Australian Market Preview 24 June

Major US stock indices closed higher Tuesday, but towards session lows for the Dow Jones Industrial Average (+0.5%), and the benchmark S&P500 (+0.4%). The tech-heavy Nasdaq (+0.7%) was once again the leader in terms of relative strength, but only managed to close mid-range.
 

European stocks were once again sold the dummy by US shares, with all major indices closing up between 1-2% at their highs before the late-day cross-Atlantic decline. The best performers were the German DAX (+2.13%) and the Italian MIB (+1.9%).
 

Local S&P ASX200 share price index (SPI) futures closed near the lows of the evening session at 5934, around where they ended the session Monday, and at a 20 point discount to the cash market. Typically, (assuming no bombshells have hit since the US markets close), Aussie shares tend to take their cues from the shape of the US trading session - rather then the end result. So, we could be in for a listless session today.

Looking to the technicals for the S&P ASX 200, we are still trying to work through dynamic resistance from the longer term moving averages at current levels. Price action will likely remain choppy until we can close above this zone convincingly, and more specifically, above the major static resistance created by the long term low of 6304 set on 16 Aug 2019. Any pullbacks into the dynamic support zones are likely to be supported. A close below the 15 June low of 5710 would be bearish.

On the commodities front, copper continued its run, up another 1.0%, and Chinese iron futures ended the session up 1.1%. Gold recovered from early session losses to trade 0.1% higher. Gold is now trading around its best levels since October 2012, and looks set to challenge the 1795 high set that month. Crude oil ended the session down 0.84%, but holding the key psychological $40 handle.

European purchasing managers index (PMI) data showed that the manufacturing and services sectors in the UK, France, and Germany had each bounced back sharply in June. Whilst indexes were generally still in modest contraction, each sector had shown marked improvement from May, and were ahead of expectations. So far, the data continues to back the 'V' shaped recovery thesis that markets have been betting on since March.

In the US, new homes sales showed that the US housing market has lost very little net momentum as a result of the pandemic, as 623,000 new home were sold during the month of May. This was up 4,000 dwellings from April and well ahead consensus estimates for a 492,000 increase. This backs up a very strong print on the Housing Market Index last week, and also indicates the American consumer remains confident in their future despite the chaos of the last few months.

Locally, data released by CBA yesterday showed a marked improvement in the local manufacturing and services industries. The CBA flash PMI rose to 52.6 in June, up from 28.1 in May. A reading over 50 indicates likely growth in the sector over the next 6-12 months. Importantly, across the managers surveyed, expectations for the future rose to the best level in 9 months.

Nickel miner Western Areas (ASX Code: WSA) rose as much as 17.3% Tuesday on the back of "highly encouraging" drilling results from its Sahara prospect within the Western Gawler Project in South Australia. Western Areas Managing Director, Mr Dan Lougher said, "This is an excellent result from our first drill hole at the Sahara prospect, intercepting broad widths of nickel and copper bearing mineralisation...we have a significant exploration result that merits immediate follow up work."   Brokers liked the news, with RBC Capital Markets calling it "promising" and potentially indicative of a wider band of mineralisation.

Here are the key broker moves for ASX stocks so far this week: