Wall St mixed, Iron ore rebounds, Why Flight Centre takes-off: ASX to fall

 

Mixed market with major indexes around the globe on growing concerns on the impact of the delta-variant of Covid-19. Eurozone traded in the red as caution prevails while China enjoys a surprise surge in exports. Local bourse ekes out a close on a confusing message from the RBA amid stocks trading ex-dividend and volatility in commodity prices.

The Australian sharemarket is set to fall with the SPI futures pointing to a drop of 0.4 per cent.

Caution trading, lower volumes on Wall St

Wall St closed mixed with the tech-heavy Nasdaq eking out a fresh record high as investors took more of a defensive play. Concerns on the impact of the spread of delta variant against the economic outlook weighed while the buying momentum in technology shares slowed down.

UBS cuts GDP forecast, jobless benefits end

This was on the back of Goldman Sach’s economists cutting their GDP forecast for the second time in a month. They’ve lowered their U.S. growth forecast for the year to 5.7 per cent from 6.2 per cent on expectations of a "harder path" ahead for consumers.

This revision followed a weak August jobs report which showed that 235,000 jobs were added into the economy, versus an expectation of 750,000. Also, yesterday the emergency federal jobless benefits came to an end, while another 3 million Americans will lose their additional US$300 to their state unemployment benefits.

This week is lighter on the economic data however, there are further reports to give investors a gauge on the labour market. There is the job openings report for July and the weekly jobless claims. Also some inflation data impacting wholesalers and producer prices are slated for this week.

Nasdaq hits record high, yield rise on 10-year

At the closing bell, the Dow Jones lost 0.8 per cent to 35,100, the S&P 500 fell 0.3 per cent to 4,520 and the Nasdaq closed 0.1 per cent higher at 15,374.

Across the S&P 500 sectors, there were three winners out of the bunch. Communication services added a modest 0.4 per cent followed by consumer discretionary. Technology shares pretty much hugged the flat line but nudged higher by 0.03 per cent. Industrials led the declines by 1.8 per cent followed by materials, real estate and utilities.

The yield on the 10-year treasury note rose to 1.37 per cent.

European markets takes a cautious approach closing lower

Across the Atlantic, European markets close lower ahead of their central bank’s meeting. This comes after the Eurozone's inflation figures hit 3 per cent year-on-year in August, up from 2.2 per cent in July versus their official target of 2 per cent.

Paris lost 0.3 per cent while Frankfurt fell 0.6 per cent. London’s FTSE slid 0.5 per cent after Prime Minister Boris Johnson announced plans to raise taxes to 1.25 per cent to fund the country’s health care and reform the social care system. An upset by many after he vowed not to hike taxes as part of the election.

Heavyweight miners were mixed in U.K. trade. BHP shed 0.3 per cent while Rio Tinto added 0.4 per cent.

Asian markets reaps rewards from exports jump

Asian markets closed higher after China’s exports unexpectedly grew at a faster pace in August, reducing the pressure in a choppy pandemic rebound.

Tokyo’s Nikkei punched through the 30,000 points at the open before closing 0.9 per cent higher in anticipation of the national election, Hong Kong’s Hang Seng added 0.7 per cent and China’s Shanghai Composite closed 1.5 per cent higher.

Exports from China jumped at a faster-than-expected rate of 25.6 per cent in August, compared to a year earlier. That’s a surge from July when exports rose 19.3 per cent year-on-year, also faster than expected reflecting some buoyancy in their industrial sector.

Imports jumped over 33 per cent year-on-year leading to a trade surplus of US$58.3 billion for August.

This better-than-expected trade data has offset some worries around China’s economy showing signs of slowing down. Along with the crackdown we have seen in their technology, education and real estate sector. Not to mention, reining in their steel production as they look to limit their carbon footprint.

ASX 200 ekes out a gain as RBA prepares to taper

Yesterday, the Australian sharemarket eked out a gain by 2 points at 7,530 after a bumpy session in the red.

The market moves were mainly driven by stocks trading ex-dividend, the continued tumble in the iron ore price and anticipation around the central bank’s moves. Also big players like CSL (ASX:CSL) added 1.5 per cent to help the index with the XJO’s recovery.

Across the sectors, energy added 0.8 per cent with communication services slightly in front, up 0.9 per cent. Materials was the worst performer, down 0.8 per cent while consumer staples shed 0.2 per cent.

The best performing stock in the ASX 200 was Chalice Mining (ASX:CHN) surging 6.3 per cent higher at $7.38 followed by Flight Centre (ASX:FLT), up 6.2 per cent then Technology One (ASX:TNE).

