Global markets were generally higher on Friday as US stocks notched gains (S&P 500 Index +0.3%) to register the S&P 500's third consecutive weekly gain for the first time since December.
Investors digested last week’s initial burst of corporate earnings (Netflix shares dropped -6%), economic data and COVID-19 news. It is going to be another huge week ahead for corporate earnings with Amazon, Microsoft and Tesla all scheduled to report. The market weighed the prospect of more fiscal stimulus against fears of further business disruptions due to a record rise in COVID-19 cases. A University of Michigan survey showed US consumer sentiment slumped in July, missing all forecasts, given the reversal of emerging optimism around re-openings.
In Europe, German Chancellor Angela Merkel raised doubts on Friday that European Union leaders would be able to agree this week on a landmark 750bn-euro recovery fund to help their economies heal from the pandemic.
Rio Tinto (RIO:ASX)
Rio Tinto shares held onto gains after releasing sound production numbers from its 2020 second quarter on Friday.
Compared to the first quarter of 2020, iron ore shipments rose by 19% to 86.7 Mt, iron ore production grew 7% to 83.2 Mt, bauxite production increased 5% to 14.6 Mt, aluminium production was flat at 785 kt, mined copper production saw no growth with 132.8 kt, titanium dioxide slag production fell 10% to 262 kt and IOC iron ore pellets and concentrate production rose 8% to 2.8 Mt.
RIO said that capital expenditure is now expected to be around $6 billion in 2020 due to an appreciation in currencies compared to the US dollar in the first quarter. Rio Tinto chief executive J-S Jacques said: “We delivered a strong performance, particularly in iron ore and bauxite, demonstrating the resilience of our business and ability to adapt in difficult conditions. Our iron ore assets are performing well in a strong pricing environment and we are on track to meet our 2020 iron ore guidance. Despite various COVID-19 related challenges, all our assets have continued to operate, with our first priority to protect the health and safety of all our employees and communities".
RIO looks to be navigating the challenges associated with COVID ahead of what should be a strong 1st half result on 29 July.
We currently have a BUY rating on Rio Tinto.
Australia & New Zealand Market Movers
The Australian market was higher on Friday (ASX 200 Index +0.4%) in a late recovery after traders were spooked by news of a surge in virus cases in Victoria and tighter restrictions in New South Wales.
Victoria is set to go back into level 4 lockdown, as it reported 363 new COVID-19 cases and three deaths, with masks to be compulsory for people living in Melbourne when travelling outside.
The media is reporting small and medium businesses will have access to cheap, part-guaranteed loans of up to $1m, while the JobKeeper scheme will be split into a series of tiered payments and its eligibility criteria tightened. The measures are expected to be announced in Thursday's economic statement.
Bluescope Steel has put its NZ Pacific Steel assets on strategic review citing carbon and energy pricing policies that are making operations tougher to justify. Following the Tiwai exit the Pacific Steel assets are one of the largest users of electricity in NZ.
The New Zealand market was in positive territory on Friday (NZX 50 Index +0.7%) as the local economy's relatively strong recovery from the covid-19 lockdown attracted investors keen to limit their exposure to the likes of Australia and the US, where the virus is spreading once more. Strong June manufacturing data release Friday was an important indicator for the domestic economy which was supporting some sectors.
In stock news, Fonterra Shareholders’ Fund units fell as the dairy exporter upgraded its 2020/21 milk price by 4% to a midpoint of $6.40, due to recovering consumer appetite in China. It also trimmed the top of the forecast range for the season that's just finished due to a stronger currency.
Contact Energy also reported a solid end to the 2020 financial year with June operating statistics stronger – although the shares have been hit of late given the uncertainty stemming from the Tiwai Point aluminium smelter closure.