Despite the soft global lead, the ASX is looking at a strong rise today, the first trading session for August, as futures traders went out on a limb and boosted the index by 37 points on Friday.
Futures traders ignored another surge in cases in greater Sydney, plus the slump in iron ore prices on Friday and last week.
The latest lockdown in southeast Queensland came too late to impact trading on Friday but will hit confidence today (Monday).
The sudden cancellation of AFL, NRL and netball games in southeast Queensland over the weekend will help concentrate investors’ minds on the reality of Covid delta’s damage and not fantasies that all is well.
Yesterday saw the situation in southeast Queensland worsen considerably with a surge in school based hot spots and areas of concern. There’s a growing number of shops, shopping malls and other businesses, as well as transport.
The confident futures trading on Friday was at variance with what happened in Wall Street and in Australia. The ASX 200 dropped 0.3% on Friday to close at 7,392.6 and slip to a narrow weekly loss of 0.02%. The market though still managed a 1.1% gain for July.
It was the ASX’s 10th straight monthly rise and the 15th of the past 16 months that it has risen and the ASX200 hit several new record highs during the week despite the ongoing lockdown in Sydney.
Wall Street fell on Friday thanks in part to a 7.5% slide in Amazon shares, but the S&P 500 enjoyed its sixth straight positive month.
The index fell 0.4% to 5,395.26, dragged down by the consumer discretionary and energy sectors. The tech-heavy Nasdaq slipped 0.7% to 14,672.68 and Dow dipped 149.06 points, or 0.4%, to 34,935.47.
The Dow lost 0.36% for the week, the S&P 500 eased 0.37% and the Nasdaq lost 1.1% as the quarterly reports from the megatechs, Apple, Alphabet (Google), Microsoft, Facebook and Amazon failed to impress – even though all reported record revenues and earnings.
Despite the falls last week, Nasdaq and Dow added about 1.2% and 1.3% respectively in July, while the S&P 500 gained close to 2.3%.
Chinese markets and Hong Kong ended a rough week in the red on Friday after the Communist Party-led administration tried to assure investors that it was not aiming to destabilise the situation with its crackdowns on food, education, online music, online retailing, crypto mining and data storage.
Hong Kong’s Hang Seng fell by 1.3% on Friday, and 5% for the week and more than 8% for all of July thanks to the tightening security clamp by the Communist Party.
The Shanghai composite lost 4.3% for the week after Friday’s 0.4% fall and shed 3.4% for the month.
The CSI 300, which covers the top 300 Chinese stocks, fell on Friday to be down a nasty 5% for the week and nearly 8% for the month.
The CSI, Hang Seng and Shanghai markets have all lost ground so far in 2021, compared to big gains in other major markets.
Japan’s Nikkei index recorded a weekly loss of 1% after Friday’s 1.8% drop which left it down a sharpish 5.1% for July.
The Stoxx 600 in Europe fell 0.45% on Friday which pushed it to a tiny 0.05% dip for the week. The index added 1% for the month.
The $A fell despite a fall in the $US, the Australian 10 year bond yield ended at 1.17% – well under the US yield which ended down at 1.228%. Both fell around 25 points or a quarter of a per cent in July.
The Aussie dollar though lost close to 2 US cents in July as the buying of 10-year bonds by the Reserve Bank and renewed fears about Covid’s delta variant overwhelmed foreign demand.
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Commodity markets were mixed with Friday’s big slump in iron ore prices caping a weak month.
Last week prices fell by between 9.8% (for 62% Fe fines), 11.4% for 58% Fe fines and 6% for 65% Fe fines from Brazil
For the month iron ore prices fell 15% for 62% Fe fines, 18.7% for 58% Fe fines and 15% for 65% Fe fines to end the bloom for the time being.
Prices are now down around levels last week in late May (two weeks after rices hit all time record highs of $Us237 a tonne for the key 62% Fe fines product from the Pilbara in WA.
Oil prices closed higher, but eased a little in after hours trading.
Brent crude rose to $settle at $US74.51 – up on the day but down 1.4% for the week and 1% for July.
US West Texas Intermediate crude futures rose 0.65% to $US73.95, up 2.6% for the week but down around 1.8%.
The sharp decline in US oil inventories and the weakening dollar supported oil prices last week.
Rig numbers in the US fell last week, according to Baker Hughes.
Its weekly survey showed the number of oil-directed rigs fell 2 to 385 and the total number of rigs dropped 3 to 488.
Gold has recovered, but without making any sparks fly as rising inflation pushed US real bond yields to new lows (-0.47% for the US 10-year).
Comex gold futures fell $US18.60 an ounce or 1% to settle at $US1,817.20. A stronger US dollar didn’t help, nor did the dip in US bond yields.
The key 10-year treasury yield finished at 1.288% – again signally that bond markets think the US economy is heading for troubled waters.
Analysts wonder if the real story is the continuing fears about the damage Covid’s delta variant might be doing, or could do in future weeks.
Copper, aluminium, nickel, tin were a touch firmer.
Comex copper rose more than 4% in July after June’s 8.3% slide.
The price on Friday settled at $US4.48, down nearly 1% on the day but up half a per cent for the week.
