Wall St slides, OPEC+ agrees to boost oil, OceanaGold +13% gold in Q2, Morgan lifts Spark after $5bn bid: ASX to fall

The Australian sharemarket is set to fall with the SPI futures pointing to a 0.5 per cent dip.

Covid-19 takes the spotlight as stocks fall

Global stocks closed in the red on Friday on growing Covid-19 cases in the U.S. Investors continued to watch earnings season on Wall St for further signs of growth. In Asia, indexes closed mixed on Japan’s steady monetary policy while back home, low rates spur merger and acquisitions spree on the chase of higher valuations.

Wall Street closed lower as the S&P 500 snapped its winning streak in four weeks putting aside strong earnings results.

Trading was choppy after all-time highs were set on Monday. The muted end to the week suggests market participants are taking a cautious approach as uncertainty looms in the second half of the economic recovery. The surge in inflation, talks on the Fed tapering its support is causing investors to ponder on the outlook.

Inflation fears offset retail sales growth

On Friday, Wall St kicked off on a positive start after retail sales rose 0.6 per cent in June beating expectations. Though investors digested the results and switched gears pulling out of cyclical stocks.

The US 10-year treasury bond yields briefly spiked to 1.34 per cent following the retail sales figures, before easing back to 1.30 per cent.

Wall St snaps, S&P 500 fades on Friday

The S&P 500 failed to get momentum as big technology names, banks and companies that rely on consumer spending pressured the index. Energy and industrial stocks pushed the market lower in an attempt to offset gains in Utilities and Healthcare.

This saw the S&P 500 dipped 0.8 per cent to 4,327, the Dow Jones Industrial Average dropped 0.9 per cent to close at 34,688 and the NASDAQ closed 0.8 per cent lower at 14,427.

Intel, Moderna & Didi make headlines

On the corporate news front, Intel fell 1.5 per cent on reports it is in talks to acquire GlobalFoundries for US$30 billion. A move that would power up the semiconductor giant’s plans to produce more chips.

Moderna jumped 10.3 per cent on news it will join the S&P 500, replacing Alexion Pharmaceuticals which shed 0.3 per cent.

Ride hailing Didi Global fell 3.2 per cent after headquarters was raided by regulators as part of their cyber security investigation.

Europe react to WA’s weather impact on iron ore

Across the Atlantic, London’s FTSE closed almost flat as mining stocks weighed on the index. Rio Tinto tumbled 3.4 per cent on news of a drop in iron ore shipments due to storms and labour shortages, BHP fell 1.5 per cent.

Looking at the numbers, London’s FTSE closed largely unchanged at 0.1 per cent, Paris shed 0.5 per cent and Frankfurt closed 0.6 per cent lower.

Asian markets closes mixed on US warning on Hong Kong dealings

Asian markets closed mixed, Nikkei fell almost 1 per cent, China’s Shanghai Composite closed 0.7 per cent lower while Hong Kong’s Hang Seng closed flat, added 0.03 per cent after the U.S. regulators gave warning on companies doing business in Hong Kong.

ASX 200 shakes Covid blues as M&A takes spotlight

On Friday, the Australian share market gained 12 points or 0.2 per cent to close at 7,348. Over the week, it closed 1.03 per cent higher to its best week in six on a backdrop of Covid-19 lockdowns and takeover bids.

Sydney Airport (ASX:SYD) and Spark Infrastructure (ASX:SKI) have rejected bids while Seven Group (ASX:SVG) closed in on Boral extending its offer for another 2 weeks after winning control.

The best performer over the week was Spark Infrastructure (ASX:SKI), up 15.9 per cent while the worst performer for the week was Zip Co (ASX:Z1P), down 16.1 per cent on reports that Apple plans to enter the buy now pay later sector.

OPEC+ agrees to boost oil, gold falls, iron ore futures rise

OPEC+ and its Russia-led oil-producing allies have agreed to pump millions of barrels of bottled-up crude over the next two years. They have committed to restore the cuts made at the start of the Covid-19 pandemic as economies and crude demand recovers.

OPEC plus referred to “the ongoing strengthening of market fundamentals, with oil demand showing clear signs of continued improvement.”

Oil has added $0.16 to US$71.81 a barrel.

To precious metals, gold lost $14.00 to US$1815 an ounce while silver fell $0.60 US$25.80 an ounce.

Iron Ore has lost 0.3 per cent to US$221.43. Its futures suggest a 0.1 per cent gain

Local economic outlook

The highlight this week is the June retail sales figures, minutes from the last RBA meeting and July purchasing managers indexes (PMIs).

First report starts on Tuesday with the weekly ANZ-Roy Morgan’s consumer confidence index followed by the RBA meeting minutes.

