ASX Futures (SPI 200) imply the ASX 200 will open 57 points higher, up 0.87%.
US stocks rallied on better-than-expected earnings from Citi and Wells Fargo, US retail sales and consumer confidence data beat economist expectations and Sarytogan Graphite makes its ASX debut at 12:00 pm AEST.
Let’s dive in.
Mon 18 Jul 22, 8:31am (AEST)
|US 10 Yr T-bond||2.93||-1.01%|
Wall Street had every reason to rally last Friday, with solid earnings from high profile companies, healthy consumer spending data and signs that inflation is slowing.
“The market is getting a little bit more convinced that the Fed is probably not going to be delivering a full point rate increase at the end of the month and that we’re getting close to seeing peak Fed tightening get priced into the market,” said Oanda senior market analyst, Ed Moya.
All 11 US sectors were green
Financials firmly in the lead after better-than-expected bank earnings
Healthcare and Communication Services outperformed
Defensives including Utilities and Staples underperformed
74% of US stocks advanced
74% of US stocks trade below their 200-day moving average (76% last Friday, 73% a week ago)
Citigroup (+13.2%) posted its biggest earnings per share gain in more than two decades, according to Refinitiv. The investment bank benefited from rising interest rates and strong trading activity
Segments including institutional clients, treasury and trade solutions, and fixed income trading revenue grew revenue by more than 20%
Similar to peers, investment banking revenue plummeted -46% as corporate activity such as M&As and IPOs declined
Share repurchases will be halted to boost capital levels
Wells Fargo (+6.2%) reported better-than-feared earnings, with second-quarter profit down -48% year-on-year
CEO Charlie Scharf said he expects “credit losses to increase from these incredibly low levels.”
“While our net income declined in the second quarter, our underlying results reflected our improving earnings capacity with expenses declining and rising interest rates driving strong net interest income growth,” said Scharf
UnitedHealth Group (+5.4%) provided the biggest boost to the Dow Jones Index after upgrading its full-year profit outlook amid a recovery in non-urgent medical procedures and lower levels of covid care
The health insurer warned about the recent uptick in covid hospitalisations, but noted a lower average length of stay compared to previous periods
US corporate earnings we’re watching this week:
Monday: Goldman Sachs, Bank of America
Tuesday: IBM, Johnson & Johnson, Hasbro
Wednesday: Netflix, Nasdaq
Thursday: Tesla, AT&T, American Airlines, Domino’s Pizza
Friday: Snapchat, Verizon, American Express, Twitter, Verizon
US retail sales rose 1.0% month-on-month in June
Economists expected a gain of 0.8%
Retail sales are up 8.4% year-on-year and 18% higher than pre-covid levels
Growth was led by autos, service stations, restaurants and online sales
Sales for building materials, supplies stores and clothing retailers fell
US industrial production fell -0.2% month-on-month in June, the first negative reading in 2022
Economists expected a gain of 0.1%
Weakness was concentrated in consumer goods such as motor vehicles and parts
US consumer confidence unexpectedly rose to 51.1 in July
Economists expected a reading of 49.9
The index was at 81.2 a year ago
China second quarter GDP growth was 0.4% year-on-year
Below economist expectations of 1.0% growth
On a quarter-on-quarter basis, GDP growth fell -2.6%
Slowest pace since the initial covid outbreak
Iron ore is threatening to go sub US$100 amid heightened fears over waning steel demand and China’s real estate troubles
Oil is trying to reclaim the US$100 level, supported by better-than-expected US retail sales and consumer confidence data
Gold prices are softer as risk appetite returns amid a solid day for US corporate earnings
Monday, 18 July 2022
Monday, 18 July 2022
|Lithium & Battery Tech||71.18||-0.10%|
|Aerospace & Defense||96.1||+0.87%|
|Robotics & AI||20.08||+2.19%|
It feels like the Fed is very close, if not already at, peak interest rate hawkishness, providing rate hike certainty and conform for equity markets.
US inflation expectations hit a 1-year low of 2.8% over a five-year horizon, according to the University of Michigan last Friday. Softening inflation expectations is the "one reason why we expect the FOMC will not accelerate the near-term hiking pace and will deliver a 75 bp hike at the July meeting," said Goldman Sachs.
Now, the question is whether or not corporate earnings have managed to hold up amid the threat of economic slowdown and rising cost inflation. We'll find out soon enough as more US companies report quarterly earnings, and ASX earnings season is also around the corner.
Anyway, onto some sectors to watch on Monday.
The Nasdaq posted broad-based gains from meme stocks through to megacaps. This could send some positive flow for local ASX-listed tech names.
Several fintech companies headlined gains including:
Perhaps keep an eye out for local names like Block (ASX: SQ2) and beaten up BNPL names at open.
From a technical perspective, the S&P/ASX 200 Info Tech Index is in a rising wedge (though still in a massive downtrend).
What's encouraging is that the Index has managed to push above the 20-day moving average (red) - a level that it's struggled to hold above on several occasions.
Eyes on the break above current levels and the 50-day moving average.
The commodity-related ETFs we track inched slightly higher, despite it being a rather risk-on session on Wall Street.
Global X Copper Miners ETF +1.47%
Global X Uranium ETF +1.3%
VanEck Rare Earth/Strategic Materials ETF +0.51%
Copper prices has yet to stage a meaningful bounce after an almost -30% correction from US$4.55 to US$3.23.
The Uranium ETF has hardly moved even after Japan's push to restart nuclear reactors, shut down after the Fukushima disaster a decade ago. Uranium spot prices remain subdued at US$46.3/lb, according to fuel brokers Numerco.
The Rare Earth/Strategic Metals ETF, which mostly consists of ASX-listed lithium miners and Chinese rare earth/cobalt miners, is trying to stabilise after a -36% selloff from April highs.
ASX corporate actions occurring today:
Ex-dividend: BBC, TRA
Dividends paid: VLC
Issued shares: AMD, AWJ, BXB, COD, CXL, FZO, GFN, HCT, HRL, INR, MAY, MGT, MKR, NAB, NBI, NUH, PAR, PGY, PH2, PHO, PPS, PUR, PWN, QRI, SGA, SWF, TMK
Other things of interest (AEST):
New Zealand Q2 Inflation at 8:45 am
Finance Writer & Social Media
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