contagious delta variant of Covid-19 and the prospect of a contraction in the September GDP was in sight.

To the economic front, ANZ and Roy Morgan are set to release their weekly consumer confidence survey while the Australian Bureau of Statistics have slated their overseas arrivals and departures figures for June for today.

Stock watch

Our weekly stock to watch this week is Linius Technology (ASX:LNU). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Linius Technology as a buy. From a technical angle, Linius Technology is bullish for several reasons.

Support was tested on a number of occasions in June, July and early August. Eventually, the tug-of-war between the buyers and sellers resulted in the buyers coming out on top.

Consequently, support was respected at the 78.6 per cent Fibonacci retracement of $0.02 in mid-August as shown by the orange arrow. Should upward momentum gather traction over the coming month, then higher levels are expected over the broader term. If this preferred scenario was to evolve, then a gradual march towards a band of resistance indicated between $0.075 and $0.085 as highlighted by the light-blue rectangle could potentially be on the horizon.

Lastly, with reference to the Williams %R momentum oscillator (purple line on the lower pane). This oscillator has moved out from oversold territory, which signals a strengthening of upward momentum.

Shares in Linius Technologies (ASX:LNU) closed 10.7 per cent higher at $0.031 yesterday.



Reporting season

There are 12 big names set to report today. ARB Corp (ASX:ARB), Bailador Technology Investments (ASX:BTI), BHP Group (ASX:BHP), Brambles (ASX:BXB), Breville Group (ASX:BRG), Dexus (ASX:DXS), Domain (ASX:DHG), Magellan Financial Group (ASX:MFG), Santos (ASX:STO), SCA Property Group (ASX:SCP), Sims (ASX:SGM) and Woodside Petroleum (ASX:WPL).

Ex dividend

Advanced Share Ltd (ASX:ASW) is paying 3 cents fully franked.
Commonwealth Bank (ASX:CBA) is paying 200 cents fully franked.
Computershare Ltd (ASX:CPU) is paying 23 cents 60 per cent franked.
Dicker Data Limited (ASX:DDR) is paying 9 cents fully franked.
FSA Group Limited (ASX:FSA) is paying 3 cents fully franked.
Genworth Mortgage (ASX:GMA) is paying 5 cents unfranked.
Insurance Australia (ASX:IAG) is paying 13 cents unfranked.
Mineral Resources (ASX:MIN) is paying 175 cents fully franked.

Commodities

Iron Ore has gained 0.9 per cent to US$163.52. Their futures are flat.

Precious metals have rebound against the fall in the 10-yr yield. Gold has gained $11.60 or 1.5 per cent to US$1790 an ounce while silver has added $0.01 or 2.9 per cent to US$23.79 an ounce.

Oil continues to fall, down $1.15 or 0.9 per cent to US$67.29 a barrel.

Currencies

One Australian Dollar at 7:45 AM is softer from yesterday buying 73.39 US cents, 53.03 Pence Sterling, 80.18 Yen and 62.33 Euro cents.

Investor event

Please join us at our next online investor event on Tuesday 24 August at 12.30pm with CEOs presenting from 5 different companies from resources to healthcare. Make your way to fnn.com.au to register for your free spot.

 

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