The ASX looks likely to edge marginally higher in early trading, with ASX200 Futures pointing to a 2-point lift.
The index finished -0.86% or 63 points lower yesterday to finish at 7,277, with only the Communications (0.81%), Energy (+0.47%) and Info Tech (+0.13%) sectors managing a positive showing.
“Renewed concerns around the Chinese property sector stemming from a failed bond payment by developer Country Garden saw the ASX200 fall to its lowest level in four weeks,” IG Markets analyst Tony Sycamore said.
“Country Garden, which has focussed on housing developments in the lower tier cities, has a 30-day grace period to come up with the payment.
“The company is approximately four times as large as failed developer Evergrande (HK:3333) which means a nervous wait ahead to see how Chinese authorities respond.”
Sycamore believes the market will now move toward a lower target of 7,174, having rejected a peak in late July and early August of 7,472.
“For a more positive view to emerge, the ASX200 needs to see a sustained close above 7,360/90. ASX futures trade flat this morning at 7,221,” Sycamore explained.
“This indicates that ASX200 cash should trade around 7,277 shortly after the opening spin.”
US markets
US markets were up on Monday, with Nvidia gaining 7.1% to its share price after Morgan Stanley (NYSE:NYSE:MS) picked it as its favourite in the AI-driven chipmaker arms race.
Industry rivals AMD added 4.1% to $111.98, and Intel (NASDAQ:INTC) added 2.26% to $35.68.
A cut to Tesla’s Model Y prices in Chinese markets translated to a 1.19% cut to its share price in turn – the stock has lost 20% over the last four weeks to sit at $239.75 a share.
Other major growth stocks also marked gains, with Alphabet (NASDAQ:GOOGL) gaining 1.4%, Amazon.com (NASDAQ:AMZN) 1.6% and Micron Technology (NASDAQ:MU) 6.1%.
PayPal (NASDAQ:PYPL) Holdings enjoyed a 2.8% rise after announcing Alex Chriss, formerly of software firm Intuit (NASDAQ:INTU), as its new CEO.
The day's standout was US Steel Corp., surging by a significant 36.8% after rejecting a US$7.25 billion takeover bid from Cleveland-Cliffs.
Overall, the Dow lifted by 0.1% or 26 points, the S&P 500 added 0.6% and the Nasdaq gained 1.1% or 143.5 points.
European markets
The Euro markets were mixed overnight, unable to decide between optimism – fuelled by a potential peak in UK interest rates – and despair, brought on by growing concerns over the health of China’s property market.
The retail sector gained 0.8% on the back of B&M European Value Retail's 3% gain, which followed a Deutsche Bank (ETR:DBKGn) price target raise.
The Healthcare sector also managed a 0.3% lift, largely attributable to a 4.4% gain in Phillips shares after investment firm Exor acquired a significant 15% stake.
The mining sector went the other way, taking a 1.5% loss in response to an ostensibly weakening Chinese construction sector.
The FTSEurofirst 300 index inched up 0.2%, and the London-based UK FTSE 100 shed 0.2%.
European equities still appear to be underappreciated
Lazard Asset Management managing director and analyst Aaron Barnfather explains why European stocks may be a good pick in the current economic climate.
“As Europe enjoys summer, it does so in the knowledge that European equities performed solidly over the first half of 2023,” Barnfather writes.
“Not all good things last, however, and European equities may struggle over the near term as the effects of higher rates begin to bite.
“When compared to their counterparts across the globe, however, European stocks arguably look relatively better placed to withstand a potential global slowdown, despite the region facing major economic headwinds.
“Heavily inverted European and UK yield curves continue to point to a recession in both the eurozone and the UK, but higher bond yields mean European fixed-income investors can pick up attractive yields for modest risk.
“We suggest steering clear of riskier high-yield debt at this time.”
Currencies and commodities
The US dollar gained against most currencies overnight.
- The Euro fell to US$1.0875 and was near US$1.0905 at the US close.
- The Aussie slipped to US$0.6455 cents and was near US$0.6485 cents at close.
- The Japanese yen eased to JPY145.55 and was near JPY145.50 at the US close.
Brent crude fell by 0.7% to US$86.21 a barrel, US Nymex shed 0.8% to US$82.51 a barrel and WTI Crude dipped 0.73% to $82.58 a barrel.
A strong US dollar also undercut the safe haven of gold, which fell by 0.3% to US$1907.50 an ounce. Iron futures fell 0.7% to US$104.63 a tonne – again impacted by the crisis at Chinese property developer Country Garden – and aluminium fell 1.6%.
Copper escaped with a 0.3% increase despite the overall momentum against mineral commodities.
On the small cap front
The Small Ords lost 0.57% yesterday, unsurprising given the ASX itself fell by a larger margin. You can read about the following and more in further detail during the day.