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Global Market Report - 13 July

Lewis Jackson  |  13 Jul 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to open higher as Wall Street closed at an all-time high, buoyed by Tesla and financials ahead of quarterly earnings. Goldman and JP Morgan report after market close.

The Australian SPI 200 futures contract was up 20 points or 0.28 per cent at 7,272 near 7.10 am Sydney time on Tuesday.

The Dow Jones Industrial Average rose 0.36 per cent to end at 34,996.18 points, while the S&P 500 gained 0.35 per cent to 4,384.63. The Nasdaq Composite climbed 0.21 per cent to 14,733.24.

All three closed at their highest levels ever.

The Australian dollar was buying 74.80 US cents near 7.20am AEST, up from 74.69 at Monday’s close.

Locally, two of the biggest miners on the ASX had whopping gains as investors lapped up China's decision to ease lending rules and ramp up economic activity.

BHP and Fortescue rose by more than three per cent and helped the market higher as investors responded to the People's Bank of China decision late last week.

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Shaw and Partners chief investment officer Martin Crabb said China had for months been trying to lower commodity prices, but the latest decision suggested a change of direction.

"China is saying to its banking sector - we're giving you the green light to lend more money to drive economic activity," he said.

"And any positive for growth in China is positive for commodity stocks and producers."

Australia's miners make much of their money from selling commodities such as copper and iron ore, the latter used to make steel, to China.

IG Markets analyst Kyle Rodda also noted the significance of the central bank ploy.

He said it was a big change to economic policy and sweetened the growth prospects of some ASX stocks.

The mining gains, and a good lead from Wall Street, helped the benchmark S&P/ASX200 index close up 60.2 points, or 0.83 per cent, to 7333.5.

The All Ordinaries closed higher by 59.6 points, or 0.79 per cent, to 7604.9.

In the US this week, investors are focusing on company earnings, starting with major banks.

They will be particularly interested in forecasts about the second half of 2021 as some worry the recent economic surge is waning.

Meanwhile in Australia, the federal government will soon give more financial support for businesses affected by the coronavirus lockdown in Sydney and surrounds.

The lockdown is in its third week and there were 112 infections reported on Monday.

On the ASX, one of the main stories was Wesfarmers' $687 million offer for Australian Pharmaceutical Industries.

Wesfarmers boss Rob Scott said buying the Priceline Pharmacy owner would form the basis of a new healthcare division.

The suitor, which owns the Bunnings and OfficeWorks stores, offered $1.38 for each share it does not own.

API shares were higher by 19.65 per cent to $1.37.

Wesfarmers shares were up 0.5 per cent to $58.29.

While materials shares had the spotlight, property shares were next best and were higher by 1.23 per cent.

Goodman Group rose 2.16 per cent to $21.80.

Information technology and healthcare shares were better by 0.78 per cent and 0.75 per cent respectively.

Market giant CSL rose 1.3 per cent to $279.06.

The big four banks all closed higher by less than one per cent.

Mining services provider NRW Holdings jumped 11.97 per cent to $1.73 after selling mining equipment for $81 million.

Boggabri Coal Operations is buying the equipment from NRW subsidiary Golding Contractors.

NRW will use most of the money to reduce debt.

Stockbroker and investment adviser Bell Financial Group said first-half earnings were likely to be higher by three per cent on the previous corresponding period.

Investing in technology offset better sales and resulted in a profit before tax of $24 million.
Shares were down 6.5 per cent to $1.65.

Spot Gold was down 0.1 per cent at $US1806.17 an ounce; Brent crude was down 0.8 per cent at $US74.93 a barrel, Iron ore was up 1.4 per cent at $US217.85 a tonne.

The yield on the Australian 10-year bond closed at 1.31 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.67 per cent at 3,547.84.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed up 0.62 per cent at 27,515.24.

Japan's Nikkei 225 Index was up 2.25 per cent at 28,569.02.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.69 per cent at 460.83.

The German DAX rose 0.65 per cent to 15,790.93.

North America

Wall Street's main indexes have closed at their highest levels ever, lifted by Tesla and bank stocks as investors eyed the start of the second-quarter earnings season and a batch of US economic data.

The Dow Jones Industrial Average rose 0.36 per cent to end at 34,996.18 points, while the S&P 500 gained 0.35 per cent to 4,384.63. The Nasdaq Composite climbed 0.21 per cent to 14,733.24.

All three closed at their highest levels ever.

The S&P 500 financials, communication services and real estate sector indexes each gained more than 0.8 per cent.

Tesla rallied more than 4.0 per cent and was the top contributor to gains in the S&P 500 and Nasdaq.

CEO Elon Musk insisted in court on Monday he does not control Tesla, and he said he did not enjoy being the electric vehicle company's chief executive as he took the stand to defend the company's 2016 acquisition of SolarCity.

The S&P 500 banks index climbed 1.3 per cent ahead of quarterly earnings reports this week from major banks, including Goldman Sachs and JPMorgan on Tuesday.

JPMorgan Chase rose more than 1.0 per cent and Goldman Sachs rallied more than 2.0 per cent, fuelling the Dow's gains.

Investors will closely watch quarterly reports for early clues on how long the US economic recovery may last, with June-quarter earnings per share for S&P 500 companies expected to rise 66 per cent, according to IBES data from Refinitiv.

The S&P 500 has rallied about 17 per cent so far this year, with some investors questioning how long Wall Street's rally may last and concerned about a potential downturn.

"Earnings season is going to be warmly greeted as an opportunity for existing biases to be confirmed," warned Mike Zigmont, head of trading and research at Harvest Volatility Management in New York.

"Even if forecasts are not as rosy as what the most bullish had hoped, it's all going to get rationalised away."

Focus this week will also be on a series of economic reports, including headline US inflation data and retail sales.

As well, Federal Reserve Chair Jerome Powell is due to appear before Congress on Wednesday and Thursday for views on inflation.

Investors have been concerned about higher inflation and the spread of the Delta coronavirus variant in the past few sessions, with traders seesawing between a preference for economy linked-value stocks and tech-heavy growth names.

Walt Disney jumped over 4 per cent to a two-month high after it and Marvel's "Black Widow" superhero movie took in $US80 million ($A107 million) in its first weekend. And the entertainment company plans to raise prices for its ESPN Plus streaming service.

Didi Global Inc dropped about 7 per cent after it confirmed China's cyberspace administration notified app stores to remove the ride-hailing company's 25 apps and said the move could impact its revenue in the region.

Virgin Galactic Holdings tumbled 17 per cent after the space tourism company said it may sell up to $500 million worth of shares, a day after the company completed its first fully crewed test flight into space with billionaire founder Richard Branson on board.

Volume on US exchanges was 8.3 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favoured advancers.

The S&P 500 posted 66 new 52-week highs and no new lows; the Nasdaq Composite recorded 85 new highs and 38 new lows.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email at: editorialAU@morningstar.com

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