The ASX is expected to rise higher today. ASX 200 futures are up 0.3% to 6,597 this morning.
The upward trend follows Wall Street’s mixed finish last week with the technology-heavy Nasdaq Composite ending higher as the Dow Jones Industrial Average and S&P 500 index slipped after a stronger-than-expected June jobs report.
All three major benchmarks gained on the week, with the Nasdaq leading the way up.
The Dow Jones Industrial Average 46.40 points, or 0.1%, to close at 31,338.15 on Friday, while the S&P 500 dipped 3.24 points, or 0.1%, to finish at 3,899.38, snapping for straight days of gains. The Nasdaq Composite gained 13.96 points, or 0.1%, to end at 11,635.31, a fifth straight day of gains that marks its longest winning streak since November.
Here’s what we saw (source Commsec):
- The Euro rose from lows near US$1.0076 to highs near US$1.0188 and was near US$1.0185 at the US close.
- The Aussie dollar lifted from lows near US67.93 cents to highs near US68.73 cents and was near US68.55 cents at the US close.
- The Japanese yen eased from near 135.50 yen per US dollar to near JPY136.55 and was near JPY136.10 at the US close. The yen rose 0.5% immediately after former Japanese prime minister Shinzo Abe was assassinated in Nara but ceded most of those gains.
- Global oil prices climbed by 2% on Friday. But oil posted a weekly decline as investors worried about a potential recession-driven demand downturn even as global fuel supplies remained tight.
- The Brent crude price rose by US$2.37 or 2.3% to US$107.02 a barrel.
- The US Nymex crude price added US$2.06 or 2.0% to US$104.79 a barrel. Brent posted a weekly decline of US$4.61 a barrel or 4.1% and the Nymex a loss of US$3.64 a barrel or 3.4%.
- Base metal prices were mostly lower on Friday. Copper fell by 0.3% extending its losing streak to five weeks to be down 3.1% on global growth concerns. Lead lost 2.5% but nickel rose 0.2% on Friday. Tin shed 4.9% over the week, but zinc was up by 3.0%.
- The gold futures price rose by US$2.60 or 0.1% to US$1,742.30 an ounce. Spot gold was trading near US$1,742 an ounce at the US close. Over the week, gold fell by US$59.20 an ounce or 3.3%.
- The iron ore futures price shed US42 cents or 0.4% to US$113.76 a tonne. For the week, iron ore slid by US$1.47 a tonne or 1.3%.
Australian market
Best and worst performing sectors last week
The best performing sectors were Information Technology, Consumer Discretionary and Healthcare, all up over 5%. The worst performing sectors included Materials down over 2% followed by Energy down over 1% and Industrials just in the red for the week.
Best performers in the S&P/ASX top 100 stocks include Xero Limited up over 11% followed by WiseTech Global Ltd and Block Inc (NYSE:SQ), both up over 10%. The worst-performing stocks were Lynas Rare Earths Ltd down over 10% followed by Iluka Resources Ltd (ASX:ILU) down over 6%, while ALS Ltd and South32 Ltd (LSE:S32, ASX:S32, OTC:SHTLF, JSE:S32) both are down more thasn 5%.
What’s next for the Australian stock market?
As he does each week Wealth Within founder and chief analyst Dale Gillham gives his insight into what to expect from the Australian stock market.
“The Australian stock market was up strongly at the start of the week rising over 1% but in the following three days it did not follow suit. For the Australian stock market to have any chance of being bullish in the coming weeks, prices needed to hold and preferably trade higher on Friday.
"That said, regardless of where the market closed on Friday (the ASX 200 recovered all of Thursday’s losses with a 1.9% rebound to close at 7,075.1, but it was not enough to prevent it finishing in the red for a fourth week in a row), it is still too early to tell if the All Ordinaries Index has stopped falling.
“What is alarming is that retail investors are ignoring the warning signs and buying stocks hoping and, I dare say, praying for them to rise, as there is movement in many speculative stocks as these investors chase short-term returns.
"We are also seeing movement in technology, as well as other stocks that have been hard hit by the downturn as investors continue to speculate. As we know, anything can happen but all too often these investors get burnt.
“While it is possible they are right and the market has bottomed, the All Ordinaries Index is far from convincing, which is why it is far better to err on the side of caution. Given this, I am still recommending that investors sit tight and get ready for the next opportunity to buy that will come in the not-too-distant future.”
US markets
Are there opportunities?
Global equities boutique manager Bell Asset Management (BAM) believes the drawdown in the United States over the last six months will lead to a favourable environment with the emergence of good buying opportunities.
BAM Portfolio manager Adrian Martuccio said while most US companies were more sanguine than usual, there were also many that continue to be enthusiastic.
“A lot of the companies we spoke to said margin expectations across the market are still too high so consensus forecasts need to come down. This is likely to take another couple of quarters.
“Stock prices have factored a lot of this in, but it will be hard for companies to rally convincingly in the face of downgrades.
“Companies in our portfolios such as Jack Henry, Honeywell (NYSE:HON), ICON and Ritchie Brothers continue to be optimistic as they have robust balance sheets, sustainable franchises and are well-positioned to weather a high inflationary environment,” Martuccio said.
As with all analysts, Martuccio says inflation will remain a key issue for some time.
“Input cost inflation only started in March and April of this year so we believe the full margin effect is unlikely to be seen until closer to the end of this year,” he noted.
While the NASDAQ had a good week last week, tech stocks will still be taken with a cautious approach.
“Funding is definitely drying up in the software and biotech space which has flowed through to valuations of listed companies, but private companies certainly still have high expectations.
“It’s likely this will reduce once these companies do another funding round or when a venture capitalist wants to exit,” Martuccio said.
He hinted that mergers and acquisitions will increase off the back of falling listed prices and the private market flagging.
“We’re likely to see an increase in M & As but it will really have to be the right technologies – the equation of buy versus build versus time to market will ring true.
“Job losses at tech start-ups have also accelerated as they try to stop bleeding cash. This has resulted in larger, more established tech companies becoming more attractive to key talent.
With all this in mind, what can we expect post-pandemic?
“Pandemic pull-forward demand remains the biggest uncertainty, especially if the consumer environment is more challenging.
“This doesn’t just apply to consumer companies but software as well,” he said before adding ‘the company pivot’ is still ongoing with businesses looking to broaden their product reach and addressable markets but it’s unlikely to replicate previous growth - a risk for big business as well.
“When we look at companies like BOX and Zoom they’re now in a position where they have to really focus on corporate customers because the consumer market has faded rapidly” he said.