US markets surge, ASX earnings season kicks off in a big way

Stocks rose sharply on Friday, clinching the fourth straight positive week for the S&P 500 as investors celebrated signs that inflation may be peaking. The key fundamental driver of this week's upside was softer-than-expected July CPI and PPI data, providing more support for the peak inflation narrative. On Friday, import prices also fell more than expected.

The market also managed to push higher despite a recent batch of corporate updates that fit into expectations for a more meaningful earnings reset. The Dow Jones Industrial Average added 1.27 per cent. The S&P 500 gained 1.73 per cent to finish at and the Nasdaq Composite surged 2.09 per cent. The S&P 500 rose 3.26 per cent on the week, notching its longest weekly winning streak since November 2021. The Dow was up 2.92 per cent for the week, while the Nasdaq Composite moved higher by 3.08 per cent.

In Australia this week a big test of the recovery in local investor sentiment and confidence looms in the form of the June half Australian earnings reporting season, which hits full pace this week with around 60 major companies revealing their results, led by BHP (ASX:BHP) tomorrow.

Meanwhile, the dying embers of the US June earnings season see a couple of major US retail stocks report this week, with the most awaited figures from retail giant Walmart Tuesday night, Sydney time and Target, the number two, the next day. Costco's quarterly results will be out on Thursday.

Food inflation in the United States hit 10.9 per cent in July, the highest since May of 1979. The fear is that this is affecting customers’ ability to spend on general merchandise categories and requiring retailers to more heavily markdown inventory, particularly apparel.

In the US on Friday, all sectors were up, including energy, despite the oil price fall. Big tech, semis, autos, asset managers, managed care, and precious metals were among the standouts.

Of note, the US House passed a sweeping tax, health and climate bill on Friday, delivering a major win for Democrats and President Joe Biden less than three months before the pivotal midterm elections. The climate, tax, and healthcare bill passed by the House includes a tax credit of $7,500 for Americans buying electric vehicles.

There’s just one small problem. To qualify for the credit, EVs would need to:

Be assembled in North America
Have at least 50 per cent of components in its battery come from North America by 2024, and 100 per cent by 2028. EVs are also going to need to meet new sourcing thresholds for minerals in batteries.

Of course, many of the materials that go into an electric vehicle, such as rare earth metals, aren’t currently produced in the US. They come from places like China, the Democratic Republic of Congo and Myanmar — places the US isn’t especially keen on trading with going forward. This is the problem Australian resource companies are looking to solve moving forward.

Futures

The SPI futures are pointing to a 39 point rise.

Currencies

The US Dollar index was up 0.5 per cent but ended lower for the week.

One Australian dollar at 7:10 AM has strengthened compared to the US dollar on Friday, buying 71.21 US cents (Fri: 71.10 US cents), 58.68 Pence Sterling, 95.07 Yen and 69.43 Euro cents.

Over the past 24 hours, Bitcoin has lost 0.61 per cent to US$24,353.88.

Commodities

Iron ore futures are pointing to a 0.2 per cent gain.
Gold has gained $8.30 or 0.46 per cent to US$1,815.50 an ounce.
Silver is up $0.35 or 1.69 per cent to US$20.85 an ounce.
Copper has lost $3.80 or 1.03 per cent to US$366.85 a pound.
Oil has lost $2.25 or 2.38 per cent to US$92.09 a barrel.

Oil prices plunged around 2 per cent on Friday, on expectations that supply disruptions in the U.S. Gulf of Mexico would be short-term, while recession fears clouded the demand outlook.

Figures around the globe

Across the Atlantic, European markets closed higher on Friday. Paris added 0.1 per cent, Frankfurt gained 0.7 per cent and London’s FTSE closed 0.5 per cent higher.

Asian markets closed mixed. Tokyo’s Nikkei gained 2.6 per cent, Hong Kong’s Hang Seng gained 0.5 per cent and China’s Shanghai Composite closed 0.2 per cent lower.

On Friday, the Australian sharemarket closed 0.5 per cent or 38 points lower at 7,033.

Ex-dividends

There are three companies set to trade without the right to a dividend.

QV Equities (ASX:QVE) is paying 1.2 cents fully franked
Scentre Group (ASX:SCG) is paying 7.5 cents unfranked
WOTSO Property (ASX:WOT) is paying 3 cents unfranked

Dividends payable

There are two companies set to pay eligible shareholders today.

NB Global Corporate Income Trust (ASX:NBI)
Qualitas Real Estate Income Fund (ASX:QRI)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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Source: Finance News Network