Total
0
Shares
Market Herald logo

Subscribe

Be the first with the news that moves the market

Australian stocks looked set for a cautious start to a big week of corporate earnings and economic data despite record closes for the Dow and S&P 500.

ASX futures eased nine points or 0.12 per cent to 7313 as weak US consumer sentiment kept Wall Street gains in check. Oil declined. Gold and copper rallied.

The domestic reporting season hits top gear this week with updates from BHP, CSL, Coles, Woodside Petroleum, Santos, Newcrest and Brambles. July employment data and the minutes from this month’s RBA meeting are also on tap (more on all below).

Wall Street

US stocks inched to fresh closing highs as a strong result from Walt Disney helped offset concerns about a collapse in consumer sentiment.

The S&P 500 rose seven points or 0.16 per cent to a fourth straight record close. The Dow Jones Industrial Average added 16 points or 0.04 per cent, also ending at a fourth-straight record. The Nasdaq Composite put on seven points or 0.04 per cent.

The Dow was boosted by a knockout quarter from Disney. Strong subscriber growth at Disney+ and signs of a turnaround at theme parks helped the entertainment giant beat revenue and earnings estimates. The share price gained 1 per cent.  

Consumer sentiment slumped to a ten-year low amid signs a resurgence of Covid cases had a greater impact than economists expected. The University of Michigan’s preliminary consumer sentiment index dropped to 70.2 this month from a final July reading of 81.2. The decline was the third largest in half a century. The reading was the lowest since 2011.

“The renewed plunge suggests the latest wave of virus cases driven by the Delta variant could be a bigger drag on the economy than we had thought,” Andrew Hunter, an economist at Capital Economics, told Reuters.

Covid cases in the US have doubled in the last fortnight to a six-month high. In the wake of the report, stocks and treasury yields declined, while gold rallied. Cyclical sectors retreated. Bond proxies rose as yields fell.

“The pandemic’s resurgence due to the Delta variant has been met with a mixture of reason and emotion… mainly from dashed hopes that the pandemic would soon end,” survey director Richard Curtin said.

US stocks broke fresh ground all week, but gains were muted amid low, holiday-affected volumes. The Dow finished the week 0.8 per cent ahead. The S&P 500 gained 0.7 per cent. The Nasdaq declined 1 per cent as investors favoured cyclical sectors.

Australian outlook

A subdued conclusion to the US trading week offers little direction for this morning’s open. A stark decline in US consumer sentiment suggested consumers are more concerned about Covid than financial markets. Unfortunately, the weekend brought little evidence of improvement here. All of New South Wales entered lockdown, Queensland tightened border restrictions, and stubbornly-high case numbers in Victoria muddied prospects for an end to lockdown.

The S&P/ASX 200 rallied all of last week, finishing at a record. The week finished with a flourish. The index climbed 41 points or 0.54 per cent on Friday for a weekly tally of 1.2 per cent.

Bond proxies outperformed in the US on Friday as yields fell and cyclical stocks weakened. The pick of the sectors were consumer staples +0.81 per cent, real estate +0.68 per cent and health +0.6 per cent. Tech stocks gained 0.54 per cent.

Energy led a decline in sectors most exposed to the economic cycle, falling 1.29 per cent. Financials shed 0.73 per cent and industrials 0.32 per cent. Materials inched up 0.07 per cent.

A huge week of corporate earnings kicks off with updates today from JB Hi-Fi, Bluescope Steel, LendLease, Bendigo Bank, Beach Energy, Carsales.com, GPT, Argo Investments, GWA and Atomos. (Sources for all listings: CommSec, Motley Fool.)

The rest of the week looks like this: Tuesday – BHP, Woodside Petroleum, Brambles, Westpac, Dexus, Magellan, Breville, Shopping Centres Australasia and Domain Holdings.

Wednesday: CSL, Coles, Santos, Vicinity Centres, Tabcorp, OZ Minerals, Super Retail Group, Corporate Travel Management, Domino’s Pizza, Accent Group, Nearmap, Netwealth, Pro Medicus, Emeco, Tassal Group, Aventus and Southern Cross Media.

Thursday: Newcrest, Treasury Wine Estate, South32, Origin Energy, Star Entertainment, Iress, Evolution Mining, ASX, Redbubble, Orora, Perpetual, humm, Airtasker, Data#3 and Integrated Research.

Friday: Cochlear, Stockland, Sydney Airport, Inghams, TPG, Cleanaway, Adairs, Steadfast and MyState.

While corporate earnings will likely set the tone, there are potential mood-changers on this week’s economic calendar. The Reserve Bank releases tomorrow the minutes from this month’s board meeting, which should explain in more detail why the bank decided to press ahead with reducing its bond-buying program.  The decision to “taper” appeared at odds with the economic hit from lockdowns.

The week’s other potential market-mover is Thursday’s July employment report, which may show the first effects of the Greater Sydney lockdown. CBA expects the jobless rate to hold steady at 4.9 per cent. The bank thinks the lockdown is more likely to show in the August report.

The IPO pipeline has temporarily dried up. At this stage, the ASX has no companies listed for the week ahead.

China releases monthly updates today at noon AEST on industrial production, retail sales, employment and asset investments.  

The dollar started a new week in the ascent, rising 0.12 per cent to 73.68 US cents.

Commodities

Oil declined as weak US consumer sentiment signalled potential pressure on demand. Brent crude settled 72 US cents or 1 per cent lower at US$70.59 a barrel.

Gold was supported by declines in the US dollar index and treasury yields. Metal for December delivery settled US$26.40 or 1.5 per cent ahead at US$1,778.20 an ounce. The NYSE Arca Gold Bugs Index climbed 2.04 per cent.

BHP and Rio Tinto firmed in overseas trade. BHP’s US-listed stock improved 1.34 per cent and its UK-listed stock added 1.49 per cent. Rio Tinto rose 0.35 per cent in the US and 0.23 per cent in the UK.

Copper rose after BHP reached a deal with workers at its Escondida mine in Chile to avert a strike. US-traded copper advanced around 0.7 per cent on Comex to US$4.39 a pound.

More From The Market Herald

" ASX Close: Rate-hike fears dampen rally

An early rally largely fizzled out after a hotter-than-expected inflation report sharpened fears official rates may rise as soon as next year.

" ASX Update: Surging inflation, Woolies weigh on market

The share market gave up early gains after the Reserve Bank’s preferred inflation measure jumped more than expected, increasing pressure on the bank

" ASX Today: Flat start ahead of inflation data

Australian shares were set to open little changed ahead of today’s consumer prices report despite another round of records on Wall Street.

" ASX Close: Fifth straight rise but gains dwindle away

The share market’s winning run stretched into a fifth session – just – as gains in tech stocks helped offset declines in defensive