S&P 500 falls for 5th day, ANZ, Atlas Arteria, Kelsian, Hub24 on watch: ASX to fall

Wall Street closed mixed as investors await the Federal Reserve’s interest rate hike announcement. ASX entered correction territory. What to look out for locally today.

Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to fall, adding to its losses from yesterday.

Wall St closes mixed as investors wait for the Fed

It was a weak close on Wall St with the Nasdaq, eking out a gain as stocks bounced off its worst levels for the day while the US 10-year treasury yield, hitting its highest level since April 2011. Investors are focused on the start of the Fed’s two day meeting as they await the policy decision tomorrow on interest rates in an effort to suppress hot inflation.

At the closing bell, the Dow Jones lost 0.5 per cent to 30,365, the S&P 500 fell 0.4 per cent to 3,735 for its fifth straight session and the Nasdaq gained 0.2 per cent to 10,828.

On the day, information tech and energy stocks edged higher on the S&P 500 while utilities performed the worst. The rest of the sectors closed lower.

If we look more broadly, the S&P 500 is officially in a bear market, but underneath the surface, seven of the 11 sectors are still afloat. That means they are less than 20 per cent off their recent highs, so a definition of a bear market, according to the Dow Jones. All but one of the 11 are down so far this year, with energy, up about 50 per cent as the exception while consumer discretionary is the worst performer year to date, down about 35 per cent.

Why the reaction?

Investors noticed an improvement in the producer price index (PPI) print in May which provided some hope that cost pressures are starting to cool. For the month, PPI rose 0.8 per cent and 10.8 per cent over the year after April’s reading was revised lower. That means that if companies were to pass down any costs, it would be marginally less.

These figures came in before the start of the Fed’s two day meeting today. As they are a data-dependent central bank, not only are they going to comb through the recent economic data, including last week’s hotter-than-expected CPI print which sparked the sell-off across several asset classes, but the tamer PPI figures are also on the table.

What’s been priced into the market is a 50 basis point hike but the question is – will they hike interest rates by 75 basis points instead? If so, that could ease market concerns that the central bank is behind the curve, or potentially play into worries about a policy mistake with financial conditions already tightening. We will find out tomorrow.

Either way as we determine if inflation has peaked the same goes if the market has bottomed? Despite quantitative tightening starting, we won’t see the impact of the treasuries maturing yet. They have not started to roll off. This is what we need to be aware of as it is set to zap further liquidity out of the market.

Meanwhile, the Business Roundtable quarterly survey of top business leaders found that CEOs expectations continue to decline amid continued geopolitical, and global economic uncertainty. Executives still plan to hire and invest but at a slower pace.

This is interesting as we are starting to see companies announce the letting go of staff. The most recent one was Coinbase with other companies like Microsoft, Paypal, and Apple. This is playing into the stagflation fears of slow economic growth, rising inflation and the missing ingredient of high jobless rate.

Let’s take a look at what this means for the Aussie markets today.

Figures around the globe

European markets closed lower. Paris fell 1.2 per cent, Frankfurt lost 0.9 per cent, while London’s FTSE closed 0.3 per cent lower. On the London Stock Exchange, Rio lost 0.5 per cent, BP gained over 2 per cent and Shell added 0.9 per cent.

Asian markets closed mixed, Tokyo’s Nikkei fell 1.3 per cent, Hong Kong’s Hang Seng closed flat while China’s Shanghai Composite added over 1 per cent.

Yesterday, the Australian sharemarket plunged 3.6 per cent to 6,686, entering correction territory.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to 0.6 per cent fall.

What to look out for today

If we take a lead from Wall St, technology and energy stocks could see some reprieve today.

In economic data, two consumer confidence surveys due, a weekly one from ANZ and Roy Morgan and another one by Westpac and the Melbourne Institute for June. Both surveys are likely to provide an insight into investor’s sentiment around the RBA’s 50 basis point rate hike, the Federal election result, petrol prices and the cool down in the property market.

From and M&A lens, ANZ Bank (ASX:ANZ) is mulling on buying accounting software company MYOB from private equity giant KKR, according to the AFR.

Atlas Arteria (ASX:ALX) amid IFM Investors set to put in a bid for the company, according to The Australian.

Plus Kelsian group (ASX:KLS) after London operator Go Ahead group accepted a US$787 million takeover bid from the company, according to The Australian.

Also, Hub 24 (ASX:HUB) have their investor strategy today after reporting its first half-year net income above expectations of $8.39 million versus $6.12 million.

Lastly, another company Woolworths (ASX:WOW). The supermarket giant entered into a deal to acquire 81 per cent of MyDeal.com.au. The ACCC is set to begin its review and will release its findings on September 1.

Ex-dividend

There are two companies set to trade without the right to its dividend.

Plato Inc Max (ASX:PL8) is paying 0.55 cents fully franked
Tower (ASX:TWR) is paying 1.9438 cents unfranked

Dividend-pay

There are four companies set to pay eligible shareholders today.

Infratil (ASX:IFT)
Pengana International Equities (ASX:PIA)
Qualitas Real Estate Income Fund (ASX:QRI)
Waterco (ASX:WAT)

Commodities

Iron ore has lost 1.8 per cent to US$134.20. Its futures point to a 0.2 per cent fall.

Gold has dropped $22.00 or 1.2 per cent to US$1810 an ounce. Silver was down $0.26 or 1.3 per cent to US$20.99 an ounce.

Oil has lost $1.88 or 1.6 per cent to US$119.05 a barrel.

Currencies

One Australian Dollar at 7:10 AM has weakened since yesterday, buying 68.76 US cents (Tue: 69.27 US cents), 57.33 Pence Sterling, 93.09 Yen and 65.99 Euro cents.

Disclaimer

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.

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics