Fund flows focus on China: ASX to open flat


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US stocks tumbled on Tuesday as worries over global economic growth dented investor appetite for risk assets and Wall Street braced for June inflation data.

Ahead of tomorrow's US June CPI report, analysts are suggesting a 9 per cent headline y/y inflation reading could eventuate.

Stocks fell in the final hour of trading after struggling to pick a direction throughout the day. The major indexes fluctuated between gains and losses, with the Dow up as much as 172 points and down more than 300 points at different stages.

Market participants are keeping a close eye on downside risk to earnings forecasts as companies grapple with rising interest rates and greater inflationary pressures, as Wall Street debates the likelihood of a recession.

The impact, however, won’t hit until companies post third-quarter earnings.

Across the sectors, all major sectors finished the day in the negative led by energy, which tumbled 2 per cent as oil prices declined on fears of a global slowdown. WTI settled down 7.9 per cent with oil moving back below $100/barrel.

Growth lagged value, with MSFT-US and AMZN-US amongst the poor perfomers. Energy, railway (downgrades), software were also areas of weakness. Airlines, media, homebuilders, food, cruiselines were some of the outperformers.

Some beaten-up tech bounced on Tuesday but gave up those gains later in the session. Salesforce and Microsoft each fell more than 4 per cent while Netflix and Alphabet shed more than 1 per cent. Amazon dropped more than 2 per cent.

Twitter shares, which have been volatile after Elon Musk terminated his deal to purchase the social media company, added 4.3 per cent.

Across global equity markets a potential recovery in Chinese stocks is stirring a debate among global investors that were previously burned by Beijing’s harsh regulatory crackdowns: Is it time to get bullish again on China?

Last month, more than $6 billion flowed into the 30 largest international mutual funds that focus on Chinese equities — the highest level since at least early 2021 — according to Morningstar , signalling fresh investor optimism about the battered asset class.

The MSCI China Index, which slid to a five-year low in March, has recovered some losses but was still down 14 per cent in the year to date as of Monday. The Nasdaq Golden Dragon China Index, which includes dozens of U.S.-listed Chinese companies’ ADRs , was down 16 per cent for the year.



A barrage of regulatory measures against internet-platform companies, economic weakness caused by Beijing’s unwavering zero-Covid policy, and heightened geopolitical tensions continue to be a drag on the market.

In currency news the dollar index, which measures the US currency’s performance against six other currencies, continues to hit new highs, bringing the Euro to parity with the US dollar and to its lowest level since 2002 as recession fears heighten in Europe.

The dollar index has been on fire this year, rising nearly 13 per cent. Several Wall Street strategists have warned that this strength in the US currency could spell trouble for corporate earnings ahead.

The surging USD is a symptom of global unease and will make life even more difficult for corporate America moving forward.

Bitcoin futures were off 5.1 per cent and back below the $20K level.

The SPI futures are pointing to a flat start.

Figures around the globe

US markets closed lower. The Dow Jones fell 0.6 per cent to 30,981, the S&P 500 lost 0.9 per cent to 3,819 and the Nasdaq dropped almost 1 per cent to 11,265.

Across the Atlantic, European markets closed higher. Paris added 0.8 per cent, Frankfurt gained 0.6 per cent and London’s FTSE closed 0.2 per cent higher.

Asian markets closed lower. Tokyo’s Nikkei fell 1.8 per cent, Hong Kong’s Hang Seng lost 1.3 per cent and China’s Shanghai Composite closed almost 1 per cent lower.

Yesterday, the Australian sharemarket closed 0.1 per cent higher at 6,606.

Dividends payable

There are a numer of companies set to pay eligible shareholders today:

Ardent Leisure Group (ASX:ALG)
iShares Asia 50 ETF AUD (ASX:IAA)
iShares Core Composite Bond ETF (ASX:IAF)
iShares MSCI Emerging Markets ETF AUD (ASX:IEM)
iShares Europe ETF AUD (ASX:IEU)
iShares Treasury ETF (ASX:IGB)
iShares S&P/ASX Dividend Opportunities ETF (ASX:IHD)
iShares S&P Mid-Cap ETF AUD (ASX:IJH)
iShares MSCI Japan ETF AUD (ASX:IJP)
iShares S&P Small-Cap ETF AUD (ASX:IJR)
iShares MSCI South Korea ETF AUD (ASX:IKO)
iShares Government Inflation ETF (ASX:ILB)
iShares S&P/ASX 20 ETF (ASX:ILC)
iShares Global 100 ETF AUD (ASX:IOO)
ishares Core S&P/Asx 200 Etf (ASX:IOZ)
iShares S&P/ASX Small Ordinaries ETF (ASX:ISO)
iShares MSCI EAFE ETF AUD (ASX:IVE)
iShares S&P 500 ETF AUD (ASX:IVV)
iShares Global Consumer Staples ETF (ASX:IXI)
iShares Global Healthcare ETF AUD (ASX:IXJ)
iShares China Large-Cap ETF AUD (ASX:IZZ)
Perpetual Credit Income Trust (ASX:PCI)

Commodities

Iron ore has fallen 7.2 per cent to US105.80 a ton.

Iron ore futures are pointing to a 1.1 per cent fall.

Gold lost $6.90 or 0.4 per cent to US$1,725 an ounce.

Silver was down $0.17 or 0.9 per cent to US$18.96 an ounce.

Copper was down $14.25 or 4.2 per cent to US$328.80 a pound.

Oil fell $8.25 or 7.9 per cent to US$95.84 a barrel.

On the London Stock Exchange, Rio lost 0.7 per cent, BP fell almost 2 per cent and Shell closed 1.6 per cent lower.

Currencies

One Australian dollar at 7:10 AM has strengthened compared to the US dollar yesterday, buying 67.58 US cents (Tue: 67.36 US cents), 56.88 Pence Sterling, 92.56 Yen and 67.36 Euro cents.


Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics

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