As US corporate earnings and fundamental economic data compete with the unfolding trade-war for the headlines, the ASX appears equally likely to consolidate as it does pull back.
Following numerous attempts to challenge the 6300 level, another close above that mark has so far alluded the ASX 200, which is showing definite signs of fatigue. Perhaps the luck has run out of for the index, following several well-timed runs, thanks to activity in mining stocks and the recovery in bank bares. Each of those stories looks to have run its course now, with the miners weighed down by falling commodity prices amidst the unfolding trade way; and the financial sector returning to the levels it was trading at prior to the sell-off in the sector during the Royal Commission into banking. From a technical point of view, several trend lines appear to be holding up: the first around 6225 and the next at the more crucial 6170.
The winners and losers
Being the sluggish week that it was, radical moves across major sectors were relatively mooted. The ASX seemed to have rotated between a handful of active industries, as lower than average volumes kept broad based gains at bay. Consumer services shares benefitted from the strong Consumer Sentiment figures printed last week, driving funds towards stocks like Flight Centre, which managed to around 8% throughout the weeks trading. The healthcare space also saw a level of strong activity, led by a plus-5% climb in the share price of Sigma Healthcare.
As it applies to the losers on the ASX 200 last week, utilities suffered on the back of the release of an ACCC report that suggested the major utilities companies are effectively price gouging. AGL Energy stocks tumbled as a result, falling almost 6%. Mining stocks also battled amidst the turmoil caused by a global trade war, while the pull back in oil prices over the course of last week drove Oil and Gas stocks a whole 2% lower.
The little Aussie battler
The AUD/USD regained its fight towards the end of last week, regaining some lost ground to rally above the 0.7400 handle, and towards support/resistance at 0.7420. Remarkably, this came in the face of a rally in the broad US Dollar Index that saw the greenback register month-to-date highs around 94.90. The fundamental picture for the local unit is negligibly different to last week, although a counterintuitive return of risk appetite could be pinned as the major reason for the run. The AUD/JPY – a great indicator of the global growth and global risk binary – has performed an impressive push higher last week, and in July more generally, to trade back towards 83.50 at time of writing.
The data week ahead
As it relates to fundamental data this week, traders will have many high impact events both locally and abroad to trade-on. On the local front, the two major releases jump-off the calendar: the first is Tuesday’s RBA Monetary Policy Minutes, which is expected to strike a characteristically dovish tone across the report; and the second is employment data for the month of June, which is forecast to reveal a steady unemployment rate of 5.4% and a gain of 16k jobs across the economy.
A slew of Chinese data has already been released this week, crossing off the first item on many trader’s lists. The real interest will be in the action-packed US corporate earnings calendar, as traders await fresh impetus to buy into the resilience US equity markets. From a macroeconomic front, Retail Sales data is released out of the US, the UK and Canada; US Fed Chair Jerome Powell speaks on Thursday too; while CPI data will print in the UK, New Zealand and Canada.
