Wall St closes mix as calm returns, Why Adairs is a hold: ASX to dip

 

The Australian sharemarket is set to fall with the SPI futures pointing to a 0.4 per cent drop following Wall St’s mixed performance as the Nasdaq hit a record high while the S&P 500 and the Dow retreated.

The S&P 500 growth index did tip 0.24 per cent higher in morning trade, a new high before nerves jumped in which saw the index give back gains. It meandered between gains and losses as investors digested mixed economic data to close 0.1 per cent lower at 4,242.

The June factory PMI grew faster in May to a new record but the services PMI tripped back from its record expansion though growing at a faster pace than the factory sector. New home sales in May popped a surprise disappointment as it fell 5.9 per cent to a one year low though sales rose 9.2 per cent over the year. Given the tight supply of houses which was seen as a threat to the housing market momentum, economist’s expected a much higher activity.

At the close the blue-chip Dow Jones Industrial Average dipped 0.2 per cent to 33,874 while the tech heavy Nasdaq closed 0.1 per cent higher at 14,272.
Consumer discretionary advanced 0.62 per cent followed by Financials and Energy added over 0.28 per cent while Utilities lost 1.05 per cent as the worst performer.

Market participants seemed to have calmed down following the Federal Reserve’s talks on inflation though they’re now bracing themselves for tomorrow’s central bank’s preferred inflation gauge, which could explain why trading volumes were low this session. The data will cover May’s consumer price index which has seen inflation soar 5 per cent over the year.

Gold gained $6.00 to US$1783 an ounce though failed to gain momentum following last week’s 6 per cent fall. Silver added $0.25 to US$26.15 an ounce.
Bond yields were steady following the mixed economic data. The yield on the 10-year treasury rose 2 points at 1.49 per cent while the 2-year was little unchanged added 1 point.

Oil price was up $0.23 to US$73.08 a barrel close to near 2-year highs which helped the Energy sector on Wall St, while in London trade, BHP and Rio Tinto rose over 0.8 per cent. Iron Ore has gained 0.8 per cent to US$216.01. Its futures are pointing to 1.8 per cent gain.

Across the Atlantic, European markets closed lower, London’s FTSE lost 0.2 per cent, Paris fell 0.9 per cent and Frankfurt closed 1.2 per cent lower while in Asian markets, they closed mixed. Tokyo’s Nikkei lost 0.03 per cent, Hong Kong’s Hang Seng gained 1.8 per cent and China’s Shanghai Composite closed 0.3 per cent higher.

ASX 200 – Wednesday wrap

Yesterday, the Australian sharemarket closed 0.6 per cent lower at 7,298 as Technology shares and Materials led as the broader market closed in the red. Investors chased technology shares after bond yields eased in recent days. The moves followed the Nasdaq which closed at news highs. Investors attention shifted to the growing Sydney Covid-19 cluster and the restrictions enforced late yesterday afternoon. Big names pressured the market with CSL (ASX:CSL) fell 2.1 per cent while health imaging company Pro Medicus (ASX:PME) tumbled 5.3 per cent. Heavyweight miners gained with with BHP (ASX:BHP) up 1 per cent followed by Rio Tinto (ASX:RIO) and Fortescue Metals (ASX:FMG). The best-performing stock in the ASX 200 was Washington H. Soul Pattinson (ASX:SOL), jumped 8.5 per cent after investors continued to mull on their announcement on Tuesday to merge with Milton (ASX:MLT). The worst-performing stock in the ASX 200 was Redbubble (ASX:RBL) fell 6.9 per cent.

Local economic news

Today the Australian Bureau of Statistics is set to release the June business conditions and sentiments survey and the May detailed labour force figures are due.

Company news

Buy now pay later Afterpay (ASX:APT) have expanded their pay-in-4 instalment services to 13 big names in the US with the likes of Amazon, Dell, Nike and Walgreens welcomed aboard. The list of merchants added represents almost half of all the US ecommerce volume. The $35.6 billion company shift gears to allow all customers to be able to make purchases, not just partner merchants. The move follows as the tech star told shareholders in their third quarter profit results in April that they’re mulling on the idea to list on Wall St. Shares in Afterpay (ASX:APT) closed 3.17 per cent higher at $122.90 yesterday.

Broker moves

Ord Minnett downgrades Adairs (ASX:ADH) as a hold with a price target of $4.45. The company has reaped from the elevated demand in the home improvement space over the past 12 months with their sales growth well above average as operating margins appear to be high. The broker suggests this will normalise in FY22 however, following the settlement of online furniture provider Mocka, implied earnings are below its forecasts. Due to this, Ords downgrades its estimates for FY21-23 reducing the target price to $4.45 from $4.50. Shares in Adairs (ASX:ADH) closed 10.96 per cent lower at $4.06 yesterday.

IPOs

Drinks and hospitality provider Endeavour Group (ASX:EDV) is set to make their debut on the ASX today following their demerger with Woolworths (ASX:WOW). The Dan Murphys and BWS liquor chains owner was spun off as Woolies investors voted in favor last Friday to stand as a separate company. Upon listing, the retail supermarket giant will continue to have a 40 per cent stake in the business.

Ex – Div

Fisher & Paykel Healthcare Corp Ltd (ASX:FPH) is paying 20.65 cents unfranked.

Commodities

Iron Ore has gained 0.8 per cent to US$216.01.
Iron Ore futures are pointing to 1.8 per cent gain
Gold has gained $6.00 to US$1783 an ounce.
Silver has added $0.25 to US$26.15 an ounce.
Oil was up $0.23 to US$73.08 a barrel.

Currencies

One Australian Dollar at 7:40 AM was buying 75.74 US cents, 54.24 Pence Sterling, 84.06 Yen and 63.51 Euro cents.
 
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