By Millie Muroi
The Australian sharemarket had a lukewarm morning on Tuesday as investors awaited the July interest rate decision by the Reserve Bank and Wall Street had a subdued session ahead of Independence Day.
The S&P/ASX 200 was down 5.8 points, or 0.1 per cent, to 7240.3 at about 1.10pm AEST, as all sectors except energy, materials and real estate traded in the red.
Energy (up 0.7 per cent) was the strongest sector on the local bourse as coal miners Whitehaven (up 2.7 per cent) and Yancoal (up 2.5 per cent) both lifted.
Miners (up 0.4 per cent) also gained as lithium miners Pilbara Minerals (up 4.7 per cent), Allkem (up 1.2 per cent) and IGO (up 1.9 per cent) lifted. Gold miners were stronger, with Evolution Mining (up 1.8 per cent) and Northern Star (up 1.2 per cent) both advancing.
IT (down 0.6 per cent) was the worst-performing sector, continuing Monday’s declines, as Xero (down 0.9 per cent), WiseTech (down 0.1 per cent) and data centre operator NEXTDC (down 0.4 per cent) fell. Markets are pricing in a 20 per cent chance of a rate hike by the Reserve Bank, which could weigh on the valuation of growth stocks such as tech companies.
Healthcare companies (down 0.6 per cent) also dropped, with Resmed (down 2 per cent) the biggest large-cap decliner.
US stocks ended with marginal gains in a holiday-shortened session on Monday, helped by a surge in Tesla and strength in bank shares as the second half of the year kicked off on a sober note.
The Dow Jones Industrial Average edged up 0.03 per cent; the S&P 500 added 0.12 per cent and the Nasdaq Composite gained 0.21 per cent. Trading volumes were lighter than average as the stock market closed at 1am local time. About 6 billion shares changed hands in US exchanges, compared with the 11 billion daily average over the last 20 sessions.
“You have got a lot of people that are just not in the market,” said Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana. “Nobody is really placing any big bets on either side of the market right now.”
Tesla shares jumped 6.9 per cent after the electric vehicle maker said it delivered a record number of vehicles in the second quarter. Shares of major US banks gained after the companies raised dividends as they sailed through the Federal Reserve’s annual health check.
US investors are tempering expectations for stocks in the second half of the year after megacap stocks drove strong gains so far. While central banks have kept up their hawkish rhetoric, signs of moderating inflation in the world’s largest economy have fuelled big gains across technology shares. The Nasdaq posted its biggest first-half gain in 40 years, rising 31.7 per cent.
Meanwhile, on the bond market a widely watched section of the US Treasury yield curve hit its deepest inversion on Monday since 1981, reflecting financial markets’ concerns about the economy. The two-year note’s yield briefly exceeded the 10-year rate by as much as 110.8 basis points, according to data compiled by Bloomberg.
US manufacturing slumped further in June, a survey showed, reaching levels last seen when the economy was reeling from the initial wave of the COVID-19 pandemic.
Traders are looking to the upcoming earnings season and additional data, such as Friday’s nonfarm payrolls, for clues on the health of the economy.
”With both global and US stocks more than 20 per cent above their October 2022 lows and a more challenging second-half outlook, we believe investors should position for more lacklustre stock market performance through the remainder of the year,” Solita Marcelli, chief investment officer Americas at UBS Global Wealth Management, said.
Nikolaos Panigirtzoglou, global market strategist at JPMorgan, said that “stocks have done well in the first half because a US recession didn’t happen.”
The tech trade, he added, has turned into “a pain trade for institutional investors, causing them to capitulate. This first-half backdrop creates vulnerabilities for the second half as it means if a US recession happens, there would be a rather abrupt market repricing.”
In commodities markets, US crude prices steadied around $US70 a barrel after Saudi Arabia’s state-run news agency said the country will prolong its unilateral oil production cut by one month, keeping a lid on supply even as the market is expected to tighten. Its OPEC+ ally, Russia, also announced fresh curbs on exports.
Also in focus this week will be US Treasury Secretary Janet Yellen’s trip to Beijing, which kicks off on July 6, as the world’s two largest economies look to mend ties after a spate of bilateral tensions.
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Source: Thanks smh.com