ASX Futures (SPI 200) imply the ASX 200 will open 32 points higher, up 0.46%.
Major US indices power ahead, Wall Street posts another strong round of corporate earnings, services data from major economies was better-than-expected and oil tumbles towards US$90 a barrel.
Let’s dive in.
Wed 03 Aug 22, 10:35pm (AEST)
|US 10 Yr T-bond||2.748||+0.26%|
Pullback? What pullback? US stocks were running hot thanks to strong earnings from names including PayPal, Gilead Science, Starbucks, Electronic Arts and eBay. Service activity data from China, Europa and the US was better-than-expected, reflecting stabilising price pressures and easing supply chain bottlenecks
Several Fed members spoke overnight, many of which were confused about the rather extended market rally. San Francisco Fed President Mary Daly said the markets were getting ahead of themselves on potential rate cuts in 2023. Similarly, Minneapolis Fed President Neel Kashkari said “I’m unsure what the markets are looking at”.
What about Pelosi, Taiwan and China? "Concern over her trip and China's reason are easing," said Bank of America, adding that "there were also those CATL development halts put in place yesterday. Military drills around the island ... All in, not much of a bite here."
10 out of 11 US sectors higher
Growth and cyclical sectors outperformed
Tech and Discretionary both rallied more than 2%
Energy fell an outsized -3% as oil prices rolled over
Defensives were relative underperformers
67% of US stocks advanced
56% of US stocks trade below their 200-day moving average (58% on Wednesday, 64% a week ago)
Moderna (+15.9%) quarterly earnings smashed expectations with sales up 9% to US$4.7bn. Though, the company took an almost US$500m hit from write-downs for expiring vaccines
PayPal (+9.3%) posted better-than-expected results, with revenue up 9% to US$6.81bn and active customers up 6% to 429m users. The Board authorised a US$15bn share buyback plan, expects repurchases to “remain aggressive”
“PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near and long term,” said Elliott Management, one of its largest investors
Gilead Science (+4.6%) second quarter sales rose 7% year-on-year to US$5.7bn, driven by HIV, cell therapy and Trodelvy products
Starbucks (+4.3%) earnings and revenue beat Wall Street expectations as demand for coffee and drinks remained resilient. Net sales rose 9% to US$8.15bn
"We continue to see strong beverage growth overall, 9% in the quarter. Cold obviously was the biggest contributor, 74% of our beverage sales are cold,” said CEO Howard Schultz
eBay (+4.3%) second quarter earnings beat both top and bottom line expectations
“Despite rising inflation, and an uncertain macro environment, we remain on track to deliver on our 2022 commitments,” said CEO Jamie Iannone
Electronic Arts (+3.4%) posted better-than-expected earnings thanks to an “exceptionally strong” performance from its FIFA franchise
Airbnb (-1.1%) shares struggled to rally as Wall Street was looking for more growth and a revenue beat. Still, revenue rose 58% to US$2.1bn in its most profitable second quarter to date
“From a growth perspective, we exceeded 103M Nights and Experiences Booked, our largest quarterly number ever … Our revenue and GBV are 73% larger than in Q2 2019,” said Airbnb
"In Q3 2022, we anticipate the highest quarterly revenue in Airbnb history"
US corporate earnings we’re watching this week:
Thursday: Alibaba, Block, Beyond Meat, Virgin Galactic, DoorDash
Friday: DraftKings, Norwegian Cruise Line
China services PMI rose to 55.5 in July, the fastest growth since April 2021
"Beware the July rebound narrative. Markets are convinced that easing lockdowns mean the worst is over, but July data show that firms are still largely refusing to invest, borrow and especially now, hire," warned Leland Miller, Chief Executive at China Beige Book, Reuters reported
Australian retail sales rose 1.4% in the June quarter to a new all-time high
Third consecutive quarter in the rise of total retail turnover, following rises of 1.0% in the March quarter 2022 and 7.7% in the December quarter 2021
“The top three retail industries in the June quarter were all hit hard during lockdowns. Since the end of the Delta lockdowns, they have all continued to recover quickly, as they have returned to more usual trading conditions.” said Ben Dorber, head of retail statistics at the ABS
Eurozone services PMI fell to 51.2 in July from 53 in June
Consensus expected a greater decline to 50.6
Eurozone retail sales fell -3.7% year-on-year in June from 0.4% in May
Consensus expected a decline of -1.7%
“The Eurozone economic outlook has darkened at the start of the third quarter, with the latest survey data signalling a contraction of GDP in July,” notes S&P Global
US services PMI unexpectedly rose to 56.7 in July from 55.3 in June
Consensus expected a fall to 53.5
The Institute of Supply Management showed that supply chain bottlenecks were easing and prices paid by businesses had declined by the most since 2017
US factory orders rose 2.0% month-on-month in June from 1.8% in May
Consensus expected a smaller rose of 1.1%
Orders for transport equipment, computers and electronic products led the gains
Iron ore futures tumbled -3.8% to US$110 a tonne
Almost a third of China’s steel mills could go bankrupt in a squeeze that’s likely to last five years, warned Hebei Jingye Steel Group’s founder Li Ganpo
Oil prices briefly rallied after OPEC+ proposed an output hike of 100,000 barrels a day, the smallest in OPEC history. Prices plummeted after poor gasoline demand data from the US and bearish data from the EIA
Gold prices are starting to soften as risk appetite improves, Treasury yields rise and the US dollar rebounds
Wed 03 Aug 22, 10:35pm (AEST)
Wed 03 Aug 22, 10:35pm (AEST)
|Lithium & Battery Tech||75.33||-0.58%|
|Aerospace & Defense||104.66||+0.45%|
|Robotics & AI||22.65||+1.72%|
The Nasdaq is in breakout mode, showing no signs of fatigue just yet. The next point of interest will be the 200-day moving average and trendline, both of which are around 1.35% away.
The FinTech, Cloud and eCommerce ETFs all rallied at least 4% overnight. These ETFs consist mostly of US-listed companies but provide a useful gauge for industry sentiment and performance.
This could see some positive flow for local tech names as the market opens.
Oil prices briefly rallied 3% after OPEC+ proposed an output hike of just 100,000 barrels a day, the smallest in OPEC history.
The 100,000 b/d hike distributed among the 23 OPEC+ countries would effectively mean a 34,000 b/d production rise, with most of it coming from Saudi Arabia as most other members are tapped out of capacity, according to S&P Global Platts.
Still, demand worries were louder than tight supplies, with US gasoline demand falling below pandemic levels, according to the EIA.
Still, Oanda senior market analyst Ed Moya remains optimistic about a rebound, saying that "the oil market will remain tight over the short-term and that means we should still have limited downside here. Crude prices should find strong support around the US$90 level and eventually will rebound towards the US$100 barrel level even as the global economic slowdown accelerates."
The US Jets ETF has been consolidating around the $17 level for the last 6 weeks and now breaking out.
I took the lazy way out on Tuesday, explaining "there's something about the shape of the US Jets ETF I can't quite put my finger on".
Earlier this week, Mariott CEO said "we have not seen signs of leisure travel abating, with leisure room nights in the region more than 15%higher than second quarter 2019."
Coupled with the positive outlook from Airbnb and falling oil prices, things are looking quite positive for the travel industry.
Still, US gasoline demand was rather underwhelming, which could balance the otherwise positive outlook.
ASX corporate actions occurring today:
Dividends paid: ARF, PSC, UWL
Issued shares: 1MC, ALL, ART, AVR, BEN, BGL, BLU, CKF, CNJ, CPT, CXO, DEM, EAI, FLT, G1A, MGF, MGH, MYX, NAB, NBI, PCK, PFT, PPE, RUL, SSR, SZL, TPW, TYR, VEN, XRO
Other things of interest (AEST):
Australia Balance of Trade (June) at 11:30 am
UK Interest Rate Decision at 9:00 pm
US Balance of Trade (June) at 10:30 pm
Finance Writer & Social Media
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