It is likely to be a cautious start to the market this week as investors assess the impact of the assassination attempt on Donald Trump. Having noted that, ASX 200 futures are 0.6% higher at 7,992 points.
“The assassination attempt on former US President Trump on the weekend, which has boosted his re-election chances will likely see a more cautious start to trading this morning,” IG Markets analyst Tony Sycamore said.
“The US dollar should be a beneficiary for two reasons, it is viewed as a safe haven currency and because Trump is likely to increase/add to tariffs on China and increase spending which, in turn, will lead to higher inflation and US yields.”
Bitcoin may also be a beneficiary.
“The rally gained momentum after the attempted assassination of pro-crypto former US President Donald Trump," Sycamore said.
"If Bitcoin can hold onto its gains above the 200-day MA at $59,205 over the next 24/48 hours, it increases the chances that Bitcoin will put in place a capitulation-type low at the early July $53,550 print and that the rally can extend towards trend channel resistance $72,000/$74,000 area,”
The local market
The ASX200 finished 1.75% higher last week at 7,959, reaching a new record high. July has proven to be a strong month for the market.
At the sector level, Consumer Discretionary (+3.62%), Real Estate (+3.50%), Telcos (+3.22%) and Financials (+2.75%) sectors outperformed. The Utilities (-0.91%), Materials (-0.57%) and Energy (-0.24%) sectors were the only sectors to decline.
At the stock level, the top performers were Synlait Milk Ltd (+30.43%), Core Lithium Ltd (ASX:CXO) (+20.88%), Drone Shield Ltd (+20.00%) and Fleetwood Corporation Ltd (+17.11%).
Conversely, Strike Energy Ltd (ASX:STX) (-6.52%), South32 Ltd (LSE:S32, ASX:S32, OTC:SHTLF, JSE:S32) (-5.24%), EML Payments (ASX:EML) Ltd (-5.15%, and Whitehaven Coal (ASX:WHC) Ltd (-4.01%) were the biggest losers.
Investors will be looking to Thursday's Labour Force Report for June. In May, the Australian economy added 39,700 jobs, exceeding the expected 30,000 gain. The unemployment rate dropped to 4.0% in May from 4.1%, despite a rise in the participation rate to 66.8% from 66.7%.
For June, the market expects the economy to add 20,000 jobs, with the unemployment rate remaining at 4.0%. The rates market starts this week, pricing in an 18% chance of a 25bp RBA rate hike in August.
In the US
US equity markets finished higher on Friday, led by the Russell 2000, as investors focused on small caps leveraged to Federal Reserve rate cuts. These stocks have significantly underperformed the broader market this year.
For the week, the Russell 2000 gained 6%, the Dow Jones increased by 1.59%, the S&P 500 added 0.86% and the Nasdaq finished the week 0.30% lower.
A weaker-than-expected Preliminary July University of Michigan Consumer Sentiment on Friday night supported the case for a September rate cut by the Federal Reserve.
The index fell for a fourth consecutive month to 66 from 68.2 in June, below the forecasted 68.5. Both 1-year and 5-10-year inflation expectations slowed to 2.9%.
Additionally, the components of Friday night’s Producer Price Index (PPI) data that contribute to Personal Consumption Expenditures (PCE) inflation, such as airfares and financial services, were softer than expected.
Big bank earnings released on Friday night were disappointing due to higher financial costs impacting consumers and businesses. Citibank fell 1.8% to $64.52, Wells Fargo (NYSE:WFC) dropped 6.02% to $56.54 and JP Morgan decreased by 1.21% to $204.94.
This week will see earnings reports from companies including Bank of America (NYSE:BAC), BlackRock (NYSE:BLK) and Netflix (NASDAQ:NFLX). Additionally, key points of interest will be retail sales data on Tuesday night and a speech from Federal Reserve Chair Powell early Wednesday morning.
European markets
European share markets climbed on Thursday, partly due to earlier optimism on Wall Street. Real estate and consumer discretionary sectors saw significant gains, supported by a decline in continental government bond yields. Luxury brands LVMH, Hermes, Kering (EPA:PRTP) and sportswear giant Adidas (ETR:ADSGN) each rose between 1% and 2%.
Investor sentiment was further boosted by economic data showing German inflation at an annual rate of 2.2% in June, aligning with forecasts, and a better-than-expected UK GDP reading. The UK economy returned to growth in May, expanding by 0.4% compared to the anticipated 0.2%.
The continent-wide FTSEurofirst 300 index advanced by 11 points or 0.6%, while in London, the UK FTSE 100 index increased by 29 points or 0.4%.
Currencies
In European and US trade, major currencies rose against the US dollar, reflecting falling Treasury yields and the conviction that multiple rate cuts are anticipated from the Federal Reserve in the medium term.
- The Euro firmed from US$1.0840 to US$1.0900 and was near US$1.0867 at the US close.
- The Australian dollar traded from US$0.6760 to US$0.6799 and was near US$0.6760 at the US close.
- The Japanese yen rose from JPY161.62 per US dollar to JPY157.44 and was near JPY158.80 at the US close.
Commodities
Commodity prices were supported marginally by a moderation in the US dollar.
- Global oil prices rose on Thursday, with the Brent crude price gaining US$0.32 or 0.4% to US$85.40 a barrel.
- The US Nymex crude price improved by US$0.52 or 0.6% to US$82.62 a barrel.
Base metal prices were mixed on Wednesday.
- Iron ore futures recovered recent losses, gaining 0.8%.
- The Comex gold futures price rose US$42.20 or 1.8% to US$2,421.90 an ounce, with spot gold trading near US$2,414 an ounce at the US close.
- North American uranium stocks were buoyant on Thursday, following an unexpected rise in uranium mining taxes in Kazakhstan, the world's largest uranium producer, which hints at potential decreases in uranium output. NexGen Energy (TSX:NXE) gained 1%, Denison Mines (NYSE:DNN) rose 1.6%, Cameco increased by 2% and Uranium Royalty surged 5%, all experiencing double-digit gains in recent days.
What about small caps?
The S&P/ASX Small Ordinaries gained 1.49% on Friday to 3,065.50. Over the week, it was up 2.61%.
Newsflow has been slow this morning, but you can read about the following and more throughout the day.