The Monday Report

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This story features NEWS CORPORATION, and other companies.
For more info SHARE ANALYSIS: NWS
The company is included in ASX200, ASX300 and ALL-ORDS

 By Greg Peel

Wall Street opened to the news on Friday that the US GDP grew in the second quarter by 2.4%, just shy of the 2.5% consensus estimate. It doesn't seem like much of a difference but it is a 4% “miss”. Consequently the Dow fell 120 points from the bell.

But weakness was temporary as traders took heart in two subsequent releases of July economic data. The Chicago Fed region purchasing managers' index (PMI) was expected to slip further in the month from its 59.1 level in June, but instead it rose to 62.3. This is the first piece of data not to show slowing in the last couple of months. The second Michigan Uni survey of consumer confidence for July read 67.8, which was down from June's second reading at 76.0 but up from July's first reading at 66.5.

These two data releases, and particularly the PMI, were enough to turn Wall Street around and ensure a flat close. Ultimately the Dow lost one point and the S&P 500 gained less than one point to 1101. The session was not helped, nevertheless, by earnings misses from Dow components Chevron and Merck.

July thus closed on one of the best monthly rallies in some time, with the S&P 500 gaining 6.9%. We are now 70% of the way through earnings season, with the score being a 42% year-on-year increase in earnings on a 9% increase in sales.

The gold bugs are not going to let the metal down lightly, and the weaker GDP number was enough to spur some bargain-hunting on Friday. Gold rose US$14.90 to US$1181.40/oz despite the US dollar index being relatively flat at 81.59. The Aussie was 0.4 of a cent higher at US$0.9042.

Oil rose US58c to US$78.95/bbl and month-end positioning and short-covering in base metals saw London prices jump 1-2%, with the exception of aluminium up 3%.

The SPI Overnight gained 7 points or 0.2%.

The official Chinese manufacturing PMI was released yesterday, and it showed a third straight month of slowing. The July reading fell to 51.2 from 52.1 in June.

This was actually quite a positive result, and one might even call it a “Goldilocks” result. The world was expecting a lower number given Chinese tightening measures, but the fear was the July PMI would actually fall into contraction territory below 50 and send more panic through global markets. The reading of 51.2 shows manufacturing has slowed as is Beijing's hope, but is still expanding. Such a result means Beijing is unlikely to press on with further aggressive tightening.

Today HSBC releases its independent measure of the Chinese PMI, while Australia's AiG manufacturing PMI is also released. Tonight all of the UK, EU and US release their PMIs. The US PMI has also been ticking down lately, but the Chicago read will provide some hope for not too ominous a drop for the US number as well.

Today in Australia also sees the monthly inflation gauge from TD Securities and the RBA's second quarter commodity price index. Tomorrow sees building approvals and retail sales ahead of the RBA decision which will be to leave rates on hold. Wednesday sees the services PMI and a second quarter house price index while Friday wraps up with the construction PMI and the RBA's quarterly monetary policy report.

Aside from its manufacturing PMI, the US sees construction spending tonight. Tuesday it's pending home sales, vehicle sales, factory orders and monthly income and expenditure. On Wednesday it's the services PMI and the ADP private sector unemployment report, while Thursday brings chain store sales and Friday the all important monthly unemployment data, along with consumer credit.

Both the Bank of England and European Central Bank make rate decisions on Thursday and while neither is expected to move, accompanying commentary will be closely noted.

On the local stock front, we've now seen the end of the resource sector quarterly production report season and have moved into the second week of the six-monthly earnings season. This week is still a quiet one before the pace ramps up next week and all hell breaks loose the week after.

Earnings season highlights this week include AXA Asia-Pacific ((AXA)) and West Oz News ((WAN)) on Wednesday, News Corp ((NWS)), Rio Tinto ((RIO)) and Tabcorp ((TAH)) on Thursday and ResMed ((RMD)) and Equinox ((EQN)) on Friday.

And as noted, there is still 30% of US stocks yet to report quarterly earnings.

For further global economic release dates and local company events please refer to the FNArena Calendar.

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