Morning Wrap: European stocks bounce, ASX set to snap 7-day losing streak

US markets were closed on Monday, major European indices bounced overnight, wholesale prices in Germany are surging and China kept its interest rates unchanged.

Let’s dive in.

Markets

US markets were closed in observance of the Juneteenth National Independence Day holiday. We now turn to the next best alternative: European markets.

• European benchmarks including the pan-European STOXX 600, FTSE 100 and German DAX all rose at least 0.97% after a brutal selloff last week on recession worries

• Looking at UK markets:

  • Energy, discretionary and bank sectors outperformed

  • Industrials, materials and utilities underperformed

Stocks

• Renault (+9.7%) after Jefferies upgraded the French carmaker to a “Buy”

• International Consolidated Airlines Group (+7.3%) saw the largest increase among FTSE 100 constituents. This is in-line with the bounce for local travel stocks on Monday

• HSBC (+5.7%) amid a broad-based rebound in battered bank stocks 

• Kingspan (-11.4%) shares plunged after the building insulation specialist said that market sentiment was deteriorating and order intake volumes were down significantly in May and June

Economy

• Chinese banks kept lending rates unchanged, in-line with forecasts

  • The 1-year loan prime rate was left at 3.7%

  • The 5-year loan prime rate was maintained at 4.45%

  • China is in wait-and-see mode as it gauges the economic rebound from covid lockdowns

  • Bloomberg economists said that China is still in an easing cycle and expect it to lower rates by another 20 bps by year-end

• Germany’s producer price index surged 33.6% year-on-year in May

  • This is the 6th consecutive month of record highs and slightly ahead of the 33.5% reading in April

  • Energy was the biggest contributor, notably prices for the distribution of natural gas, electricity and mineral oil products

  • Excluding energy, producer prices rose 16.5% compared to last year 

Commodities

• Iron ore prices plunged on Monday amid concerns about weak Chinese demand and its troubling property market

• Oil prices are steady around US$110 as investors weigh recession fears against extremely tight supply

• Gold is still trying to price-in more hawkish-than-expected central banks

The S&P/ASX 200 is hoping to snap a 7-day losing streak on Tuesday. SPI futures are currently pointing towards a 0.74% rise at open and overnight markets were also positive.

Sectors to look for signs of strength:

• Energy: Can oil stocks rebound from the sharp selloff on Monday?

• Uranium: Several Toronto-listed uranium miners bounced overnight, including Cameco (+2.6%)

• Coal: Another sector that was sold off heavily on Monday. Worth noting that Newcastle coal futures rose 6.6% overnight

• Travel: Can local travel names extend gains to a 2-day winning streak?

• Tech: ASX 200 tech index rose 1.2% on Monday, another sector looking to extend gains from no-man's land

ASX corporate actions occurring today:

• Ex-dividend: KPG, PMV

• Dividends paid:  CRN, FPC, OCA, VUK

• Listing: None

• Issued shares: 1ST, AFP, AKN, AM7, AVR, BSA, CLG, CXM, DTR, DVP, EEG, FHE, GCX, IHL, KAU, KKO, KMT, KZA, LRS, MFG, MGU, MRI, NAB, NBI, OAU, PCK, PDI, PPC, RHY

Other things of interest (AEST): 

• RBA Gov Low Speech at 10:00 am

• RBA Meeting Minutes at 11:30 am