ASX to recover after yesterday’s fall … and keep an eye on manganese stocks

After a strong week last week in which the S&P 200 continued to climb to record highs, the ASX started slowly this week. At the beginning of trade yesterday, Futures pointed to a dip of nine points, or 0.1%, at open, with more COVID-19 uncertainty potentially impacting this week’s trading. By the time the market closed, the ASX had dropped by as much as 0.5%, falling back below 7,600. Earnings results drew a mixed reaction from investors. Bendigo and Adelaide Bank (ASX:BEN) Ltd, Beach Energy Ltd, Lendlease Group and Seven West Media Ltd (ASX:SWM) all released earnings and were heavily sold off. BlueScope Steel (ASX:BSL) Limited, Carsales.Com Ltd, GPT GROUP (ASX:GPT), JB HiFi Limited also reported. JB HiFi performed well, reporting full-year net profit growth of 67%, however, the pandemic is now starting to bite. “We can see lockdowns do have an effect,” JB’s incoming CEO Terry Smart told The Australian.  “We can see the strongest states are those that are not in lockdown, and those that are in lockdown are the lowest-­performing. “What we tend to see is those higher-involvement, premium-style products which people tend not to transact online … they delay those purchases until stores are open.” According to some analysts, it is not all doom and gloom on the horizon. Dale Gillham, chief analyst at Wealth Within says, “Reporting season is underway in Australia and with the results being positive for some of our largest companies, it seems we may now finally see the Australian market trade higher in a sustained move. “Telstra and insurance companies, as well as the long-suffering AMP all reported positive results with their respective share prices rising, driving the market up. The US market is just finishing its reporting season with over 80% of companies announcing improved results and I suspect we will follow suit. “We need to be mindful that the results being delivered are for the previous financial year and as we are only one month into the new financial year and over half of our population in lockdown, we are likely to see a different story, at least in the next one or two quarters. “Right now the market is bullish, and I believe it will continue to push towards 8,000 points and beyond. That said, we are due for a high in the next month with the market likely to fall into its next low in the last quarter of this year.” In Australia We should see a slight recovery from yesterday’s trading after Wall St closed mostly higher. Today, we’ll see earnings released from BHP Group Ltd, Santos Ltd (ASX:STO), Magellan Financial Group Ltd (ASX:MFG) and Domain Holdings Australia Ltd.  It will be interesting to see how the market reacts to rumours that BHP is in talks to merge its oil and gas business with Australian independent Woodside Petroleum Limited (ASX:WPL). The $40 billion deal could create the country's biggest upstream producer with output of over 500,000 b/d of oil equivalent (boe/d). It follows this month’s merger between Santos Ltd and Oil Search Ltd in a deal valued at $21 billion. The oil price may be down, but there’s certainly a lot going on in the sector.  Oil prices were down 1.5% at US69.51 a barrel Australian indices ASX 200 fell 0.61% to 7,582.5 ASX24 futures rose 0.1% to 7,508.  S&P/ASX Small Ordinaries fell 0.56% to 3,498.2 All ordinaries fell 0.61% to 7,849.6 S&P/ASX 100 fell 0.61% to 6,271.3  In the US US stocks enjoyed a second straight week of gains last week. The US market was given a leg up by Walt Disney Co, whose profit exceeded market expectations on the back of its streaming service performance. Lockdown has been kind to the company, as subscribers have flocked to the platform for more content. Disney theme parks also returned to profitability after reopening. The positive sentiment carried into trading overnight, despite a sluggish start. Major indices opened the session lower. They were weighed down by disappointing Chinese economic data and expectations that the Federal Reserve will phase out stimulus measures. Equities rebounded after open, as investors looked for bargains.  However, the US market could be shaken by consumer sentiment. The University of Michigan’s preliminary consumer sentiment index fell to 70.2, its lowest level in a decade. The fall suggests that the Delta variant of the coronavirus is impacting consumers. “That is concerning, the consumer is by all accounts in an extremely strong position but there is this kind of COVID fatigue that is really starting to wear on people’s sentiment,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. “Regardless of lockdown or full reopen, the consumer is healthy enough to spend and kind of keep the economy afloat, it will be different names and different sectors that become the beneficiaries of it.” US indices Dow Jones rose 0.3% to 35625.40. S&P 500 rose by 0.3% to 4479.70  Nasdaq declined 0.2% to 14793.76 In Europe The pan-European STOXX 600 finally broke its consecutive days of wins, falling 0.5%. This was the index’s longest winning streak since December 2006. "European markets will pay attention to US and China growth concerns ... especially as Europe's data calendar is almost empty today," Jeffrey Halley, a senior market analyst at OANDA, wrote in a note. Michael Hewson, chief market analyst at CMC Markets UK, says the pullback isn’t surprising. "Having seen European markets eke out incremental gains on an almost daily basis since the beginning of the month, it shouldn't have been too much of a surprise to see a little bit of a pullback at some point."  European indices STOXX 600 fell 0.5% to 47345. German Dax fell 0.3% to 15925.73 UK FTSE fell 0.9% to 7153.98 Keep an eye out for Battery metals. Most notably manganese, which is set to be the big winner as demand for electric vehicles ramps up. BloombergNEF reports that manganese demand in lithium-ion batteries will climb an astonishing 9.3 times between now and 2030.