Wall St sets records, why Rio Tinto is a buy: ASX will rise
The Australian equity market is expected to rise with SPI futures showing a gain of 1.1%.
Rebound driven by economically sensitive stocks
Global stocks made a comeback on Friday as investors shrugged off concerns about the economic recovery. Market participants rushed to redeem the decline after Thursday’s drop amid easing US government bond yields. Wall St has seen major indices reach record highs as economically sensitive sectors lead the way. European and UK markets also rebounded, with punters looking for bargains. In Asia, a mixed close emerged on waning sentiment regarding the spread of the highly transmissible variant Delta.
For the S&P 500 sectors, the gain was mostly broad, with financials adding 2.9%, followed by energy, up 2%, and real estate, followed by technology. Materials weighed 1.4% less, followed by healthcare, down 0.5%, the only two sectors in the red.
Bond yields recover from multi-month lows
On Friday, US government bond yields recovered their losses after four sessions of decline as they fell to multi-month lows. The yield on 10-year US Treasury bonds hit its biggest daily gain of 6 basis points at 1.36% from 1.3% on Thursday. Over the week, 10-year rates rose 7 points and 2-year rates lost 2 points.
Yields that fall when bond prices rise have tended to fall since March under pressure from investors assessing their optimistic forecasts. With the Covid-19 headlines looming, reduced expectations of Federal Reserve support and mixed economic data, investors bought back the bonds which saw yields fall even further last week.
Wall St hits new high
The Dow Jones gained 1.3% to close at 34,870, the S&P 500 added 1.1% to 4,370 and the Nasdaq closed almost 1% higher at 14,702 recording new highs. During the week, the Dow Jones rose 0.2% while the S&P 500 and Nasdaq both gained 0.4%.
The big banks increased their profits this week, Goldman Sachs jumped 3.6% while JP Morgan Chase rose 3.2%. Apple climbed 1.3 percent to its first all-time high since January.
Pfizer added 1% to news that biotechnology is working on a booster for its Covid-19 vaccine to target the Delta variant. Chinese carpooling provider Didi Global rebounded 7.3%. The company has been targeted by the Chinese cyberspace watchdog after launching an investigation to crack down on data security concerns.
European and UK markets profit from gains amid bargain hunting
Across the Atlantic, London’s FTSE closed 1.3% higher, boosted by financials and miners. Paris gained 2.1% and Frankfurt closed up 1.7%. The UK economy grew 0.8% slower than expected in May compared to April. BHP rose 4.3% while Rio Tinto gained 4.1%. Travel stocks have taken off as Britain plans to lift the quarantine for fully vaccinated arrivals. Although in Europe last week, the World Health Organization warned that a new wave of Covid-19 is inevitable, with cases of the Delta variant on the rise.
Asian markets mixed amid spread of Covid-19
In Asia, low vaccination rates amid concerns about the spread of the delta variant have increased. Japan’s Nikkei fell 0.6%, Hong Kong’s Hang Seng rose 0.7% and China’s Shanghai Composite closed flat on Friday. The People’s Bank of China has announced that it will reduce the reserve requirement ratio of major commercial banks by 50 basis points. This means that it will allow them to lend more to compensate for the rise in the price of raw materials.
ASX tumbles on tighter Sydney restrictions
The Australian stock market fell 68 points or 0.9% on Friday to close at 7,273, falling to its worst session in nearly three weeks as foreclosure restrictions tighten in Sydney. During the week, it closed down 0.5% or 35.3 points.
Sydney Airport is the best performing stock that takes off all expectations (ASX: SYD) climbed 33 percent. Last week, the airline operator received a surprise $ 22 billion takeover offer from a consortium of infrastructure investors, which is a 42% premium over its closing price before the offer. .
The worst performing stock of the week is medical device company Polynovo (ASX: PNV), fell 13.4 percent on no big business announcements.
Iron ore landslides, gold and oil gains
Gold gained US $ 10.40 to US $ 1,811 per ounce and silver gained US $ 0.25 US $ 26.23 per ounce. Oil added $ 1.62 to US $ 74.56 per barrel.
Iron ore fell 1.5% to US $ 214.77 per tonne, with its futures pointing to a gain of 2.8%. During the week, iron ore lost 0.4%.
Local economic outlook
This week, June data on employment, business confidence surveys and consumers should be in the spotlight.
In May, jobs jumped 115,200, beating expectations as unemployment plunged to its pre-pandemic low. It will be interesting to see figures from the Australian Bureau of Statistics on Thursday if the trend can continue given Sydney’s extended lockdown.
Looking at NAB’s trading conditions in May, operating conditions hit a record high for the second consecutive month with growth spread across industries and the country. While Westpac / Melbourne Institute consumer sentiment is expected to be put under pressure by the events of Covid-19, but tends to rebound when restrictions ease.
Other things to watch include construction activity and overseas travel statistics on Wednesday and consumer inflation expectations on Thursday.
The local results season is underway, the AGM
AusNet Services Annual General Meeting (ASX: AST) is scheduled for 2:00 p.m. (AEST) on Thursday.
by Woodside (ASX: WPL) second quarter results are also expected on Thursday, while Rio Tinto’s (ASX: RIO) the second quarter operations review is scheduled for Friday.
Profits kick off in the United States, economic outlook overseas
The U.S. earnings season kicks off next week with several major banks releasing their second quarter results.
Investors will also be keeping an eye on June US consumer price data on Tuesday for a glimpse of inflationary pressures. The appearance of Federal Reserve Chairman Jerome Powell before the Senate Banking Committee to deliver the semi-annual monetary policy report to Congress on Thursday will also attract attention.
Elsewhere, China’s second-quarter GDP growth figures, Eurozone inflation figures and the UK will also be in the spotlight. The Bank of Japan is expected to keep its key rate at -0.1% at its meeting this week.
The broker is moving
Credit Suisse rates Rio Tinto (ASX: RIO) as a purchase with a target price of $ 133. In 2022, the broker estimates that the global iron ore market will remain reasonably tight and raises its forecast to US $ 179 per tonne from US $ 149 per tonne in 2021. For 2022, the broker has increased its forecast to US $ 144 per tonne. ton compared to US $ 120 per ton in 2022.
However, Credit Suisse maintains a downward forecast price path as record iron ore prices encourage more sourcing, especially from China. This could put further price pressure on the medium to long term and raise the target price to $ 133 from $ 131 and maintain its rating.
With spot prices of the company’s main revenue drivers still ahead of consensus, improving consensus earnings should remain a potential positive catalyst.
Actions is Rio Tinto (ASX: RIO) closed 0.7% lower at $ 125.40 on Friday.
ICSGlobal Limited (ASX: ICS) pays 23 cents with no deductible.
Iron ore fell 1.5 percent to US $ 214.77 per tonne.
Iron ore futures show a gain of 2.8%.
Gold gained $ 10.40 to US $ 1,811 an ounce.
Silver gained US $ 0.25 $ 26.23 an ounce.
Oil added $ 1.62 to US $ 74.56 per barrel.
An Australian dollar at 7:50 a.m. bought 74.91 US cents, 53.95 pence sterling, 82.49 yen and 63.10 euro cents.