ASX to rise on Euro rally, AUD falls, Iron ore price tanks, RBA set to meet, Why Webjet is bullish

European, Asian and the Australian markets rose after a disappointing U.S. jobs data encouraged investors to buy back into tech stocks. Wall St closed for Labor Day,

The Australian sharemarket is set to rise with the SPI futures pointing to a gain of 0.2 per cent.

Wall St was closed so we will look to the European markets for our lead.

European closes higher boosted by rise in German factory orders

European markets closed higher, bouncing back from last week’s disappointing jobs data in the U.S. boosted by an unexpected rise in German factory orders in July.

Gains were almost across the board after investors reacted to an unexpected rise in factory orders, boosted by overseas demand from the shipbuilding sector, according to figures released by Destatis.

Factory orders increased 3.4 per cent for the month after a 4.6 per cent surge in June, beating expectations of a fall of 0.7 per cent. Compared to pre-pandemic levels at February 2020, new orders in July lept 15.7 per cent higher.

The Stoxx 600 closed 0.7 per cent higher, the best performance in almost six weeks propped up by a 1.7 per cent jump in the tech sector, hitting a new record high. Defensives such as utilities and real estate sectors closed lower.

We have seen technology stocks rally, which we also saw on the ASX yesterday as investors buy back into growth stocks despite the rise in Covid-19 cases, amid a lack of definite timeline on changes to monetary policy.

The European Central Bank is slated to meet this week to determine whether to taper back its stimulus on a backdrop of rising inflation.

Netherlands based chipmaker ASML, jumped 2.7 per cent while tech conglomerate and Tencent part-owner Prosus bounced 2 per cent higher, riding the coattails of their American counterparts performance on Friday as well as Tencent’s strong performance in Hong Kong.

Shares in aluminium supplier Norsk Hydro gained 3.4 per cent to a 13-year high in Oslo.

At the close, Paris gained 0.8 per cent, Frankfurt closed almost 1 per cent higher while London’s FTSE closed 0.7 per cent higher led by financials and industrials stocks.

Heavyweight miners were mixed. Rio Tinto closed 1.3 per cent lower while BHP closed flat.

Asian markets closes higher ahead of inflation data

Asian markets closed higher ahead of China’s trade and inflation figures later this week.

Tokyo’s rally continued on hope that new stimulus will be considered by the Prime Minister’s successor. The Nikkei gained 1.8 per cent, Hong Kong’s Hang Seng added over 1 per cent and China’s Shanghai Composite closed 1.1 per cent higher.
 
Tech giant Tencent rose 3.5 per cent while Alibaba added 1.9 per cent.

ASX 200 recovers as Fortescue weighs

Yesterday, the Australian share market closed 0.1 per cent higher at 7,528 after starting the day in the red. The recovery was staged by an afternoon surge which helped the local bourse start the week in the black.

Why we saw such a rocky start was following the number of companies going ex-dividend. We have seen the XJO swim in the red as companies trade almost the percentage difference on their payout to shareholders.

Last week we saw heavyweight Rio Tinto shift the local bourse and yesterday Fortescue Metals (ASX:FMG) followed suit. It closed 10.9 per cent lower at $18.57 as the worst performer of the session, followed by shares in Pro Medicus (ASX:PME) and Pilbara Minerals (ASX:PLS).

The best-performer was Appen (ASX:APX), closing 4.6 per cent higher at $11.00 followed by shares in IDP Education (ASX:IEL) and Evolution Mining (ASX:EVN).

Across the sectors, the gains were almost across the board. Energy dragged on the index, down 1.7 per cent followed by materials, down 1.1 per cent. The best performer was technology adding 1.2 per cent with consumer discretionary and and communication services following after gaining over 0.8 per cent.

In company news, Santos (ASX:STO) and Oil Search (ASX:OSH) closed 1.85 and 2.4 per cent lower respectively after they posted news on a one week extension to conduct their due diligence. Early last month, Santos propped up their offer to acquire Oil Search shares under a revised merger proposal.

Shares tanked in Mineral Resources (ASX:MIN) after they banked $328 million after they confirmed the sale of their 5.4 per cent stake in lithium miner, Pilbara Resources (ASX:PLS). Mineral Resources are set to use the proceeds to fund their own projects. They closed 1.8 per cent lower while Pilbara (ASX:PLS) tanked 5.3 per cent.

Elsewhere, gold prices helped the likes of Northern Star Resources (ASX:NST) and Newcrest Mining (ASX:NCM) shine over 2.5 per cent.

Meanwhile, on the story of aluminium, Alumina spiked 3.2 per cent as jitters of a tighter global bauxite supply after a coup in Guinea fuelled concerns over raw material supplies. Aluminium prices have surged to their highest levels in more than a decade on the back of reported shortages in China.

Local economic news

Today the Reserve Bank is set to meet at 2.30pm EST on the backdrop of economic data pointing to a contraction.

Economists expect the economy could contract by as much as four per cent in the September quarter as the lockdowns across NSW and Victoria weigh.

The Board is expected to keep the cash rate at a record low 0.1 per cent.

Meanwhile, the weekly ANZ-Roy Morgan consumer confidence index will also be released today.

Stock watch

We covered Webjet on the 1st June when the share price was trading at $5.06. It finished today’s session at $6.00, and continues to remain attractive.

Our weekly stock to watch this week is travel booking company Webjet (ASX:WEB). David Thang, Senior Private Wealth Adviser at Sequoia (ASX:SEQ) rates Webjet as a buy. From a technical angle, Webjet is bullish for a number of reasons.

A zone of support held between $4.29 and $4.58 as shown by the orange rectangle during the month of May. At the end of May, a bullish doji formed, which is suggestive of an emergence of buyers. Upward momentum has gathered traction over the course of August, therefore increasing the probability of further upside over the medium-term.

Should this bullish case unfold, then the initial target is indicated at the 38.2 per cent Fibonacci retracement of $6.44. Beyond, a long-term advance towards a zone of resistance sighted between $7.42 and $7.56 being made up of the 61.8 and 50 per cent Fibonacci retracement levels respectively cannot be ruled out. This is illustrated by the light-blue rectangle.

Shares in Webjet (ASX:WEB) closed 0.84 per cent higher at $6.00 yesterday.

IPO

Today we have one company set to make their debut on the ASX. Mining company, Midas Minerals (ASX:MM1).

Ex-dividend

We have more companies going ex-dividend today, so keep an eye out for any movements like we have seen recently around companies potentially trading lower.

Amcor PLC (ASX:AMC) is paying 15.93 cents unfranked
BlueScope Steel Ltd (ASX:BSL) is paying 44 cents unfranked
GWA Group Ltd (ASX:GWA) is paying 6.5 cents fully franked
Healthia Limited (ASX:HLA) is paying 2.5 cents fully franked
IOOF Holdings Ltd (ASX:IFL) is paying 11.5 cents fully franked
IGO Limited (ASX:IGO) is paying 10 cents fully franked
Iluka Resources (ASX:ILU) is paying 12 cents fully franked
MotorCycle Holdings (ASX:MTO) is paying 10 cents fully franked
Origin Energy (ASX:ORG) is paying 7.5 cents unfranked
Pengana International Equities Ltd (ASX:PIA) is paying 1.35 cents fully franked
Spheria Emerging Co (ASX:SEC) is paying 5 cents fully franked
Sonic Healthcare (ASX:SHL) is paying 55 cents 65 per cent franked
TPC Consolidated Ltd (ASX:TPC) is paying 10 cents fully franked
Universal Store (ASX:UNI) is paying 10.5 cents fully franked

Commodities

Iron ore has tumbled, down 8.5 per cent to US$132.38. Their futures are pointing to 3.5 per cent fall.

Gold has lost $8.20 or 0.5 per cent to US$1826 an ounce while silver has fallen $0.05 or 0.2 per cent to US$24.75 an ounce.

Oil was down $0.40 or 0.6 per cent to US$68.89 a barrel.

Currencies

One Australian Dollar at 7.30am this morning has weakened from yesterday buying 74.40 US cents, 53.77 Pence Sterling, 81.77 Yen and 62.68 Euro cents.

Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Commentators may hold positions in stocks mentioned. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.

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