ASX expected to continue its bullish run this week

ASX expected to continue its bullish run this week

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The ASX 200 finished on a high on Friday, rising 0.4% to set a new record high of 7538.4. It was a solid performance that is set to continue into this week. In fact, the index rose 1.9% last week, its best performance since May.  Of the best performing sectors last week, Information Technology was up over 11%. Consumer Staples, Financials, Utilities and Consumer Discretionary, were all up over 2%.  The ASX/S&P top 100 stocks were reflective of the overall performance of the ASX last week. The pending acquisition of Afterpay for $29 million by US payment giant Square, saw Australia’s biggest BNPL (Buy Now Pay Later) company rise over 30%. Other strong performers included Xero, Domino’s Pizza and Wisetech – all up over 6%.  Another factor, in the market’s strong performance is Reserve Bank of Australia (RBA) Governor Philip Lowe’s outlook of a strong bounce-back by the Australian economy. Lowe stated it was “quite unlikely” Australia will suffer a recession this year.  Despite this, the RBA has trimmed its forecast for GDP growth this year from 4.75% to 4%, according to the August Statement on Monetary Policy. It will also need to take into account the effect of lockdowns on Australian employment. Australian shares could also start the week on a positive note as data points to a further recovery in the US labour market. “So good to get such a good, across the board, #jobs report,” Allianz’s Mohamed El-Erian said in a tweet. “The strong July numbers were accompanied by favourable revisions to prior months. Makes a big difference to a lot of people. The key now is to sustain the improvements.” Things look a little grimmer in Australia on the labour front. Michele Levine, CEO Roy Morgan, says the series of lockdowns around Australia over the past few months are creating headaches for many industries with an extended NSW lockdown, and multiple lockdowns in Victoria, Queensland and elsewhere to deal with. “The latest Roy Morgan employment estimates for July show unemployment up 0.3% points to 9.7% and under-employment up 0.6% points to 9.1%. This means a total of 2.76 million Australians (18.8% of the workforce) were either unemployed or under-employed in July, the highest monthly figure since February 2021 (3.07 million, 21.0% of the workforce). “The increases in both unemployment and under-employment in July are not surprising when one considers the number of lockdowns around Australia over the last few months. There have been three lockdowns of Victoria, two lockdowns in Queensland, a lockdown of South Australia, a lockdown of Greater Perth, a lockdown of Darwin and an extended lockdown in Greater Sydney which began in late June and is set to continue until at least the end of August. “The multiple lockdowns are especially detrimental to travel and tourism industries and for those in the retail and hospitality sectors. Already Qantas has stood down 2,500 staff as hundreds of flights are cancelled due to the lockdowns and State border closures and the damage to the retail and hospitality sectors continues with trade disrupted and stores forced to close again.” Time will tell just how impactful these numbers will be on the market moving forward. What will the mining sector do this week?   It was the miners that lagged on the ASX last week. The worst-performing stocks included Fortescue Metals down over 6% followed by Mineral Resources Limited (ASX:MIN) down over 5% and OZ Minerals Limited was down around 3%. Of the worst-performing sectors, Materials was down around 1%, with Industrials and Energy also both just in the red.  Notably, Qantas also took a hit with Sydney’s lockdown forcing the airline to stand down 2,500 staff. In some encouraging news, Qantas chief executive Alan Joyce said this was a temporary measure.  Overall, the market remains bullish, with analysts believing it will continue to push towards 8,000 points.  That prediction comes with a caveat.  “As has been demonstrated many times in the last year or so, the market does have a mind of its own,” Wealth Within’s Dale Gillham says.  “Therefore, I continue to urge investors to exercise caution and not to chase shadows, as I am seeing many try to profit from stocks that have already made strong gains believing they will achieve a similar return in the future. The truth is that you cannot buy yesterday’s returns, so make sure you invest wisely for tomorrow’s returns.”   Around the grounds US futures were subdued. The Emini for the S&P500 and Dow slipped 0.1%, while the Nasdaq was also flat.  Investors seem to be waiting for the latest non-farm payroll data before making any moves. The pan-European Stoxx 600 ended up 0.02%, with the banking index adding 2% to lead gains, while health care stocks fell 1%. UK Prime Minister Boris Johnson’s green agenda has been plunged into chaos as the costs of reaching “net zero” is causing fear among working-class families in newly-won Tory seats.   A Treasury review of the costs of reducing net greenhouse gas emissions to zero by 2050 has raised concerns that the poorest households will be hit the hardest as the UK and Europe switch to electric vehicles and hydrogen cars. A Whitehall source said: “Obviously, with anything like this, those with less money are going to be disproportionately hit more. That’s common sense. That’s why work is ongoing to ensure the best solutions to ensure we hit 2050 without extraordinary costs to ordinary working-class families.” At the opposite end of the spectrum, China’s top planning authority authorized more shuttered coal mines to restart production. Key policymakers in China are seeking to balance progress on climate goals against surging power demand. Operations will restart at 15 coal mines across northern provinces, which is expected to deliver as much as about 44 million tonnes of coal. Market movers The S&P 500 rose 0.2% The Nasdaq 100 fell 0.4% Australia’s S&P/ASX 200 Index futures rose 0.4% Hang Seng Index futures fell 0.3% earlier What to watch for Sydney lockdown impact China PPI, CPI due Monday The US consumer price index on Wednesday is forecast to show prices increased again in July OPEC Monthly Oil Market Report due Thursday

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