Wall St falls, BHP's $20b merger with Woodside, Why Pexa is an outperform: ASX to drop


Global markets fell as retail sales data, regulatory scrutiny and mixed company earnings failed to impress investors. U.S. markets closed lower on disappointing retail sales for July. Asian shares dived on regulations for China’s online companies while European markets closed mixed on mild economic growth.

The Australian sharemarket is set to fall with the SPI futures pointing to a decline of 0.5 per cent.

U.S stocks close lower

Wall St closed in the red as investors digest disappointing retail sales amid global Covid-19 concern. The S&P 500 and the Dow retreated from record highs as weakness in the economic data played on investors' minds ahead of the Federal Reserve’s July meeting minutes.

U.S. retail sales dip more than expected, shift to spending on services

Americans cut back on spending last month as a surge in Covid-19 cases kept people out of stores. Retail sales fell seasonally adjusted 1.1 per cent in July from the month before. It was a larger drop compared to the 0.3 per cent dip that was expected by Wall St. According to the U.S Commerce department, sales fell at stores selling clothing, sporting goods and furniture. There was even a slight dip in sales at grocery stores plus a sharp decline in used cars sales, as Amercians shift their spending to restaurants, bars and gas stations.

Homebuilder confidence sinks to 13-mth low as costs bite

There were more concerns from the housing sector with homebuilder confidence falling sharply to a 13-month low. It dropped 5 points to a 75 point reading in August for newly built single-family homes according to the National Association of Homebuilders. Higher construction costs and supply shortages along with rising home prices pushed builder confidence to its lowest reading since July 2020.

Dow snaps winning streak, 10-yr bond yield unchanged

At the close, the Dow Jones shed 0.8 per cent to 35,343, the S&P 500 fell 0.7 per cent to 4,448 while the Nasdaq closed 0.9 per cent lower at 14,656.

Across the S&P 500 sectors, Consumer Discretionary was the worst performer by 2.3 per cent by no surprise, followed by Materials and Industrials. Technology and Financials also closed lower. Healthcare added 1.1 per cent with Real Estate, Consumer Staples and Utilities, more of your defensives, advancing.

The yield on the 10-year treasury note was close to little unchanged at 1.26 per cent.

Tesla, Alibaba & Baidu come under pressure

Tesla lost 3 per cent as regulators investigate the safety of its autopilot system.

U.S. Chinese listed stocks fell after the Chair of the Securities and Exchange Commission warned of the risks in investing in US-listed Chinese stocks. He also put a pause on new IPOs of such companies after Chinese regulators issued draft regulations for the conduct of online businesses. Alibaba tumbled 4.7 per cent and Baidu sunk 5.5 per cent.

European markets digest employment numbers, London FTSE to lose BHP

Across the Atlantic, Paris lost 0.3 per cent, Frankfurt just notched a 0.02 per cent loss while London’s FTSE rose 0.4 per cent, as investors digested improved employment numbers and earnings results.

Miner BHP jumped 3.4 per cent after reporting strong earnings. The heavyweight miner announced it will proceed with the Jansen potash mine development in Canada. Also they unveiled their plans to consolidate their company listing, with the ASX to be their main market. Rio Tinto shed 1 per cent.

Asian markets takes a dive on new online competition regulations

Asian markets closed lower on new online competition and privacy regulations for the internet sector. The latest move in a crackdown on the country's powerful tech companies.

China’s Shanghai Composite tumbled 2.0 per cent, Hong Kong’s Hang Seng dropped 1.7 per cent while Japan’s Nikkei dipped 0.4 per cent on tightened Covid-19 restrictions.

ASX 200 tumbles for the 2nd day

Yesterday, the Australian sharemarket suffered for a second day tumbling 0.9 per cent to 7,511 on concerns about the spread of coronavirus amid a raft of earnings results.

The local bourse saw a heavy sell-off in financial stocks, Materials and Energy which all fell over 1.3 per cent on fears of lowered demand fears. Healthcare added 0.4 per cent while Communication Services and Consumer Staples just clinched onto their gains.

Shares in Commonwealth Bank (ASX:CBA) fell 3.5 per cent as the bank traded ex-dividend after hitting an all-time high last Wednesday.

Westpac declined 1.3 per cent after they warned shareholders of tighter margins and higher costs in their June quarter update, offsetting a share buyback offer.

Magellan Financial (ASXS:MFG) tumbled 10.2 per cent after the investment manager posted a fall in performance fees to $30.1 million for the financial year ended in June.

Santos (ASX:STO) closed 0.8 per cent lower after revealing a 162 per cent boost to their interim dividend for the half year, after their profit sharply bounced back.

On a rosier note, Domain (ASX:DHG) was the best performer, surged 4.7 per cent after declaring a final dividend of 4 cents per share. Its first final dividend since FY19. The real estate business attributed their digital revenue from residential listings as the main driver to their full-year profits.

Local economic news

The Australian Bureau of Statistics is set to release wage price figures for the June quarter.

Westpac group economists expect the wage price index to lift by 0.7 per cent in the June quarter, up from a 0.6 per cent increase in the March quarter.

Reporting season

To reporting season which is in full swing with 22 companies set to release full year figures. Some big names include

Amcor (ASX:AMC), Coles Group (ASX:COL), CSL (ASX:CSL), Domino’s Pizza (ASX:DMP), Fletcher Building (ASX:FBU), Nearmap (ASX:NEA), Pro Medicus (ASX:PME), Saracen Mineral (ASX:SAR), Super Retail (ASX:SUL), Tabcorp (ASX:TAH), Vicinity Centres (ASX:VCX) and Woodside (ASX:WPL) are slated today.

Company news

Mining giant BHP (ASX:BHP) is set to merge with Woodside Petroleum (ASX:WPL) to claim the title of Australia's largest publicly-listed energy company. The $20 billion merger will push the titans to be one of the top 10 energy companies in the world.

As part of the deal yet to be approved by regulators, BHP's oil and gas business would merge with the oil giant Woodside, while Woodside would issue new shares to BHP shareholders.

The merger would see a close to even split in ownership with 52 per cent owned by Woodside shareholders and 48 per cent owned by existing BHP shareholders.

Meanwhile, BHP's annual profit soared by 42 per cent to $US11.3 billion ($15.5 billion) thanks to record production output.

The mining giant’s board declared a 151 per cent boost to their FY21 dividend of US$3.01 per share, a 89 per cent dividend payout ratio.

Shares in BHP Group (ASX:BHP) closed 1.42 per cent lower at $51.33 yesterday.

Broker moves

Macquarie rates Pexa (ASX:PXA) as an outperform with a price target of $20.15. The broker describes the company as a pioneer of digital property settlements. Offshore expansion is the largest swing factor in the broker's valuation with revenue opportunity in England and Wales around 2.3 times of that in Australia.

Macquarie believes that the competition is currently limited in Australia and notes that this is likely to change in the coming years on the launch of exchange interoperability. The broker suggests that the removal of stamp duty would be a handy kicker.

Shares in PEXA Group (ASX:PXA) closed 2.05 per cent lower at $16.70 yesterday.

Ex dividend

Bell Financial Group (ASX:BFG) is paying 4.5 cents fully franked.
ResMed Inc (ASX:RMD) is paying 3.9778 cents unfranked.

Commodities

Iron ore has lost 1.7 per cent to US$160.75. Their futures are pointing to 2.4 per cent fall.

Gold has lost $2.00 or -0.11 per cent to US$1788 an ounce. Silver has fallen $0.13 or -0.5 per cent to US$23.66 an ounce.

Oil was down $0.70 or -1.04 per cent to US$66.59 a barrel.

Currencies

One Australian Dollar at 7:35 AM was buying 72.54 US cents, 52.81 Pence Sterling, 79.51 Yen and 61.97 Euro cents.

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