ASX to open on a softer tone after taking a bumpy ride with Wall Street

February 24, 2021 - 3 days ago
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Australian shares are set to open lower after taking a down-and-up ride with Wall Street on Tuesday.

The ASX futures ended down -25 points, or -0.5%, 6,766, with our local currency, the Australian dollar is currently buying US$0.7910 (as of writing).

Bitcoin displayed a volatile 24-hour session after plummeting -16.6% to $US45,093.8 before showing a mild bounce.

On today’s reporting season schedule are Appen (APX), Blackmores (BKL), City Chic (CCX), AMA Group (AMA), Healius (HLS), IOOF (IFL), Invocare (IVC), Michael Hill (MHJ), MedibankPrivate (MPL), Mosaic Brands (MOZ), Nanosonics (NAN), Nine Entertainment (NEC), Reliance Worldwide (RWC), Scentre Group (SCG), SmartGroup (SIQ), Sydney Airports (SYD), Viva Energy (VEA), Woolworths (WOW), and WiseTech (WTC).

Meanwhile, all three major U.S. stock indexes bounced back from steep losses on Tuesday and closed the session in positive territory after U.S. Federal Reserve Chair Jerome Powell eased some of the concerns about higher interest rates and inflation.

The U.S. economic recovery “remains uneven and far from complete”, Powell told a committee of U.S. senators on Tuesday.

In his semi-annual update on monetary policy, his first delivered under Joe Biden’s presidency, Powell indicated the Fed would not be changing monetary policy any time soon, given the slow recovery in the labour market.

During Powell’s testimony, Republicans pushed the chairman to address their concerns that Biden’s $1.9tn economic stimulus plan, which Democrats are trying to push through Congress this week, will lead to high inflation.

Powell, as he has done in recent weeks, downplayed their concerns over aid sparking inflation.

“This is not a problem for this time, as near as I can figure,” Powell said, noting that the Federal Reserve has tools to challenge rising inflation rates should they be seen.

Powell emphasized the top priority for reviving the economy should be to continue vaccination efforts, which “offer hope for a return to more normal conditions later this year”.

The chairman is expected to testify again tomorrow before the House financial services committee.

At the finishing bell, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average wiped out a -360-point loss and closed +15.66 points higher, or +0.05%, to 31,537.35.

The broad-based Standard & Poor’s 500 Index reversed a -1.8% loss and ended the day eking out +4.87 points, or a +0.13% gain to 3,881.37.

The rich-tech Nasdaq Composite index fell -67.85 points, or -0.50% to 13,465.20 after dropping as much as -3.9% earlier.

Tesla closed -2.2% lower after sliding as much as -13% earlier.

The electric car maker suffered a -9% decline in the previous session.

Apple’s stock dipped just -0.11% after falling -6% earlier.

Viewing the technical standpoint for the S&P/ASX 200 (XJO), the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator is mixed as it flirts with the 50-midway point, while the Moving Average Convergence Divergence (MACD) is holding a negative signal since breaking beneath the 0.00 axis.

The Average Directional Movement Index (ADX) trend indicator is sideways (trendless).

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 is strengthening or weakening.

Viewing the topside, the (XJO) resistance is seen minor at 6,825 with 6,895-00 viewed above.

The support is assessed from 6,770-75. Reassess from there, as a break would expose the region of 6,710-25.

Daily outlook on the benchmark S&P/ASX 200

The Australian sharemarket picked up its pace from the opening session on Tuesday even though technology stocks were hit hard locally and on Wall Street.

At the closing bell, the benchmark S&P/ASX 200 index rose to +58.3 points, or +0.86%, to 6,839.2, while the All Ordinaries added to +49.2 points, or +0.70%, to 7,110.8.

Energy, Real Estate, Materials, Industrials and Financials kept the index above the waterline while Information Technology plunged -4.06%.

U.S. technology shares booked steep losses on Monday as inflation concerns weighed on the once high-flying growth names.

Investors’ concerns are growing to the rapid rising in Treasury yields in recent weeks as they could especially hurt high-growth companies reliant on easy borrowing while diminishing the relative appeal of stocks.

Many on Wall Street still believe that the jump in bond yields reflects a sign of growing confidence in the economic recovery, and stocks should absorb higher rates amid strong earnings.

Since the start of February, 10-year yields are up about 27 basis points, on pace for their largest monthly gain in three years, with Monday’s close, up at 1.37%.

The 30-year yield touched a one-year high of 2.2% Monday. A basis point is 0.01%.

On another big day of results, Seek fell -7.1%, to $28.19, while the buy now pay later stocks also hit with Afterpay plummeted -7.2%, to $138.46, Zip fell -3.4%, to $11.96, and Sezzle fell -6.6%, to $10.55.

Jumbo Interactive fell -7%, to $13.48 and Nearmap dropped -6.1%, to $2.46.

COVID-19 winners Domino’s Pizza, Temple & Webster and Nick Scali all declined.

Domino’s dropped -8.9%, to $95.67, Temple & Webster declined -7.7%, to $9.94 and Nick Scali slipped -4.5%, to $10.60.

Miners were firm with BHP Group leading the titans higher after advancing +3.13%, to $50.43, Rio Tinto rose +1.77%, to $133.00, while Fortescue Metals Group climbed +0.4%, to $24.84, South32 added +3.26%, to $2.85 and Mineral Resources slipped -0.13%, to settle at $39.58.

Gold resources were firm, with Newcrest Mining climbing +4.39% to $25.44, Northern Star added +1.69%, to $10.85, and Evolution rallied +1.18%, to $4.30.

The Financials sector were firmer, with Westpac Banking Corp leading the “Fab Four” banks higher after rising +1.85%, to $24.16, Commonwealth Bank rose +1.7%, to $83.29, while Australia and New Zealand Banking Group added +1.17%, to $26.81, National Australia Bank gained +1.14%, to $24.85, and Macquarie Group rose +0.83% and settled at $148.37.

Travel stocks were firmer with Webjet surging +2.79%, to $5.52, with Flight Centre rallying +6.22%, to $16.56, Qantas firmed +4.36%, to $5.03, Regional Express, meanwhile, slipped -2.65%, to $1.655 and Corporate Travel Management jumped +9.82%, to $20.80.

Healthcare was weaker, with Biotechnology giant CSL eked out +0.06%, to $267.96, while ResMed rose +0.36%, to $25.33, Cochlear fell -1.37%, to $217.36, Ramsay Health added +1.79%, to $63.26 and Mesoblast climbed +1.54%, to $2.60.

Wesfarmers finished -3.23%, lower to $50.93, while Woolworths saw its share price end the trading session weaker -0.08%, to $39.09 while its rival Coles Group lost -1.18%, to $15.91.

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