The worst performing stock was in the ASX 200 was Regis Resources (ASX:RRL), down 4.6 per cent at $2.28 followed by Appen (ASX:APX) and Mineral Resources (ASX:MIN).

RBA leaves confusing note while the Aussie dollar skids

The Reserve Bank surprised market participants with a confusing message around their monetary support. The central bank kept rates unchanged but stuck to their tune in winding back their asset purchases program. This is designed to help keep interest rates low and our Aussie dollar attractive.

Instead of pumping $5 billion per week into the economy, it will be reduced to $4 billion per week, but they’ve pledged to extend the program to February next year. Initially, it was till November, however with the lockdowns and the September GDP forecast set to contract, economists expected the program to be delayed.

One move that didn’t delay on the news was the Aussie dollar. Upon the announcement of the tapering of the program, the Aussie dollar jumped while the ASX fell then on news of the extension of the program, we saw the reverse so some nervous moves there.

Iron ore price tumbles while coal price stays firm

In addition to this, the tumble in the iron ore price also put pressure on the dollar and the local bourse. Miners declined further in the red. Fortescue Metals (ASX:FMG) fell 3.1 per cent to $17.99 for the first time since December, BHP (ASX:BHP) shed 0.4 per cent to $42.04 and Rio Tinto (ASX:RIO) dropped 1.8 per cent to $108.70.

Meanwhile, coal prices have surged which helped the likes of Whitehaven Coal (ASX:WHC), up 3.1 per cent to a 21-month high of $2.98.

Local economic news

The Australian Bureau of Statistics has pencilled in their release of their labour account report for June. The report will give us a glimpse on the number of people who work multiple jobs and other employment data.

Elsewhere, the Reserve Bank Deputy Governor, Guy Debelle is set to deliver an online speech at TradeTech FX.

Broker moves

Credit Suisse upgrades Flight Centre (ASX:FLT) to an outperform with a price target of $19.

The broker sees Flight Centre’s large exposure to Australasian sales, in particular their international outbound channel. This company was initially their least preferred stock in their coverage. However, with progress on the vaccinations and a better break-even opportunity, the rating is upgraded to outperform. Now, the broker sees this company as a pick.

The broker observed that their corporate division had been steadily gaining market share and continues to be a high-quality business. Target is raised to $19 from $18.

Shares in Flight Centre (ASX:FLT) jumped 6.2 per cent higher at $18.59.

Ex-dividend

We have more stocks going ex-dividend so keep an eye out on these companies potentially trading lower today. 

Adairs Limited (ASX:ADH) is paying 10 cents fully franked
Antipodes Global Investment Company (ASX:APL) is paying 4 cents fully franked
Austal Limited (ASX:ASB) is paying 4 cents unfranked
AUB Group Ltd (ASX:AUB) is paying 39 cents fully franked
AVJennings Limited (ASX:AVJ) is paying 1.8 cents fully franked
Accent Group Ltd (ASX:AX1) is paying 3.25 cents fully franked
Blackmores Limited (ASX:BKL) is paying 42 cents fully franked
Brambles Limited (ASX:BXB) is paying 14.24 cents 30 per cent franked
Clearview Wealth Ltd (ASX:CVW) is paying 1 cents fully franked
Emeco Holdings (ASX:EHL) is paying 1.25 cents fully franked
Kip McGrath Education Centres (ASX:KME) is paying 1 cents fully franked
Money3 Corporation (ASX:MNY) is paying 7 cents fully franked
Medibank Private Ltd (ASX:MPL) is paying 6.9 cents fully franked
Pacific Group Ltd (ASX:PAC) is paying 26 cents fully franked
St Barbara Limited (ASX:SBM) is paying 2 cents fully franked
Seek Limited (ASX:SEK) is paying 20 cents fully franked
SRG Global Ltd (ASX:SRG) is paying 1 cents fully franked
Shaver Shop Group Ltd (ASX:SSG) is paying 5 cents fully franked
Thorney Opportunities Ltd (ASX:TOP) is paying 1.35 cents fully franked

Commodities

Iron ore has gained 4.2 per cent to US$137.97. Their futures are pointing to 0.5 per cent gain.

Gold has lost $35.20 or 1.9 per cent to US$1799 an ounce while silver has fallen $0.43 or 1.7 per cent to US$24.37 an ounce.

Oil was down $0.94 or 1.4 per cent to US$68.35 a barrel.

Currencies

One Australian Dollar at 7:30 AM has weakened slightly buying 73.89 US cents, 53.61 Pence Sterling, 81.48 Yen and 62.39 Euro cents.
 
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Source: Finance News Network