On Wednesday, Australian Bureau of Statistics (ABS) is set to release the June retail numbers.

Westpac group economists expect retail sales to show a 0.2 per cent decline as the full impact of Victoria’s restrictions is likely to appear in the figures. They have noted that lockdowns tend to see an increase in sectors like basic food which make up 40 per cent of total retail sales.

On Thursday, ABS has scheduled international trade for June and the weekly payroll and jobs data for the fortnight ending 3 July.

On Friday, we will see IHS Markit release the PMIs for July. Lockdowns are expected to weigh on business conditions.

Local quarterly reporting season continues

Quarterly reporting season continues with over 80 companies set to report this week.

Some of the big names include South32 (ASX:S32) which is slated for today, BHP (ASX:BHP) and Oil Search (ASX:OSH) scheduled on Tuesday with Newcrest Mining (ASX:NCM), Evolution Mining (ASX:EVN) and Santos (ASX:STO) pencilled in on Thursday.

Overseas economic outlook

In the U.S., housing market sentiment, housing starts and existing home sales are set to take centre stage.

Elsewhere, the European central bank is set to hold a policy meeting. It is expected they will maintain their monetary policy stance after announcing last week that 2 per cent is their inflation target allowing for deviation in either direction.

Japan is closed on Thursday and Friday while globally, July PMIs are due on Friday.

U.S. Q2 earnings season continues

The second-quarter earnings season continues with names like IBM, Netflix, Intel, Johnson & Johnson and Twitter set to release their results.

Company news

Dual-listed gold producer OceanaGold (ASX:OGC) has seen a bright spot in their preliminary second quarter results they released after market close on Friday, 15 July. The gold miner produced 12.8 per cent more gold at 93,848 ounces at an all-in sustaining cost (AISC) of US$1,226 per ounce, $3 less per ounce in the second quarter.

The multinational miner reports first half of 2021 production to be 27 per cent higher than the same period in 2020 mainly driven by their Haile gold mine in South Carolina in the USA as it picks up the slack for the other 3 mines.

The success comes after they announced last week that the Philippines government renewed the Financial or Technical Assistance Agreement (FTAA) for Didipio, their gold and copper producing mine situated on the northern end of the Philippines for another 25 years.

The grand news was much enjoyed after the debacle in October last year when the government sealed the area off, halting production as negotiations went underway. A total of 496 staff and 400 contractors were given the sack that were predominantly from local communities. The company’s first priority is rehiring and training its Philippine workforce.

Shares in OceanaGold (ASX:OGC) closed 1.55 per cent higher at $2.62 on Friday.

IPOs

There are seven companies set to arrive on the ASX this week ranging from miners to fintech and insurance providers.

On Tuesday, Western Gold Resources (ASX:WGR) and Western Mines Group (ASX:WMG) are slated.

There are three companies pencilled in on Wednesday from diverse industries.

Life insurance provider NobleOak Life (ASX:NOL) is slated after a capital raise of $62.2 million at $1.95 per share. Real estate payment solutions Openn Negotiation (ASX:OPN) is penciled in. BCAL Diagnostics (ASX:BDX) is pencilled in. They are a biotech company focused on breast cancer testing.

On Thursday Victory Goldfields (ASX:1VG) is pegged in while on Friday, Almonty Industries (ASX:ALL) is in the calendar.

Broker moves

Morgan Stanley upgrades Spark Infrastructure (ASX:SKI) to buy with a raised target price of $2.68 from $2.06 following its takeover bid.

Proposals to acquire the electrical investment manager on Thursday 15 July lead prompted the broker to adjust their longer-term growth and return assumptions.

Morgans estimates that the most recent indicative proposal of $2.7375 per share which Spark rejected, equates to a 27 per cent premium to year-to-date 2021 volume-weighted average price of $2.16 per share prior to the trading halt.

Aside from Spark's interim earnings result on 24 August 2021, annual post-tax revenue model updates for the company's regulated businesses, and progress on renewables developments, the broker sees developments in the potential corporate activity across its stock coverage as the key investor focus area from here.

Morgan Stanley's industry view is cautious.

Shares in Spark Infrastrucutre Group (ASX:SKI) last traded at $2.63, the shares were placed on the Trading halt on Thursday.

Ex-Dividends

Alternative Invest (ASX:AIQ) is paying 0.34 cents unfranked.
Euroz Limited (ASX:EZL) is paying 13.5 cents fully franked.
Plato Income Maximiser Ltd (ASX:PL8) is paying 0.45 cents fully franked

Currencies

One Australian Dollar at 7:45 AM was buying 74.05 US cents, 53.81 Pence Sterling, 81.50 Yen and 62.72 Euro cents.

Source: Finance News Network