The ASX is looking at a flat start to the week, despite positive reactions to easing US inflation figures.
ASX 200 futures were trading 2 points lower, down -0.01%, as of 8:20 am AEST.
"The ASX200 closed last week with its biggest weekly gain of the year, up 3.7%, with investors seeing the end in sight for central bank tightening," eToro analyst Josh Gilbert said.
"The market took the news of Michele Bullock’s appointment as RBA Governor well, with the hope that she may have a more dovish stance than Philip Lowe when she takes the helm in September.
“In the US on Friday, US banks handed down earnings in a field of mixed results. JPMorgan and Wells Fargo (NYSE:WFC) were the standout performers, with beats on both the top and bottom lines. However, this was overshadowed by increased loan loss provisions and weak investment banking performance, which also saw Citigroup (NYSE:C) falter, its shares falling 4.1%.”
The week that was
Here’s what we saw (source Commsec):
US markets
Were mixed on Friday as strong economic data reinforced the view that it may be too early for the US Federal Reserve to claim victory in its fight with inflation. A report showed that consumer sentiment soared to an almost two-year high, while short-term price expectations rose, sending US government bond yields higher.
Shares of JPMorgan Chase (NYSE:JPM) rose by 0.6% and Wells Fargo eased 0.3%, while the S&P 500 banks index fell by 0.9% after reporting earnings results.
Both major banks announced higher quarterly profits but said they had set aside more money for expected losses from commercial real estate loans.
Citigroup shares fell by 4.1% after the lender's quarterly profit tumbled, while BlackRock (NYSE:BLK) shares were down 1.6% after it posted a decline in quarterly revenue.
Shares of UnitedHealth Group (NYSE:UNH) surged 7.2% as profits allayed fears of runaway medical costs. Shares of AT&T sank by 4.1% to a 29-year low amid growing concerns about potentially higher costs for the phone giant.
At the close of trade, the Dow Jones index rose by 114 points or 0.3%. But the S&P 500 index dipped 0.1% and the Nasdaq index shed 25 points or 0.2%. For the week, the Dow was up 2.3%, the S&P 500 rose 2.4% and the Nasdaq advanced 3.3%
European markets
Edged slightly lower on Friday following five sessions of gains. Oil and gas shares dropped 2% on falling crude oil prices. Telecom firms fell by 1.3% with Nokia (HE:NOKIA) shares down by 9.4% after lowering its full-year results outlook and Ericsson (BS:ERICAs) (-10.6%) results underwhelmed.
The continent-wide FTSEurofirst 300 index fell by 0.1%, capping a weekly gain of 2.9%, the biggest lift since March. The UK FTSE 100 index also slipped by 0.1%, but logged its best weekly performance in more than three months, up 2.5%.
Currencies
Were mixed against the US dollar in European and US trade.
- The Euro rose from US$1.1204 to US$1.1243 and was near US$1.1225 at the US close.
- The Aussie dollar fell from US68.88 cents to US68.30 cents and was near US68.35 cents at the US close.
- The Japanese yen dipped from 137.78 yen per US dollar to JPY139.10 and was near JPY138.75 at the US close.
Global oil prices slipped by almost 2% on Friday as the US dollar generally strengthened and oil traders booked profits from a strong rally.
- The Brent crude price fell by US$1.49 or 1.8% to US$79.87 a barrel.
- The US Nymex crude price slid US$1.47 or 1.9% to US$75.42 a barrel.
- Crude prices lifted about 2% on a weekly basis, their third straight weekly gain.
- The copper futures price fell by 0.2% on concerns about Chinese stimulus.
- The aluminium futures price dipped by 0.3%. For the week, copper gained 4.1% with aluminium up by 5.9%.
- The gold futures price rose by US60 cents or less than 0.1% to US$1,964.40 an ounce. Spot gold was trading near US$1,955 an ounce at the US close. Gold rose by 1.7% for the week.
- Iron ore futures added US$1.43 or 1.3% to US$112.38 a tonne with the steel demand outlook brightening in China. Iron ore lifted by 1.7% over the week.
eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. AU employment numbers - A key piece of the puzzle
Despite a red-hot labour market, the Reserve Bank kept rates on hold earlier this month, citing time to assess incoming data after a significant increase in the cash rate in such a short period. This week holds a key piece of the RBA’s puzzle: the unemployment rate and employment growth figures, set to be handed down on Wednesday.
Although the RBA wants to see unemployment rise, they don’t want to see it spike and Philip Lowe has mentioned several times that the board would rather not be too aggressive and preserve gains in the labour market. The unemployment rate should be set to rise in the second half of 2023 as labour supply jumps and growth slows, but it has so far remained resilient, with stronger-than-expected employment last month pushing the unemployment rate lower.
The RBA will be hoping for a softer employment number to vindicate their decision to keep rates on hold. A slowing of the labour market would be welcomed by investors, with that data likely to reaffirm that the RBA may be done with raising rates after August.
2. Tesla (NASDAQ:TSLA) and Netflix (NASDAQ:NFLX) Q2 earnings
Earnings season unofficially kicks off in the US this week, and so sees two tech giants hand down earnings in Netflix and Tesla. Both companies will report on Thursday morning after the US market close.
Following a solid Q1 for the streaming giant and an almost 50% gain year-to-date, it looks as if its recent struggles are well and truly in the rearview mirror. Netflix is expected to add 1.9 million new subscribers, a far cry from the 1 million loss of subscribers in the same period last year.
The pick-up is thanks to the rollout of its ad-based tier and its password policies beginning to pay dividends. Revenue growth will be in focus after stalling in the last few years, but a strong print would set up the framework for a solid second half of the year.
However, it will be Tesla that likely steals the headlines, with the EV manufacturer delivering record vehicles in Q2 putting high expectations on its results next week. With shares climbing by 120% this year, there's little margin for error, and it will be margins that the street will focus on.
Tesla’s impressive automotive margins have been falling as of late, and more so in 2023, with significant price cuts across its range. A number below 20% might put the stock under some pressure but investors should be prepared for it, given that Musk has said the business will focus on growth over profit.
3. Operational updates from Rio and BHP (ASX:BHP)
Australia’s long-awaited reporting season is not far from kicking off, with companies set to start handing down their full-year results in the next few weeks. Before the flurry begins, two of Australia’s biggest miners, Rio Tinto (ASX:RIO) (July 18) and BHP Group (July 20), will deliver operational updates to investors next week.
Both have struggled in the last three months, with shares down around 5% in both instances in part due to China’s ailing property market, putting the miners on the back foot.
Iron ore prices, however, have picked up in the last week with more hope that China may begin to deliver the economic aid it badly needs.
Although investors' primary focus will be on full-year results in August, these operational updates offer an early picture of current and forecasted output, with potential commentary from management teams about China’s tepid recovery and how they see the current landscape.
On the small cap front
The S&P/ASX Small Ordinaries finished 1.03% higher on Friday and ended the week 5.23% higher.
There has been a flurry of activity on the market this morning including: