Federal Reserve Chair Jerome Powell’s remarks at the Jackson Hole symposium encouraged a rally on Wall St. European equities followed while Asian markets were mixed as China continues to tighten their regulatory grip on tech titans.
The Australian sharemarket is poised to rise with the SPI futures pointing to a bump of 0.2 per cent.Fed Chair is not in a hurry to raise interest rates
Wall Street closed higher on Friday with the S&P 500 and Nasdaq hitting fresh record highs. U.S. stocks rallied on Fed Chair Jerome Powell’s remarks that the central bank is looking to taper their monthly bond purchases this year. However, they won’t be in a hurry to raise interest rates after suggesting that employment rates need to improve first. Let’s take a look at what Mr Powell said.
“At the FOMC's recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year. The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant”.
“We have much ground to cover to reach maximum employment”.
Since March last year, the Fed has been buying US$120 billion in asset purchases every month to help fuel the economic recovery. Equity markets have catapulted to all-time highs buoyed by ultra-low interest rates. Chair Powell also said that the Fed will be following the economic impact of the delta variant of Covid-19.Inflation rise is the fastest pace in 3 decades
On that note, let’s turn our attention to inflation. The central bank’s preferred inflation gauge rose 4.2 per cent in July compared to a year ago. The rate of the increase over 12 months is the fastest pace in three decades. It is also hotter than their annual inflation target of 2 per cent. So far, the Fed’s view on the inflation spike is “transitory” due to the supply chain bottlenecks and rising commodity prices. The monthly increase slowed from 0.5 per cent to 0.3 per cent in July.
While in other economic news, other figures showed that Americans are spending less. The Commerce department said the spending only increased by 0.3 per cent versus 1.1 per cent rise in June. This ties into the belief that the spread of the delta variant is impacting the way Americans spend.
Meanwhile, personal income rose 1.1 per cent in July, in line with the strong jobs growth we saw last month. The rise in income might be good news for consumer spending.Wall St gains while treasury yields dip
At the close, the Dow Jones added 0.7 per cent at 35,456, the S&P 500 added 0.9 per cent to 4,509 and the Nasdaq closed 1.2 per cent higher at 15,130.
The yield on the 10-year treasury note dropped 4 points to 1.31 per cent. Over the week, US 10-year yields gained 6.5 points.
Across the sectors, nine out of the 11 sectors advanced. Energy stocks spiked 2.6 per cent higher as the clear winner, while healthcare closed marginally lower by 0.2 per cent, and Utilities closed little unchanged.Chinese listed stocks on Wall St falls on crackdown
U.S. Chinese listed tech giants fell after the Chinese Government proposed framing up new rules that would ban companies sitting on sensitive information from listing abroad.
The country is also seeking to tighten up regulation of their use of algorithms and, sidelining their cloud computing businesses in a major city.
Amid the news, China’s government is also looking to crack down on what is described as a "chaotic" celebrity fan culture, barring platforms from publishing popularity lists and regulating the sales of fan merchandise after a series of controversies involving artists according to sources at Reuters.
The country's internet watchdog said it would take action against the dissemination of "harmful information" in celebrity fan groups, and close down forums that spread celebrity scandals or "provoke trouble".
Shares in Alibaba tumbled 3.5 per cent while JD.com dropped 0.8 per cent on the news.European markets gains as commodity prices rises
Across the Atlantic, European markets closed higher as commodity prices pushed the major indexes. Paris gained 0.2 per cent, Frankfurt added 0.4 per cent while London’s FTSE rose 0.3 per cent.
Rio Tinto rose 1.7 per cent while BHP spiked 2.2 per cent. Oil heavyweights BP added while Shell gained 1.5 per cent.Asian markets watch China tighten their tech grip
Asian markets closed mixed as the tightening of regulations on tech companies continue. Tokyo’s Nikkei lost 0.4 per cent, Hong Kong’s Hang Seng was flat while China’s Shanghai Composite closed 0.6 per cent higher on Friday.ASX 200 closes flat on Friday, higher for the week
On Friday, the Australian sharemarket closed flat at 7,488. Losses in Consumer Discretionary and Technology could not offset gains in Industrials and Utilities, with the Energy sector added the least by 0.1 per cent.
Corporate earnings were on the lighter side on Friday
fell 2.8 per cent after they announced a 17.1 per cent bump to their full-year dividend, along with a surprise $2.3 billion proposed capital return at $2 per share. They recorded a profit of 16.2 per cent at $2.4 billion compared to the year before. However, the retail giant has already flagged that sales have slowed down for this financial year.
Mayne Pharma shares dropped 11.9 per cent after reporting a full-year loss bigger than expected. The weakened U.S dollar weighed along with challenges due to the Covid-19 pandemic.Local and international economic outlook
Locally, the spotlight will be on the second-quarter GDP numbers and July trade balances. We will also see private sector credit, building approvals, house prices and lending figures.
Overseas, the U.S. job report is slated as well as worldwide manufacturing and services PMI surveys.
Today, the Australian Bureau of Statistics is set to release the business indicators report for the June quarter. Broker moves
Ord Minnett rates Zip Co (ASX:Z1P)
as an accumulate with a price target of $9.50. Their FY21 EBITDA was below the broker’s estimate as costs were higher than expected.
Marketing expenses equated to 1.2 per cent of transaction value and employee expenses were 1.7 per cent. Ord Minnett expects similar percentages in the current financial year. Bad debts are also expected to remain at similar levels.
The broker continues to be impressed by QuadPay, believing this will lead the way in the sector. Accumulate rating retained while the target is reduced to $9.50 from $10.50.
Shares in Zip Co (ASX:Z1P)
closed 2.3 per cent lower at $6.90 on Friday.Reporting season
Keep an eye out for Fortescue Metals (ASX:FMG)
slated to report today. With Adore (ASX:ABY)
, Altium (ASX:ALU)
, Bubs Australia (ASX:BUB)
, Crown Resorts (ASX:CWN)
, Freedom Foods (ASX:FNP)
, Healius (ASX:HLS)
, Invocare (ASX:IVC)
, Keypath Education (ASX:KED)
and Nuix (ASX:NXL)
also pencilled in.Ex-dividends
Ansell Limited (ASX:ANN)
is paying 60.8854 cents unfranked.
Bapcor Limited (ASX:BAP)
is paying 11 cents fully franked.
Beach Energy Limited (ASX:BPT)
is paying 1 cents fully franked.
Capral Limited (ASX:CAA)
is paying 20 cents fully franked.
Credit Corp Group (ASX:CCP)
is paying 36 cents fully franked.
Challenger Limited (ASX:CGF)
is paying 10.5 cents fully franked.
Dalrymple Bay (ASX:DBI)
is paying 4.5 cents unfranked.
Evolution Mining Ltd (ASX:EVN)
is paying 5 cents fully franked.
Gryphon Capital (ASX:GCI)
is paying 0.78 cents unfranked.
Infomedia Ltd (ASX:IFM)
is paying 2.3 cents 70 per cent franked.
Kkr Credit Income Fund (ASX:KKC)
is paying 1 cents unfranked.
Latitude Group (ASX:LFS)
is paying 7.85 cents unfranked.
McMillan Shakespeare (ASX:MMS)
is paying 31.1 cents fully franked.
Oil Search Ltd (ASX:OSH)
is paying 4.6083 cents unfranked.
Perpetual Credit Income Trust (ASX:PCI)
is paying 0.3163 cents unfranked.
Pinnacle Investment (ASX:PNI)
is paying 17 cents fully franked.
Qualitas Real Estate Income Fund (ASX:QRI)
is paying 0.7894 cents unfranked.
360 Capital Enhanced Income Fund (ASX:TCF)
is paying 3 cents unfranked.
VGI Partners Asian (ASX:VG8)
is paying 5.5 cents fully franked.
VGI Partners Limited (ASX:VGI)
is paying 31 cents fully franked.
Woodside Petroleum (ASX:WPL)
is paying 41.0341 cents fully franked.Commodities
Iron ore has surged 3 per cent to US$157.55. Their futures suggest a 5 per cent gain.
Gold added $24.30 or 1.4 per cent to US$1820 an ounce, their biggest daily gain in two weeks while silver gained $0.51 or 2.2 per cent US$24.11 an ounce.
Oil has gained $1.32 or 1.96 per cent to US$68.74 a barrel, their biggest weekly gains in over a year. Energy outlets put a pause on U.S. production in the Gulf of Mexico ahead of a major hurricane expected to hit this week.Currencies
One Australian Dollar at 7:55 AM has strengthened from Friday buying 73.13 US cents, 53.18 Pence Sterling, 80.35 Yen and 62.00 Euro cents.