The ASX is likely to fall this morning, with ASX200 futures 0.8% lower, to 7,876 points.
The ASX200 finished last week 12 points higher at 7,971 (+0.15%), paring back gains from Wednesday's record high of 8,083 following losses on Wall Street.
Sector-wise, Real Estate (+1.95%), Consumer Staples (+1.44%) and Health Care (+1.12%) sectors outperformed. However, Materials (-2.24%), Information Technology (IT) (-1.81%) and Energy (-0.52%) sectors were the main detractors.
On an individual stock level, Adairs (+9.68%), James Hardie (+9.59%), Select Harvests (+9.23%) and Adore Beauty were the top performers of the week. Conversely, Lifestyle Communities (-24.34%), Deep Yellow (-16.98%), Drone Shield (-16.24%) and Aussie Broadband (-12.98%) saw significant declines.
Looking ahead, the local economic calendar is light with only Australian business conditions data expected before the critical Q2 Consumer Price Index (CPI) release on July 31.
The rates market begins the week pricing in a 20% probability of a 25 basis points (bp) rate hike by the Reserve Bank of Australia (RBA) in August.
South32 record Worsley Alumina impairment
One drag today for the ASX is likely to be energy major South32 Ltd (LSE:S32, ASX:S32, OTC:SHTLF, JSE:S32), which has announced it will record an impairment expense of US$554 million (A$812.1 million) for Worsley Alumina in its annual results following a review of the business's value.
This decision was influenced by increased uncertainty due to the Western Australia Environmental Protection Authority’s (WA EPA) recommended conditions and associated challenging operating conditions.
As a result, South32 will recognise an impairment expense of US$554 million (US$389 million post-tax) for Worsley Alumina in its FY24 financial results. This impairment reduces Worsley Alumina’s carrying value to US$2.03 billion and will be excluded from the 2024 underlying earnings.
The impairment comes as Worsley Alumina plans to appeal the WA EPA’s assessment report, which poses significant operating challenges and impacts its long-term viability.
According to Worsley Alumina, several recommended conditions exceed reasonable measures for managing environmental risks, based on scientific assessment and decades of operational experience.
Despite these challenges, South32 states that Worsley Alumina will continue to meet WA's stringent environmental standards and maintain its significant contribution to the South West, which has spanned over 40 years. Worsley Alumina aims to secure environmental approvals for its proposal by the end of December.
Major news in the US
President Joe Biden has announced he will pull out of the election race.
IG Markets analyst Tony Sycamore said, “US President Biden announced overnight that he will step aside as the Democratic candidate to contest the US election in November.
"Biden endorsed his VP Kamal Harris to lead the Democratic ticket, which should see the Democrats confirm Harris as their nominee for the presidency at the party’s national convention scheduled to begin August 19.
“Should the Democrats under Harris win the US election, policy paths are expected to be relatively unchanged from those under Biden. Former President Donald Trump remains the favourite to win the election and is paying $0.60c according to PredictIt. Kamala Harris is paying $0.38c up $0.11c.”
Meanwhile, the impact of a global cyber outage on Friday compounded an already difficult week for tech stocks, resulting in the Nasdaq 100 closing 3.98% lower last week, marking its worst performance since mid-April.
The S&P 500 lost 1.97% while the Dow Jones Industrial Average ended the week 286 points (0.72%) higher. The small-cap Russell 2000 gained 1.68%.
Friday's IT outage raised significant concerns about the disaster recovery plans of many of the world's largest organisations. However, the resolution of the outage is likely to shift market focus back to the upcoming Q2 2024 earnings reports and key economic data scheduled for this week.
Earnings reports are anticipated from companies such as Visa (NYSE:V), Ford, Alphabet (NASDAQ:GOOGL) and Tesla (NASDAQ:TSLA) (Wednesday morning Sydney time). Additionally, the Q2 advanced estimate of Gross Domestic Product (GDP) growth will be released on Thursday and is expected to show that the US economy expanded by 1.9%, up from 1.4% in Q1.
On Friday, the Federal Reserve’s preferred measure of inflation, the Core Personal Consumption Expenditures (PCE) Price Index, will be announced.
The market expects headline PCE to rise by 0.1% month-on-month (MoM), which would see the annual rate ease to 2.5%.
Core PCE is projected to increase by 0.2% MoM, maintaining the annual rate at 2.6% in June. A 25 basis point (bp) rate cut is fully priced for the Federal Reserve's September Federal Open Market Committee (FOMC) meeting, with 63 bp of rate cuts anticipated before year-end.
European markets
Fell on Friday, with travel and leisure shares among the top decliners, dropping 2.1%. This sector was significantly impacted by an 8.3% fall in Sweden's Evolution after the company missed second-quarter revenue and earnings expectations.
Miners also shed 2.1%, pressured by lower commodity prices due to the lack of Chinese stimulus measures. Heavyweight energy shares slipped 0.9% amid lower crude oil prices. Technology shares were down 1% on the day and were the worst-performing sector of the week, with a near 9% tumble.
The continent-wide FTSEurofirst 300 index fell by 0.7%, hitting a more than two-week low and logging a weekly decline of 2.8%, marking its biggest weekly fall this year. In London, the UK FTSE 100 index lost 0.6%, snapping two weeks of consecutive gains and dropping 1.2%. UK retail sales fell 1.2% in June, against an expected decline of 0.6%.
Currencies and commodities
(source Commsec)
Currencies
Currencies exhibited mixed performance against the US dollar in European and US trade.
- The Euro fell from US$1.0892 to US$1.0874, stabilising near US$1.0875 by the US close.
- The Australian dollar dipped from US$0.6706 to US$0.6680, closing near US$0.6685.
- The Japanese yen strengthened from JPY157.81 per US dollar to JPY157.00, before settling near JPY157.50 at the US close.
Commodities
Global oil prices fell over US$2 on Friday, reaching their lowest level since mid-June as investors monitored a potential ceasefire in Gaza, while a stronger US dollar further pressured values.
- Brent crude declined by US$2.48 or 2.9% to US$82.63 per barrel.
- The US Nymex crude price decreased by US$2.69 or 3.2% to US$80.13 per barrel.
- For the week, Brent crude slid 2.8%, and US Nymex crude fell 2.5%.
Base metal prices continued to decline on Friday as the US dollar strengthened.
- Copper futures dropped for the fifth consecutive session, falling 1.1%.
- Aluminium futures slid 1.3%.
- Over the week, copper prices fell 7.9%, marking the largest decline since August 2022, while aluminium prices decreased by 5.2%.
The gold futures price fell by US$57.30 or 2.3% to US$2,399.10 per ounce on Friday, as the US dollar strengthened and investors engaged in profit-taking after gold reached a record peak earlier in the week. Spot gold was trading near US$2,400 per ounce at the US close. Over the week, bullion dipped 0.9%.
Iron ore futures slipped US$0.28 or 0.3% to US$108.45 per tonne on Friday, following a policy meeting in China that did not introduce additional stimulus measures to support metals demand. The steel-making ingredient declined by 1% for the week, influenced by reports of higher production from the world's leading miners.
What about small caps?
The S&P/ASX Small Ordinaries (XSO) fell 0.97% on Friday to 3,032.60 and lost 1.07% for the week.
We’ve seen some steady newsflow this morning and you can read about the following and more throughout the day.