ASX has steady week as trade tensions strengthen $US
The Australian sharemarket has closed the week flat, following days of turbulent trading as the US-China trade saga continues to leave investors uncertain.
The S&P/ASX 200 index fell 3.9 points, or 0.1 per cent, to 6268.4 this week, as the United States announced further tariffs on an extra $US200 billion worth of Chinese goods.
Commodity stocks were rattled this week following a broad-based metal sell-off during the middle of the week. The major mining stocks fell through the week as did the energy stocks as Libya announced it would be restoring its production. This news sent oil prices tumbling with Brent crude recording its biggest single day fall in two years.
The US dollar strengthened this week, with the Bloomberg dollar index recording its best performance in a month. The rise meant that US exposed stocks were among the best performers on the local sharemarket this week.
CSL shares broke through the $200 mark on Thursday for the first time in the company's history. In a note, Citi lifted the company's price target to $232 with the analyst forecasting a positive earnings season for the healthcare giant. Its shares rose 6.3 per cent to $204.56 this week.
Afterpay Touch Group continued its strong run this month, rising in the back end of the week on a broker note from Wilsons. The tech company launched in the US market in May and brokers believe its a positive opportunity for the group. Its shares rose 10.4 per cent to $10.98.
Pilbara Minerals has continued two weeks of strong growth following a positive broker note from Credit Suisse on July 3 and a broker note from Fester Stockbroking on Thursday that gave the lithium miner a $1.21 price target. Its shares rose 14.4 per cent to $1.07 this week.
Pendal Group fell this week after its funds under management rose $1 billion, below market expectations. The company experienced weakness from its JO Hambro Capital Management business which experienced net outflows of $1.1 billion for the quarter. Its shares closed the week 11.7 per cent lower at $9.13.
Resolute Mining fell on a trading update which showed the company wasn't able to generate a positive cash flow and that its cash balance fell to $113 million, a loss of 18 per cent over the last three months. Its shares closed the week at $1.32, down 7.7 per cent.
Stock watch
A2 Milk
Despite The A2 Milk Company reporting on Thursday sales growth of 68 per cent and EBITDA up 96 per cent for the year, Morgans downgraded the company's target price due to A2's own soft expectations for the 2019 financial year. The broker has downgraded the company's NPAT forecasts for the 2019 and 2020 financial years by 6.9 per cent, although Morgans says it is still forecasting strong growth across the forecast period. A2 is expected to invest across the business in the hope that it will be able to build a global dairy nutritional company. The company says it expects strong EBITDA growth, strong cashflow conversion and a strong balance sheet. According to Morgans, the company's investment in the next financial year will soften growth for 2019 but will be extremely important to the company's medium to longer-term growth profile.
What moved the market
World Cup trading
Analysis of share volumes during World Cup games has revealed that there is a noticeable dip in the number of trades during World Cup matches when that particular market's national team is playing. Lonsec Research, using France as an example, compared two matches that occurred during the final 90 minutes of trading on the French CAC 40. Comparing them to regular trading volumes during that time in the month, there was a notable drop in volume when France played against Denmark and Uruguay. Both ended up being the second and third lowest volume periods for the month. Despite this drop, France is still leading its European rivals when it comes to sharemarket performance.
Nickel
Bullish bargain hunting investors have given nickel a boost on Thursday, lifting the metal to its highest price in a week. The metal has fallen 14 per cent from early June and hit a two-month low in the previous session. It lifted 2.3 per cent to $US14,195 as investors look to cash in on its recent price fall. "Nickel has a strong fundamental story and I think the view of investors was that after a near $2,000 pull-back, it was approaching territory that, irrespective of that macro noise, was an attractive entry point," said Nicholas Snowdon, metals analyst at Deutsche Bank in London told Reuters. "This was in particular for the Chinese investor base, where many are hard-core nickel bulls."
Yen
The Japanese yen has fallen overnight, driven in part by a strengthening US dollar and a number of other factors weakening the yen. Higher US two-year bond yields, broad weakness across the Chinese yuan and other Asian currencies and the recovery recovery trend being higher in the US and advanced economies equity markets. Analysts are expecting that the greenback will continue to strengthen against the yen as it has done so for the past month. The Australian dollar, which strengthened agains the US dollar overnight, rose more than one per cent higher against the yen to be now sitting near a one-month high.
Viva Energy
Viva Energy's first day on the market saw its share price fall 4 per cent to $2.40. The company's IPO had priced each share at $2.50 however the first trades on the ASX sent the company as low as $2.41 inside the first hour. The company's shared had been priced at the bottom of end of the proposed range, which was as high as $2.65 a share. The company successfully completed the biggest float since Medibank in 2014 as it raised $2.65 billion in an initial share offer which gave the company a $4.86 billion market capitalisation. That market capitalisation places Viva inside the 100 biggest companies listed on the Australian Stock Exchange.