Dow Today – ASX to rise, Wall St extends bull rally
The S&P 500 advanced 1 per cent, with ten of its 11 industry groups finishing up, paced by communication services, utilities and consumer staples. Facebook surged 5.3 per cent to lead the FANG group; Alphabet rose 3.4 per cent; Apple and Microsoft each added 1.2 per cent.
Local data: NZ trade balance June
Overseas data: Japan July manufacturing, services PMIs; Euro zone July IFO business climate survey; US June new home sales, July Dallas Fed index
ASX futures up 22 points or 0.3 per cent to 7335
- AUD -0.2% to 73.66 US cents
- Bitcoin on bitstamp.net $US as of .. am AEST
- On Wall St: Dow +0.7% S&P 500 +1% Nasdaq +1%
- In New York: BHP +1.1% Rio +0.8% Atlassian +0.8%
- Tesla -0.9% Facebook +5.3% Alphabet +3.4% Apple +1.2%
- In Europe: Stoxx 50 +1.2% FTSE +0.9% CAC +1.4% DAX +1%
- Spot gold -0.3% to $US1802.15/oz in New York
- Brent crude +0.5% to $US74.12 a barrel
- US oil +0.2% to $US72.07 a barrel
- Iron ore -0.6% to $US201.33 a tonne
- 2-year yield: US 0.20% Australia 0.02%
- 5-year yield: US 0.71% Australia 0.61%
- 10-year yield: US 1.28% Australia 1.19% Germany -0.42%
From today’s Financial Review
NSW lockdown needs to be ‘effective’, PM warns
Royal commission gives Crown Melbourne a way out
Elaine Stead’s unbreakable delusion
The politicisation of pandemic punditry
Wall Street gained ground for the fourth straight session on Friday, extending a rally that pushed all three major US stock indexes to record closing highs as upbeat earnings and signs of economic revival fuelled investor risk appetite.
The S&P 500, the Nasdaq and the Dow all notched weekly gains. The Dow finished above 35,000 for the first time.
LPL Financial’s Ryan Detrick: “Although there is nothing necessarily special about milestone numbers, 35,000 is yet another reminder of how far we’ve come. This bull market is alive and well thanks to a very strong economy and record earnings, justifying current levels and likely higher prices in the future.”
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance: “We consider ourselves cautiously optimistic and have stuck with this rally, but a lot of it has been fuelled by extraordinary stimulus measures and as those measures are removed (or more specifically, as the Fed communicates their intention to remove stimulus) then it will be time for a gut check.”
Second-quarter reporting season is firing all pistons, with 120 of the companies in the S&P 500 having reported. Of those, 88 per cent have beaten consensus, according to Refinitiv.
“We’re seeing companies, on average, beat on the top and on the bottom line,” Zaccarelli said. “We’re seeing the resilience of the consumer and that’s been the story of the earnings season so far.”
Analysts now expect aggregate year-on-year S&P 500 earnings growth of 78.1 per cent for the April to June period, a sizeable increase from the 54 per cent annual growth seen at the beginning of the quarter.
European stocks closed at all-time highs on Friday as optimism about the earnings season and the European Central Bank’s pledge of continued monetary support outweighed risks of a resurgence in COVID-19 cases.
The pan-European STOXX 600 index rallied 1.1 per cent to hit a record high of 461.75, and marked a 1.5 per cent weekly rise – its biggest weekly gain since early May.
Auto makers were the top gainers, up 2.5 per cent.
Mercedes-Benz maker Daimler gained 5.5 per cent after Kepler Cheuvreux upgraded its stock to “buy”, saying its growth is not properly reflected in the share price.
French car parts maker Valeo jumped 6 per cent after it posted higher first-half sales and profit, and said it expected the shortage of key technology chips to ease. Peers Faurecia and Continental rose more than 3 per cent each.
Rafale jets maker Dassault Aviation climbed 4.5 per cent on reporting higher sales and profits in the first half, while UK’s Vodafone rose 2.4 per cent after a service revenue beat.
Chip equipment maker ASML hit a fresh record high as strong earnings forecast earlier this week prompted brokerages to hike their price target
China shares ended lower on Friday, trimming gains for the week, as consumer staples, healthcare, and real estate firms dropped while foreign investors turned net sellers under a key cross-border investment channel.
The blue-chip CSI300 index fell 1.2 per cent to 5089.23, while the Shanghai Composite Index lost 0.6 per cent to 3550.40 points. For the week, CSI300 is down 0.1 per cent, while SSEC is up 0.3 per cent.
In a note on Friday, Morgan Stanley suggested investors monitor actual earnings results from Chinese companies within the next few weeks to reconcile positive corporate alerts and declining consensus expectations.
“We suggest more patience… for better calibration of market expectations among other near-term market overhangs including regulatory uncertainties, policy direction debate, and geopolitical tension,” Morgan Stanley wrote.
In Hong Kong, the Hang Seng index fell 1.5 per cent to 27,321.98, while the China Enterprises Index lost 1.7 per cent to 9839.05.
New Oriental Education & Technology Group’s Hong Kong-traded shares plunged 41 per cent to a record low, amid deepening concerns over China’s crackdown on tutoring businesses.
China will crack down on after-school tutoring businesses and ban listings of tutoring institutions, according to a soft copy of a government document circulating on social media. Reuters was unable to immediately verify its authenticity.
TD Securities on this week’s US Federal Reserve meeting: “In what should otherwise be a placeholder meeting, the Fed decision should be the focal point for currency markets. We are nonetheless keen to watch key data points in particularly hawkish regions including CAD CPI and NZ confidence surveys. Solid prints may help to solidify and potentially be early leaders in a rebound vs. an otherwise overpriced USD.”
As for the rates markets, TD said it doesn’t expect the Fed meeting to be a significant Treasury market mover unless chairman Jerome Powell suggests imminent tapering, “but we expect the conversation on timing, pace, and composition of tapering to continue in the background”.
Capital Economics has lowered its outlook for “high beta” G10 currencies: “Our view is that this is as good as it will get. In Norway, New Zealand, and Australia, our policy rate forecasts are broadly in line with investor’s expectations. But given how soon and how quickly rates are now expected to rise, the risks are mainly to the downside.
“In the UK and Canada, we now forecast that policy tightening will be considerably slower than investors anticipate.
“The second reason for our caution is that China’s economy is now clearly slowing, and we expect that trend to continue. We think that, as a result, most commodity prices will fall further. If we are right, that would be a powerful headwind for the commodity currencies, although it is difficult to judge just how significant it would be.”
European Central Bank policymakers do not expect to decide on the future of their emergency bond purchase programme in September as there will still be uncertainty over the path of the pandemic at that point, three sources told Reuters.
World crude steel production for the 64 countries reporting to the World Steel Association was 167.9 million tonnes in June 2021, an 11.6 per cent increase compared to June 2020.
China produced 93.9 million tonnes in June 2021, up 1.5 per cent on June 2020. Earlier this month, China’s statistics bureau reported that crude steel output fell 5.6 per cent in June from a record level in May.
The fall reflects tighter environmental controls and heightened efforts to curtail excess steel output.
In China’s top steelmaking city of Tangshan, “authorities have vowed to punish violations of production restrictions”, ANZ commodity strategists said in a note.
“Some independent rolled steel firms halted production in early July, with more closures expected in coming months,” they said.
Seaborne metallurgical coal prices continued to forge ahead, with active trading observed in both China and ex-China markets on Friday, according to S&P Global Platts. The firm assessed Premium Low Vol up $US2/mt at
$US214.50/mt FOB Australia, and CFR China up $US3/mt at $US318/mt CFR
China on July 23.
Norwegian aluminium maker Norsk Hydro reported a sharp jump in second-quarter core profit on Friday that beat expectations, as global economic recovery supported increased demand for the metal.
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