Wall St mixed, Reece is a sell for Stock watch: ASX poised to dip

 

A mixed market with the major indexes across the globe as concerns on the pandemic recovery continue to linger ahead of the Fed meeting next week. European markets started the week on a positive note while Asian markets saw a fresh round of regulatory crackdowns. Oil prices rose boosting energy stocks. Metal prices remained elevated. Reece (ASX:REH) is looking soft for a number of reasons covered in Stock watch. 

The Australian sharemarket is set to fall with the SPI futures pointing to a dip of 0.2 per cent.

Wall St closes mixed as energy stocks charge ahead

The Dow eked out a gain after five straight days of losses while the S&P 500 joined the party as gains in energy stocks powered up Wall St. The tech-heavy Nasdaq was left behind, so a mixed market, ahead of the CPI figures tomorrow. Investors are bracing themselves for a raft of economic data this week as they await for the Federal Reserve to meet next week.

Apple shares picked up at 0.4 per cent after closing lower on Friday after the ruling in the antitrust case with Epic games. The federal judge said that app developers do have the right to send users to other platforms to make payments, therefore avoiding the commission that Apple would make from the transaction. Meanwhile, Epic is appealing the decision alleging that Apple has been running a monopoly that stifles competition. The judge had ruled that they failed to make the case in mobile gaming saying “success is not illegal”. Investors have shifted their focus to tomorrow’s launch where the tech titan is set to unveil their new product range.

At the close, Dow Jones gained 0.8 per cent to 34,870, the S&P 500 added 0.2 per cent to 4,469 while the Nasdaq closed 0.1 per cent lower at 15,106.

The yield on the 10-year treasury note fractionally fell at 1.33 per cent while gold prices rose.

Across the sectors on the S&P 500, cyclicals led with only three sectors closing in the red. Energy stocks powered up at 3 per cent as oil prices rose, the clear winner while financials added 1.1 per cent followed by real estate. Healthcare performed lower by 0.6 per cent while utilities shed 0.2 per cent. Materials just didn’t manage to keep their gains, fractionally lower at 0.02 per cent.

European markets rise powered by energy stocks

Across the Atlantic, European markets closed higher after the ECB said that inflation is short term amid rising oil prices giving the energy sector a boost.

Paris added 0.2 per cent, Frankfurt and London's FTSE both rose 0.6 per cent.

Shell and BP surged over 2.3 per cent while heavyweight miners BHP and Rio Tinto added 0.4 per cent.

Asian markets sees fresh crackdowns

Asian markets closed mixed as the regulatory crackdown continues. Tokyo’s Nikkei marginally rose at 0.2 per cent, Hong Kong dived by 1.5 per cent, pressured lower by internet giants after Chinese regulators tightened their grip on the tech sector and China’s Shanghai Composite closed 0.3 per cent higher.

The world’s largest e-payment platform, Ant Group owned by Alibaba, has been reorganising its businesses to comply with the Chinese central bank’s instructions in April. This includes severing its Alipay payments service from other services that offer consumer loans, according to the South China Morning News.

ASX 200 gains for the 2nd day, just

Yesterday, the Australian sharemarket closed 0.3 per cent higher at 7,425 after staging a recovery in the tail end of the session. The pop 30 minutes before the closing bell pushed the local bourse higher for the second day.

The gains were nearly across the board with the unlucky three sectors in the red. We have been seeing this pattern as of late.

Real estate closed 0.4 per cent lower as the worst performer, followed by technology down 0.3 per cent and financials, shed 0.1 per cent. The best performing sector was energy rising 1.25 per cent followed by materials, up 1 per cent. Industrials followed after at 0.3 per cent.

The best-performing stock in the ASX 200 was Pilbara Minerals (ASX:PLS), surging 7.3 per cent at $2.20 followed by shares in Silver Lake Resources (ASX:SLR) and Lynas Rare Earths (ASX:LYC).

