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US equities closed higher on Tuesday with the Dow Jones posting a positive close for a 12th straight session, the longest winning streak in 6-years. The tech-heavy Nasdaq and S&P500 also closed higher as investors respond to the latest earnings results and await the key interest rate decision out of the Federal Reserve tomorrow.
General Electric shares rallied 6% after the company posted stronger-then-expected revenue for the second quarter, while Alphabet and Microsoft reported after the closing bell. Both tech giants beat expectations, especially Microsoft which was driven by AI lifting quarterly sales to the higher level ever of US$56.2bn. So far this earnings season, around 79% have exceeded analysts’ expectations according to FactSet data.
In Europe, markets also mostly rallied on Tuesday as investors in the region also responded to earnings results from big names including Unilever which beat analysts’ expectations to report a 7.9% rise in underlying Q2 sales. The European Central Bank also meets on Thursday where it is widely expected that a 25-basis point rate hike will be announced. The STOXX600 rose 0.47% on Tuesday, buoyed by mining stocks rising on the back of new Chinese stimulus measures, Germany’s DAX added 0.13%, the French CAC fell 0.16% and, in the UK, the FTSE100 added 0.17%.
China’s leaders pledged on Monday to step up the government’s policy support for the extremely weak post-COVID recovery in the region, with a focus on boosting domestic demand and aiding recovery in the building sector. Looking at China’s Q2 growth rate data, the world’s second largest economy grew only 0.8% QoQ vs 2.2% growth in Q1, in a sign economic recovery is stalling. The introduction of further government stimulus is expected to fuel a rally for iron ore prices and subsequently, iron ore miners which have taken a hit in recent months.
The local market rallied almost half a percent yesterday boosted by the iron ore miners jumping on the back of speculation that China will introduce further stimulus policy to reignite the nation’s recovery post-pandemic, causing a rise in the price of iron ore today. BHP added 3.84% yesterday, Fortescue rallied 4.55% and Rio Tinto jumped 3.4%.
Technology stocks weighed on the market yesterday with the sector closing down 0.25% on the back of the Nasdaq-100’s special rebalancing which is aimed at reducing the concentration of heavyweight companies that account for nearly half of the index’s weight. Stocks involved in the rebalancing include Microsoft, Apple and Tesla which account for 43.8% of the index weight coming down to 38.5% as a result of the rebalancing.
There are very low trading volumes across the ASX in recent times, down 12% last week on the same week last year, as investors are likely looking forward to the August reporting season for key signs of how companies performed in the high interest rate, high inflation environment of FY23, before making further moves in the market.
Pilbara Minerals bucked the lithium sell-off trend yesterday to close over 5% higher after the lithium giant release a June quarter update including a 22% increase in sales, a 10% increase in production to 162.8 thousand tonnes, and announced further drilling and resource reserve updates.
What to watch today: