Global markets were lower on Friday, with the US market (S&P 500 index -0.5%) down as investors worry about growth slowing down for some of mega cap tech names.
Sparking the concerns was Amazon which was down -7.6% its biggest decline since May 2020, following their quarterly result which missed consensus and sales would start to ease in the upcoming quarters. Pinterest fell -18.2% after saying it lost monthly users during the three-month period. Other tech heavy weights like Alphabet (-1.0%) and Facebook (-0.6%) also dipped lower.
To date, about three-fifths of S&P 500 companies have reported their earnings, and more than 80% have exceeded both sales and profit estimates, according to data compiled by Bloomberg.
European stocks was lower on Friday, with the Stoxx 600 index down -0.5% higher – but managed to close out the week up +2%.
Closer to home, the Australian cabinet announced on Friday Australia would intend to reopen to the world once 80% of the eligible population are double dose vaccinated – and believe they can reach the 70% threshold by the end of the year. Once 70% vaccination coverage is reached, travel quotas for inbound travellers will be adjusted with higher caps for vaccinated travellers, providing some much needed light on uncertainty around reopening.
The NZ market lagged global markets again in July, with the NZX 50 dipping -0.5% taking its 12 month return to +7.4%. international equities over the month were mostly higher; ASX 200, S&P 500 1.1% and +2.4% respectively (in local currency).
Wastewater treatment business De.mem (DEM) shares were up +1.75% after providing a strong update for the second quarter of 2021. Cash receipts came in at $5.2m which was up +53% from the same corresponding period last year (2020 second quarter), and up +49% from the previous quarter (2021 first quarter) – driven by organic growth as well as partial contribution from the newly acquired Capic acquisition.
This was another promising update and is encouraging to see the acquisition performing well. We remain BUY rated given the synergies and growth potential of the underlying business over the medium term and still see further upside for investors – with DEM still in an early phase of its business.
Australia & New Zealand Market Movers
The Australian market fell on Friday (ASX 200 index -0.3%) as COVID cases continue to remain high, weighing down on the market – causing the index to end the week down -1.8%.
The banks were mixed, National Australia Bank up +0.6% after announcing a $2.5 billion buyback.
Tech shares were mostly weaker for the day Afterpay leading loses down -5.3%. Fortescue fell -5.3% as brokers lowered their price target, and Origin Energy fell -7.9% after flagging $1.6 billion of write offs on its energy markets and generation assets.
The New Zealand market was lower on Friday (NZX 50 index -1.1%) as investors took profit following a strong session a day earlier.
A2 Milk slumped -4.6% leading losses, while Mainfreight and Fisher and Paykel also dipped -1.2% and -1.9% respectively.
Currency Watch – EUR/USD
Last week the FED disappointed markets by showing no rush to taper and with a news heavy week ahead, market sentiment will be geared towards building positions heading into the key Jobs data, with the US economy expected to have added roughly 1 million jobs for July. Beyond US employment data this week, EURUSD traders will also be watching today’s German Retail Sales data, which could shift the ECB’s guidance, given the recent 2% inflation target misses and thus a persistent approach to monetary easing.
The EUR/USD hit a fresh month high on the last trading day of the month, settling just below the 1.19 level and at the time of writing, finding some near term resistance at the 200MA 1.18640. The pair remains supported by the sloping trend line on the daily chart, as discussed in a previous analysis, and this could help EUR bulls build trades higher, given closes above 1.18723 and then the next target at 1.19468 (38.2% fib) as the chart discusses. So, planning to bank on this short-term US dollar weakness? Well, you may not be the only one as markets could continue to react this week to the FEDs near term outlook and NFP could well be the catalyst for another leg higher.
3 Things Markets will be Watching this Week
- Key events this week include US Earnings season scheduled to provide quarterly updates including Alibaba, Nio, Nikola, Geneal Motors, Kraft Heinz, Booking Holdings, Uber, Square and Dropbox
- Employment data (Nonfarm payrolls) and ISM manufacturing survey data in the US.
- Locally, the RBA cash rate call is the key event along with the latest employment data in NZ. Earnings season kicks into gear with Resmed, REA Group and News Corp all scheduled to report.