Wall St falls after Kabul blast, Why Platinum is an underperform: ASX to dip

Market Reports

by Melissa Darmawan

Major indexes around the globe sold off ahead of the Fed’s virtual economic symposium at Jackson Hole tomorrow amid the two explosions outside the Kabul airport. Asian markets continued to digest “common prosperity” comments.

The Australian sharemarket is poised to fall with the SPI futures pointing to a modest 0.1 per cent dip.

Wall St falls on Kabul explosions & hawkish Fed view

The major indexes on Wall St closed at session lows after investors heard about the two explosions outside the Kabul airport in Afghanistan. At least 12 U.S. service members died with over 15 injured. Aussie soldiers have been marked as “safe”.

Meanwhile, three of the Federal Reserve’s hawks Esther George, Robert Kaplan and James Bullard urged the central bank to start tapering the asset purchases program. Market participants will look to Fed Chair Jerome Powell at the Jackson Hole meeting tomorrow for his take.

Elsewhere, weekly jobless claims edged up to 353,000 last week from a revised 349,000 according to the Labor Department. The four-week moving average, which smooths out volatility in the weekly figures, fell to 366,500 last week, a new pandemic low

U.S. stocks retreat as energy sector fall

At the close, the Dow Jones lost 0.5 per cent to 35,213, the S&P 500 fell 0.6 per cent to 4,470 while the Nasdaq closed 0.6 per cent lower at 14,946.

All sectors closed lower with Property as the modest bright spot, inched up by 0.1 per cent. Energy declined the most by 1.5 per cent followed by Consumer Discretionary and Communication Services.

The yield on the 10-year treasury note was little unchanged at 1.34 per cent.

European markets dip on miners fall

Across the Atlantic, stocks closed lower. Paris lost 0.2 per cent, Frankfurt fell 0.4 per cent and London’s FTSE slipped 0.4 per cent. Heavyweight miners fell, BHP dipped 1.5 per cent and RIO dropped 2 per cent.

Asian markets are cautious as “common prosperity” continues its tune

Asian markets closed mixed, as investors turned cautious on disappointing earnings, while tech companies took the back foot. In the region, the Bank of Korea became the first major central bank to raise interest rates.

Tokyo’s Nikkei marginally rose 0.1 per cent, Hong Kong’s Hang Seng and China’s Shanghai Composite both fell 1.1 per cent.

Investors also digested further updates around China's drive for "common prosperity". President Xi Jinping's aim to ease inequality does not mean "killing the rich to help the poor", according to an official from the Communist Party.

What is “common prosperity?”

Common prosperity is seen as a more equal society with better social welfare, not egalitarianism. It also includes better public services, stronger social safety nets and a reduced income gap.

How could this impact their economy?

One aspect of the new policies the government may implement to facilitate common prosperity is a shift in the consumption space. This is just one of many areas that might get affected. I’ll just touch on this one.

Within this space, we may see a boost in consumption of staples and some discretionary goods but minimize the growth of high end luxury items. In services, we may see improved public services like transport but on the flipside, the private sector might face restrictions.

Within investments, as the private sector faces tougher regulations, investors may seek opportunities elsewhere. This could be in technology supported by the government, renewable energy, advanced manufacturing sectors, or even opportunities overseas.

Households may pivot funds into financial markets, while the government may be faced with fiscal constraints as they increase social welfare for an aging population.

For now, we will keep a pulse on what evolves around this.

ASX 200 wipes 2-days of gains

Yesterday, the Australian sharemarket closed 0.5 per cent lower at 7,491 erasing two days worth of gains. The local bourse ended its three day winning streak as materials, utilities and technology stocks slid. Communication services closed higher while consumer discretionary just hung onto its gains, followed by Property which closed flat.

Big pendulum swings continued to be felt on a heavy earnings results day.

Investors shovelled into Blackmores (ASX:BKL) closing 15.4 per cent higher after the group’s international and China channels offset weaker conditions in Australia and New Zealand. Their revenue jumped 1.3 per cent to $575.9 million for the financial year 2021. The vitamins company’s outlook remains “positive” in its international and China segments with strong sales momentum starting FY22.

While on the other hand, shareholders took the exit for Appen (ASX:APX) diving 21.4 per cent after they flagged that there will be “moderate” expense growth along with a reduced FY22 EBITDA outlook. The reaction came after they reported profit of $6.7 million, more than half from the $14.9 million last year.

Other standouts include Qantas (ASX:QAN) up 3.5 per cent after announcing plans to resume international flights to countries with high vaccine rates.

Woolworths (ASX:WOW) added 0.4 per cent after they unveiled a $2 billion share buy back and boosted their dividend by 14.6 per cent to 55 cents after a bumper year, thanks to the spin-off of Endeavour Group and a surge in spending due to the pandemic.

For a helicopter view of the companies that reported, click here or join us at Stocks of the Hour here.

Broker moves

Macquarie rates Platinum Asset Management (ASX:PTM) as underperform with a price target of $3.85.

Their FY21 net profit was slightly below the broker’s estimates due to elevated costs. Macquarie notes that their international and asian funds have performed in the red again which is likely to put pressure on flows. Adding to the pressure at the cost line is also likely to weigh on earnings. Their price target is reduced to $3.85 from $4.10.

Shares in Platinum Asset Management (ASX:PTM) closed 9.6 per cent lower at $3.94.

Reporting season

There are eight companies set to report today featuring Auswide (ASX:ABA), BWX (ASX:BWX), Coventry Group (ASX:CYG), Dusk (ASX:DSK), Integral Diagnostics Limited (ASX:IDX), Mayne Pharma Group (ASX:MYX), Resolute Mining (ASX:RSG) and Wesfarmers (ASX:WES).

Ex-dividend

Argo Investments (ASX:ARG) is paying 14 cents fully franked.
Alumina Limited (ASX:AWC) is paying 4.7479 cents fully franked.
Estia Health Ltd (ASX:EHE) is paying 2.3 cents fully franked.
Fiducian Group Ltd (ASX:FID) is paying 14.6 cents fully franked.
Hansen Technologies (ASX:HSN) is paying 5 cents 54 per cent franked.
Johns Lyng Group (ASX:JLG) is paying 2.8 cents fully franked.

Commodities

Iron ore has gained 2.9 per cent to US$152.92. Their futures are pointing to 0.6 per cent fall.

Gold has gained $4.20 or 0.23 per cent to US$1795 an ounce while silver has lost $0.23 or 0.95 per cent to US$23.60 an ounce.

Oil was down $0.94 or 1.38 per cent to US$67.42 a barrel.

Currencies

One Australian Dollar at 7:35 AM was buying 72.40 US cents, 52.85 Pence Sterling, 79.71 Yen and 61.59 Euro cents.

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