Australian shares are set for a softer opening to the start of the week, following declines on Wall Street, snapping a three-week bullish streak.
The ASX futures ended down -37 points or -0.5%, at 7,232, while our local currency, the Australian dollar, is currently buying US$0.7396 (as of writing).
Strong U.S. retail sales numbers and better-than-expected U.S. earnings reports failed to encourage renewed bullish interest as investors worried about a rise in coronavirus cases tied to the highly contagious Delta variant.
On Friday, the U.S. consumer sentiment index from the University of Michigan came in at 80.8 for the first half of July, down from 85.5 last month and worse than forecasted.
The report showed inflation expectations rising, with consumers believing prices will increase 4.8% in the next year, the highest level since August 2008, while U.S. retail sales rose +0.6% in June, missing the forecast of -0.4%.
At the finishing bell, on the New York Stock Exchange (NYSE), the broad-based Standard & Poor’s 500 Index finished the session -32.87 points lower, or -0.75%, to end at 4,327.16.
Meanwhile, the blue-chip Dow Jones Industrial retreated -299.17 points, or -0.86%, to 34,687.85, with losses accelerating later in the trading session.
The technology-focused Nasdaq Composite Index tumbled -115.90 points, or -0.80%, to 14,427.24.
All three major U.S. stock indexes ended the week lower, each snapping a 3-week bullish streak.
The Dow ended the week down -0.52%, while the S&P 500 slid -0.97%, and the Nasdaq Composite tumbled -1.87% during the same period.
The yield on the benchmark 10-year Treasury note settled at 1.300% on Friday, falling for the third consecutive week.
The weekend brought no relief as elevated COVID numbers prompted lockdowns in eastern states, with New South Wales tightened restrictions as it reported double-digit tallies both days: 111 on Saturday and 105 on Sunday, while Victoria reported 19 new local cases on Saturday and 16 cases on Sunday.
The outbreak prompted Gladys Berejiklian to declare a temporary shutdown to the construction industry on Saturday, and most retailing in what she said was “probably the most difficult day I have had personally” since the crisis began.
“We have a good window in the next two weeks to crush this thing,” she said.
Last week marked several choppy trading sessions as investors parsed higher-than-expected inflation reading on Tuesday, comments from U.S. Federal Reserve Chair Jerome Powell.
Last Tuesday, the U.S. consumer price index showed a 5.4% increase in June from a year ago, the fastest pace in nearly 13 years.
In the week ahead is the quarterly reporting season, with updates from BHP (Tuesday); South32 (Wednesday); and Santos, Newcrest, and Iluka (Thursday).
Meanwhile, this week’s economic data is (somewhat) light and is unlikely to have any major impact.
For the week, highlights the minutes from this month’s RBA policy meeting (Tuesday), June retail sales (Wednesday), and trade and quarterly business confidence data (Thursday).
Viewing the S&P/ASX 200 (XJO) daily chart, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator lacks momentum as it coasts sideways above the 50-midway point, therefore, supporting a weak positive signal.
Meanwhile, the Moving Average Convergence Divergence (MACD) holds a negative signal, although, should be monitored as it rises towards the 0.000 axes.
The Average Directional Movement Index (ADX) trend indicator decline suggests the presence of a trading market and the absence of a trend.
Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures price movements’ speed and change.
RSI oscillates between zero and 100.
According to Wilder (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.
Signals can also be generated by looking for divergences, failure swings and centreline crossovers.
RSI can also be used to identify the general trend.
Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.
The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.
(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price strengthens or weakens.
With a weaker opening expected, views a move to the short-term support at 7,285, with the near-term base located at 7,210-35.
The resistance is considered from 7,360 (minor), with 7,400-10 located above.
Daily outlook on the benchmark S&P/ASX 200
It was a stop-start week for the Australian share market as takeover action and unexpectedly strong economic data helped distract investors from lockdowns in Victoria and Greater Sydney.
