European banks rally, iron ore drops 8%, RBA minutes, Graincorp, BHP, Zip Co on watch: ASX higher
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Wall St is closed for the June 16 holiday. Europe rebounded with the emergence of falling buyers, helped by banks and energy.
Hello. I’m Melissa Darmawan for Finance News. This is your market outlook.
The Australian stock market is expected to rebound amid US futures for the Dow, S&P 500 and Nasdaq up 1% each.
European banks, travel and leisure stocks rally
Wall St is closed for the June 19 holiday, a commemoration of the end of slavery after the American Civil War. We will look to European markets for our lead today.
The Stoxx 600 rose nearly 1% after last week’s strong selloff. Investors reacted to ECB President Christine Lagarde’s statement that the risk of a sharp correction in financial assets and house prices in Europe remains “severe”. Ms. Lagarde also reaffirmed her intention to raise eurozone interest rates twice in the coming months.
At the closing bell, Paris added 0.6% as President Macron’s party lost an absolute majority in the country’s legislative elections. Frankfurt gained 1.1%, while London’s FTSE gained 1.5%, thanks to a rise in BP it rose 3.2% and Shell gained 3.3%. Rio bucked the trend, closing down 1%.
Banks, travel, leisure and energy companies led the Stoxx Europe 600 index up 3.3%, 3% and 2.1% respectively. Basic resources rose 0.7% amid falling commodity prices, while construction companies were the worst performers, down 1.8%.
Let’s see what this means for the Australian market today.
Numbers around the world
Asian markets closed mixed, Tokyo’s Nikkei lost 0.7%, Hong Kong’s Hang Seng gained 0.4% while China’s Shanghai Composite closed flat, down 0.04% .
The Australian equity market fell 0.6% to 6,433 yesterday.
SPI Futures Contracts
Taking all of that into the equation, SPI futures are pointing to a 0.7% gain.
What to pay attention to today
Minutes of the RBA meeting are due out today, following figures of a tight labor market and rising inflation expectations. Weekly consumer confidence numbers from ANZ and Roy Morgan are due.
To recap, the economy added 60,600 jobs and the unemployment rate remained unchanged at 3.9%. While inflation expectations rose sharply to 6.7% in June from 5.0% in May.
Ahead of the minutes scheduled for 11:30 a.m. AEST, investors will also hear from Governor Philip Lowe when he delivers a speech titled “Inflation and Monetary Policy.” Mr Lowe said last week that the RBA would do “whatever is necessary” to bring inflation back to the 2-3% target and that it is “reasonable” to expect the key rate to rise from 0.85% to 2.5% currently.
Money market traders see a growing likelihood of the RBA, following the Federal Reserve with an interest rate hike of 75 basis points in July or August. Overnight index swaps have put a 50% chance of this move over the next two months as prices rise ahead of today’s minutes.
Even with the tall ride, the RBA is playing catch-up. Investors will comb the meetings for any sign from the central bank that it intends to raise interest rates by 50 basis points. This bodes well for the Australian dollar against the greenback which fell more than 1.6% last week.
Looking ahead, Graincorp (ASX: CNG) has its Investor Day scheduled for today while in M&A there is speculation that Adbri (ASX:ABC) has submitted an offer to buy Western Australian building products company BGC Group, according to the AFR.
Miners Vale SA and BHP (ASX: BHP) said they were not interested in selling their Samarco joint venture.
Zip Co’s (ASX:ZIP) the UK business is under scrutiny from directors, with suggestions the board has appointed a consultant to look at options for that part of the business, according to The Australian.
Finally, Premier Investments (ASX: PMV) is trading ex-dividend today, which means the stock price is expected to decline. Eligible shareholders are expected to receive 46 cents per share of the fully franked dividend on July 27.
Two companies are ready to trade without the right to its dividend.
Kelly Partners Group Holdings (ASX: KPG) pays 0.363 cents fully franked
First investments (ASX: PMV) pays 46 cents fully franked
There are four companies ready to pay eligible shareholders today
Coronado World Resources (ASX: CRN)
Contrarian Fat Prophets Global Fund (ASX:FPC)
Oceania Health (ASX:OCA)
Virgin Money UK Plc (ASX:VUK)
Iron ore fell 8% to US$112.35. Its futures contracts point to a decline of 3.1%.
Gold added $0.10 or 0.01% to US$1,840.70 an ounce. Silver was down $0.02 or 0.07% at US$21.67 an ounce.
Oil added $0.71 or 0.7% to US$110.27 a barrel.
The 7:10 Australian dollar has strengthened since yesterday, buying 69.55 US cents (Mon: 69.30 US cents), 56.77 pence sterling, 93.93 yen and 66.17 euro cents.
That’s it for the prospects. I’m Melissa Darmawan for Finance News. Have a nice day and stay safe.
The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way, including negligence.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics