Monday Market Minutes: Scared Money Never Wins

By Glenn Dyer | More Articles by Glenn Dyer

So how will the ASX react today (Monday) to the conflicting news of record closes for the Dow and S&P 500 on Friday, sharp falls in gold and oil prices a rise in US bond yields and a worsening in Covid infection numbers in NSW, Queensland and Victoria?

The overnight Share Price Index traders pushed ASX 200 futures up 30 points, or 0.4% on Friday, pointing to a positive start to trade today.

Here this week sees the start of the June half and full year earnings season with the Commonwealth Bank on Friday the most important announcement with analysts expecting a higher dividend and buyback to go with the buybacks from the ANZ and NAB.

Investors will also have to contend with the slide in gold and oil prices last week and especially on Friday.

Iron ore prices fell last week and china’s imports in July fell 12.6% from a year ago.

Those factors will be on investor minds, as will the continuing spread of Covid Delta in NSW and the continuing lockdowns in Victoria and Southeast Queensland.

America’s latest jobs report showing more than a million new jobs – including a better than expected 943,000 for July – surprised markets. sending gold down sharply, as well as oil and US bond yields sharply higher.

And while the Dow and S&P 500 rose on Friday and ended at new highs, Nasdaq sagged. All finished higher for the week, as did stocks in Europe.

Eurozone shares gained 2.1% last week, Japanese shares were up 2% and Chinese shares rose 2.3% despite more government threats to businesses, especially online gaming, computer chips and home food delivery.

The Australian share market rose 2% to a new high propelled by M&A activity (Afterpay’s $US29 billion offer and the $A21 billion merger proposal between Santos and Oil Search).

Bond yields rose in the US, UK & Australia but were flat in Germany and Japan. Oil, metal and iron prices fell with the latter down -24% from its May high.

The $A was little changed as the $US rose in reaction to the better-than-expected jobs data and rise in bond yields.

 US stocks have reached record highs last week, due to strong quarterly results from the largest US companies, despite rising coronavirus cases, China’s regulatory assault on technology companies and the threat of higher interest rates if inflation remains high.

 The release of monthly US employment figures may change things, but market reaction is hard to predict. Investors will be looking to public appearances this week by a handful of Fed officials for further guidance, which they probably won’t get.

The 943,000 new jobs figure in July was much higher than the 870,000 economists expected and above the previous month’s 850,000. Average hourly earnings rose 0.4% versus 0.3% expected and 0.3% in June.

The unemployment rate fell to 5.4%against a market consensus of 5.8%.

The Dow rose 144.26 points, or 0.4%, and closed at an all-time high of 35,208.51. The S&P 500 rose nearly 0.2% to clinch its own record close at 4,436.52, while the tech-heavy Nasdaq Composite dipped 0.4% to settle at 14,835.76.

For the week, the Dow was up 0.7% for its second positive week in three. The S&P 500 rose 0.9% for the week and is now up 18.1% for the year. The Nasdaq rose 1.1% for the week.

US investors will have another reminder of their worries about inflation with the July Consumer Price Index this week and rising Covid infections – now over 160,000 a day and rising – the highest figures for six months.

 

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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