At the closing bell on Friday, the benchmark S&P/ASX 200 index rose +12.2 points, or +0.17%, to 7,348.1, while the All Ordinaries added +14.1 points, or +0.19%, to 7,630.7.
Apart from Energy, Utilities and Telecommunication, eight sectors lifted the ASX out of the bearish trenches.
It is the first weekly gain in a month, with the ASX wrapping the weekly session in positive territory, having slipped twice in the red out of five trading days.
Soft leads from Wall Street and Victoria’s return to lock down and the extension of NSW COVID-19 restrictions did not deter the ASX bulls.
In economic news, better-than-expected jobs data released on Thursday confirmed the recovery remained on track as the unemployment rate dropped to its lowest level in a decade.
According to the Australian Bureau of Statistics (ABS), the Australian June unemployment rate dropped from 5.1% to 4.9%.
Almost 30,000 jobs were created in June, its lowest level in more than a decade (December 2010).
Materials were mixed, with BHP Group leading the titans higher after climbing +0.66%, to $51.87, while Fortescue Metals Group added +0.23%, to $25.78, while Rio Tinto lost -0.41% to $130.60.
Gold stocks were weaker, with Newcrest Mining falling -0.41% to $26.90, Northern Star Resources lost -1.11% to $10.73, and Evolution Mining Ltd plummeted -5.25% to $4.69.
The Financial sector sank into the red, with Westpac Banking Corp leading the “Fab Four” (banks) lower after falling -0.32%, to $24.91.
Meanwhile, the National Australia Bank ended down -0.23%, to $25.96, Commonwealth Bank dropped -0.12%, to $98.19, and Australia and New Zealand Banking Group lost -0.22%, to $27.43, Macquarie Group added +1.16% and settled at $155.49.
Supermarket giants Coles and Woolworths were mixed among the consumer staples stocks with Coles climbing +0.29%, to $17.05, while its rival Woolworths lost -0.23%, to $38.24, Endeavour rose +1.74% to $6.45.
E-commerce group Kogan ended higher after climbing +1.75% to $11.61, and Seek lost -1.98% to $31.61.
Meanwhile, JB Hi-Fi rose +0.13% to $47.98, while Telstra lost -0.26% to $3.77, while Wesfarmers rose +0.87%, to $59.12, QBE Insurance added +0.28%, to $10.72, and Aristocrat Leisure rose +0.19%, to $42.36.
Biotechnology giant CSL rose +0.93%, to $277.72, while ResMed gained +0.9%, to $33.70, Fisher & Paykel Healthcare added +0.14%, to $28.72, while Cochlear slid -0.29%, to $239.92 and Mesoblast fell -4.03%, to $1.905.
Australian Pharmaceutical Industries soared +21.7%, to $1.40 after receiving a $687 million takeover offer from Wesfarmers.
Washington H. Soul Pattinson granted Wesfarmers a call option over its 19.3% stake.
In technology, Buy-now-pay-later giant Afterpay fell -1.29%, to $103.21, accounting software provider Xero added +2.04%, to $137.20, Altium lost -2.77%, to $36.55, Megaport rose +0.12%, to $16.14, NEXTDC rose +4.05%, to $12.58, EML rose +2.96%, to $3.83 and Zip Co added +2.75%, to $7.10.
As for our oil and gas producers, Woodside Petroleum sank -0.91% to $22.76, while Oil Search ended down -0.51%, to $3.87, Santos lost -0.57%, to $7.02, Beach Energy rose +0.36% to $1.29, and Worley slid -0.26%, to $11.45.
Travel stocks were firmer, with Sydney Airport rose +1.28%, to $7.91, Corporate Travel Management rose +0.53%, to $20.68, Flight Centre rose +1.02%, to $14.86, and Webjet added +1.66% to $4.91.
Spark Infrastructure soared +17.4%, to $2.63 after opening the door to KKR and a major Canadian pension fund to improve on a $5 billion cash takeover bid.