Down, down markets are down … but look out for lithium

It is a wait and see situation now, for Europe and the rest of the world, with regard to rising COVID cases in Asia and what effect that may have on broader markets and economies. 

Breville Group - Down, down markets are down … but look out for lithium

The ASX 200 had fallen 0.9% by market close yesterday to 7,511.0, marking its worst session since June 21.

Earnings results fell short of investor expectations yesterday, with weak data in the US and the COVID-19 outbreak across Sydney and Melbourne also having an impact.

With that in mind, it is likely to be another slow start to the morning with stocks poised to open lower.

It seems everything is down:

  • The Australian dollar is lower at US72.50.
  • Iron ore fell 1.8% to $US159.50. 
  • Oil prices fell again. Brent crude fell 0.7% to $US69.03 a barrel. 
  • Gold futures fell 0.1% to $US1787.80 an ounce.

In Australia

The market just isn’t happy this week.

Even Breville Group (ASX:BRG) Ltd was down.

Breville dropped 8.97% despite a 24.7% increase in revenue to $1,187.7 million, a 29% gross profit increase to $413.7 million, earnings before interest, tax, depreciation and amortisation (EBITDA) up 36% to $163.3 million and net profit after tax up 42.3% to $91 million.

Breville’s figures were excellent and people are buying plenty of toasters and juicers in lockdown, but it’s not making a difference to the company’s share price. 

Magellan Financial Group Ltd (ASX:MFG) is another with excellent figures. It dropped 10.15%.

There was a bright light, with Domain Holdings Australia Ltd rising 4.71% after recording a net profit of $37.9 million, up 66% year-on-year.

Companies reporting today include CSL Limited (ASX:CSL), Woodside Petroleum Limited (ASX:WPL), Pro Medicus Limited, Domino’s Pizza Enterprises Ltd, Nearmap Ltd (ASX:NEA) and Coles Group Ltd.

Australian Indices

  • ASX 200 fell 0.94% to 7,511.00
  • S&P/ASX Small Ordinaries fell 1.10% to 3,459.70
  • All Ordinaries fell 0.97% to 7,773.30
  • S&P/ASX 100 fell 0.93% to 6,213.10

In the US

Wall Street’s five-day streak of records is over.

A lacklustre US retail sales report and worries over the latest COVID-19 wave, having a big impact.

Analysts expected a moderate drop in retail sales in the United States, what they got was a 1.1% fall in July compared to June – much bigger than expected.

According to the Commerce Department, the fall can be put down to a steep decline in auto sales, reported.

Low sales figures were a catalyst for a sell-off, following record weeks on the Dow and S&P 500.

COVID-19 cases are also rising and fresh restrictions are expected in some parts of the United States, although analysts believe these will not be as restrictive as when the pandemic first began.

The question now is whether outbreaks in China and other key exporting countries worsen supply chain problems that could lead to more inflation.

US indices

  • Dow Jones rose 0.8% to 35,343.28.
  • S&P 500 rose by 0.7% to 4,448.08
  • Nasdaq declined 0.9% to 14,656.18

In Europe

The Euro zone economy rose 2% in the June quarter, that is despite automakers crashing by 1.8%, banks losing 1.2% and travel and leisure falling 1%.

It is a wait and see situation now, for Europe and the rest of the world, with regard to rising COVID cases in Asia and what effect that may have on broader markets and economies. 

European indices

  • STOXX Europe 600 rose 0.07% to 473.78.
  • German Dax was stable finishing at 15,921.95
  • UK FTSE rose 0.4% to 7,181.11

Keep an eye out for

Lithium stocks. Macquarie has upgraded its lithium price outlook, which now reflects further tightening of the market fundamentals, as well as the emergence of a spot market for spodumene and a forward market for lithium carbonate. 

"Electric vehicle sales and underlying lithium demand remains strong and given the lack of supply response we continue to see the lithium market in deficit," a Macquarie broker said.

"The emerging spot market has provided a key positive catalyst for lithium prices, which were already rising due to the positive market fundamentals.

“We now expect spot lithium prices to approach previous peaks in the next six months and upgrade our price outlook in the short and medium term.”

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