The worst-performing stock was Omni Bridgeway (ASX:OBL) tumbled 4.5 per cent at $3.60 as investors mulled on the overturned outcome last week. This was followed by shares in Unibail-Rodamco-Westfield (ASX:URW) and Redbubble (ASX:RBL).

In company news, Sydney Airport (ASX:SYD) jumped 4.6 per cent after receiving a sweetened $8.75 per share takeover bid from Sydney Aviation Alliance. The consortium’s third attempt followed a rebuff on the earlier offer of $8.45 per share, and the initial offer of $8.25.

Qantas (ASX:QAN) lost 0.2 per cent after the ACCC turned down the proposed alliance between Qantas and Japan Airlines. The two flight companies were looking to coordinate flights between Australia and Japan. The competition watchdog deemed the alliance would reduce competition, given that they were accounting for 85 per cent of flights between these destinations before the pandemic hit.

Local economic news

It’s a big day today on this front with quite a bit of data coming out at 11.30am AEST today.

We will see the NAB business survey results for August, then the Australian Bureau of Statistics dropping their residential property indexes for the June quarter along with overseas arrivals and departures for July.

Then at 1pm, the Reserve Bank Governor, Philip Lowe is slated to deliver an online speech with investors keeping note of his tone around the current economic landscape, given the climbing number in Covid-19 cases.

Stock watch

Our weekly stock to watch this week is Reece (ASX:REH). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Reece (ASX:REH) as a sell. From a technical angle, Reece is looking soft for a number of reasons.

At the end of August, a bearish engulfing candle formed.

This is suggestive of a pause in the almost vertical ascent in share price since March 2020 or the Covid-low print of $7.70. Should sellers remain in control over the near term, then support is initially expected at the 38.2 per cent Fibonacci retracement of $18.98.

A decisive break below this level would likely result in a deeper decline towards the 50 per cent Fibonacci retracement of $16.83 over the medium-term.

With reference to the Williams %R momentum oscillator on the lower pane as shown by the purple line. This indicator has moved lower from overbought territory, which signals a weakening of upward momentum.

From a broader perspective, the long-term uptrend remains intact. However, investors should be cautious of further weakness in share price if the bears gain the upper hand.

Shares in Reece (ASX:REH) closed 0.9 per cent higher at $19.43 yesterday.

Ex-dividend

Absolute Equity Performance Fund (ASX:AEG) is paying 2.6 cents fully franked
Breville Group Ltd (ASX:BRG) is paying 13.5 cents fully franked
Glennon Small Companies Ltd (ASX:GC1) is paying 2.2 cents fully franked
IVE Group (ASX:IGL) is paying 7 cents fully franked
Inghams Group (ASX:ING) is paying 9 cents fully franked
Mercury NZ Limited (ASX:MCY) is paying 9.7673 cents unfranked
News Corp (ASX:NWS) is paying 9.471 cents unfranked
PSC Insurance Group Ltd (ASX:PSI) is paying 6.5 cents 70 per cent franked
Sunland Group Ltd (ASX:SDG) is paying 20 cents fully franked
Saunders International Ltd (ASX:SND) is paying 1.7 cents fully franked
Tassal Group Limited (ASX:TGR) is paying 7 cents unfranked
TPG Telecom Limited (ASX:TPG) is paying 8 cents fully franked

Commodities

Iron ore has lost 4.5 per cent to US$123.84. Their futures are pointing to 0.9 per cent fall.

Gold has gained $2.30 or 0.1 per cent to US$1794 an ounce. Silver has lost $0.10 or 0.4 per cent to US$23.80 an ounce.

Oil rose to a six-week high at $0.73 or 1.1 per cent to US$70.45 a barrel on slow output in America after Hurricane Ida and after OPEC+ forecast a stronger demand next year. They expect output to surpass pre-pandemic levels.

Currencies

One Australian Dollar at 7:40 AM has strengthened from yesterday buying 73.70 US cents, 53.28 Pence Sterling, 81.08 Yen and 62.42 Euro cents.

Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Commentators may hold positions in stocks mentioned. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.
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