The ASX is set to dip, following mixed results on Wall St to end last week and ahead of important inflation numbers this week.
ASX 200 futures are down 0.2% to 7,765 points this morning.
Last week, the ASX200 finished 71 points (0.93%) higher at 7,796, supported by gains on Wall Street despite a more hawkish stance from the RBA.
As the end of the financial year approaches, the ASX200 has underperformed compared to many global peers but remains just under 1.5% from its record high of 7,910. Following this week's end-of-month and quarter rebalancing, there is an expectation of a push towards new highs.
On a sector level, Utilities (4.21%), Financials (+2.08%), Health Care (+1.92%) and Telcos (+1.86%) sectors outperformed. Conversely, the Materials (-1.08%), IT (-0.62%) and Industrial (-0.24%) sectors were the main detractors.
At the stock level, Tyro Payments (+16.47%), Drone Shield (+12.71%), Sigma Pharma (+12.50%) and Telix Pharma (+11.02%) achieved double-digit gains. In contrast, Bubs Australia (-10.71%), Mineral Resources (-10.60%), Liontown (-10.10%) and Core Lithium (-9.78%) faced significant declines.
This week, the key event is the release of the Monthly CPI indicator on Wednesday. The market anticipates an increase to 3.8% in May from 3.6% previously. Ahead of this release, the rates market is pricing in about a 15% chance of a 25bp RBA rate hike in August to 4.60%.
What happened last week
US sharemarkets
Ended little changed on Friday with cautious traders. The S&P 500 and Nasdaq indexes closed marginally lower, impacted by a 3.2% decline in Nvidia shares, which weighed down the technology sector.
However, semiconductor stocks Qualcomm, Broadcom and Micron rose 2.2%, boosting the Dow Jones index. The Dow rose by 16 points or 0.04% while the S&P 500 index fell 0.2% and the Nasdaq slid 32 points or 0.2%.
For the week, the Dow rose 1.5%, the S&P 500 gained 0.6% and the Nasdaq remained flat.
European sharemarkets
Closed lower, with technology stocks losing 1.3% and eurozone banks sliding 1.6%. Carlsberg dropped 9.3% after Britvic rejected its US$3.9 billion takeover bid.
The HCOB eurozone composite PMI fell to 50.8 in June from 52.2 in May. The FTSEurofirst 300 index slipped 0.8% but recorded a weekly gain of 0.8%.
The UK FTSE 100 index fell 0.4% but logged a 1.1% weekly advance, ending a five-week losing streak. UK retail sales rose by 2.9% in May.
Currencies
Weakened against the US dollar.
- The Euro fell to US$1.0690.
- The Aussie dollar to US66.40 cents.
- The Japanese yen to JPY159.80.
Commodities
Global oil prices eased due to concerns over global oil demand growth and a strong US dollar.
- Brent crude fell by US47 cents to US$85.24 a barrel.
- Nymex crude dipped US56 cents to US$80.73 a barrel.
- Both benchmarks were up about 3% for the week.
Base metal prices slipped.
- Copper futures dropped 2.7%.
- Aluminium futures dipped 0.4%.
- For the week, copper and aluminium lost 1.3% and 0.3%, respectively.
- The gold futures price fell by US$37.80 or 1.6% to US$2,331.20 ounce on Friday, weighed down by a stronger US dollar and higher US bond yields after data showed strong US business activity.
- Spot gold was trading near US$2,320 an ounce at the US close.
- Bullion dipped 0.8% for the week.
- Iron ore futures slipped US19 cents or 0.2% to US$106.96 a ton on Friday amid talk in the market of a cap on crude steel output in China. The steel-making ingredient posted a fourth straight weekly loss, down 0.3%.
What's next for Australian market?
Wealth Within chief analyst Dale Gillham runs the ruler over what to expect from the local market in the coming weeks.
Last week, buyers regained control, pushing the All Ordinaries Index up by around half a per cent while also continuing the recent pattern of weekly price reversals.
So, with the market still stuck sideways, the critical question now looming is: what will trigger an upward breakout from this sideways movement? The answer lies in the performance of individual sectors, in particular Financials and Materials.
These two sectors account for 50% of the total market weighting for the All Ordinaries Index, meaning their influence on the overall market direction is substantial.
If both sectors experience growth together, the market will rise. Conversely, if both are falling, the index will decline. But what happens if one is rising while the other is falling? Generally, the market moves sideways.
So far this year, the financial sector is up more than 13%, while the materials sector is down over 12%, making it the worst-performing sector.
Given its significant weighting, it's no surprise that the market is struggling to move higher. However, despite being the worst-performing sector, there is a silver lining for materials.
The sector is trading around a crucial support level, which has historically acted as a springboard for price rises.
Since March 2023, each time the materials index has fallen to around 17,000 points — four times so far — it has rebounded. However, with the current price in freefall, holding above the 17,000 point level seems unlikely; therefore, if the index fails to maintain this level, we might see further declines in the short to medium term.
So, what does this mean for the broader market? If the materials sector continues to struggle, the overall market could remain stuck in a sideways pattern. However, if materials can find support and rally from here, it could be the catalyst for further growth in the All Ordinaries Index.
Therefore, keep a close eye on the materials sector, as it is at a pivotal moment, with potential answers to the market's direction just around the corner depending on its reaction to the 17,000 support level.
The small cap market
The S&P/ASX Small Ordinaries (XSO) gained 0.62% to finish the week at 3,004.60. Over the week, the index gained 1.70%.
It has been a quiet start to the week on the news front, but you can read about the following and more throughout the day.
- Strickland Metals Ltd (ASX:STK) has highlighted significant progress and future plans for its wholly-owned Yandal Gold Project. The company is optimistic about the recent and ongoing results from the Palomino, Warmblood and Bronco prospects. The Horse Well area is proving to be a highly significant gold project, with ongoing discoveries of new gold mineralisation, extensions to known deposits and the identification of promising new targets across a vast prospect area. To accelerate exploration efforts, Strickland plans to introduce an additional diamond drilling rig to the Yandal project.
- Alkane Resources Ltd (ASX:ALK, OTC:ALKEF) announced its plans for the next five years of operation at its Tomingley Gold Operations in the Central West of New South Wales. These plans show Tomingley increasing production above 100,000 ounces of gold per annum, with strong resultant cash flow.
- Latrobe Magnesium Ltd (ASX:LMG, OTC:LTRBF) Stage 1 Demonstration Plant Project is progressing positively, with no reportable Health, Safety or Environmental (HSE) incidents to date. During the commissioning trial, the project successfully produced magnesium oxide (MgO) that met the required quality specifications. Following this successful trial, the plant will now move towards continuous MgO production, with revenue from sales anticipated in the near term. LMG is also continuing detailed planning to complete the full construction and commissioning of the Demonstration Plant in preparation for the production of magnesium metal.
- Reward Minerals Ltd (ASX:RWD) has advised that the International Preliminary Examining Authority (IPEA) has provided a positive Preliminary Report on Patentability of its processing technology (Reward Process) for recovery of Potassium Sulphate (K2SO4 or SOP) directly from concentrated seawater and other high-sulphate brines.
- Orion Minerals Ltd (ASX:ORN, JSE:ORN) reported further outstanding assay results from the confirmation diamond drilling program in the Flat Mines area at its Okiep Copper Project (OCP) in the Northern Cape, South Africa. The latest results add further momentum to Orion’s development strategy for the OCP, building on initial results from April and confirming the geology and endowment of the Flat Mines Area.