Markets Week Ahead: Energy and tech stocks on watch as oil rallies and further stimulus looms

Markets Week Ahead: Energy and tech stocks on watch as oil rallies and further stimulus looms

The local share market is poised for a blistering start to the week as futures suggest large gains at the opening bell this morning. It comes after the US market finished sharply higher following a volatile trading session on Friday evening, as well as a weekend breakthrough in stimulus negotiations that all but guarantees a new injection of US$1.9 trillion in support for the US economy.

 

Economic calendar and news

Over the coming days there will be new data regarding business and consumer confidence, new home sales, and building permits from January. In addition, Wednesday will see a speech by Reserve Bank of Australia Governor Philip Lowe at the Australian Financial Review Business Summit, touching on Australia’s economic recovery, as well as investment and monetary policy. 

A week after the RBA effectively doubled its daily bond purchasing under the QE program, further light may be shedded on the central bank’s views regarding the current and future low-interest rate environment.

After a marathon session saw the US Senate pass a revised version of President Joe Biden’s US$1.9 trillion COVID-19 bill, the legislation will make its way back to the House of Representatives for final approval. Changes were made to the bill after members on both sides of the aisle baulked at raising the minimum wage to US$15 per hour, and the size of supplemental unemployment benefit payments also proved a sticking point.

In light of the stimulus package seemingly being across the line, inflation will be the key talking point this week. A new reading for February inflation is expected Wednesday morning US-time, however, bond yields will be the telling clue as to how the market expects the Fed to manage fiscal policy as the economy stands to potentially ‘overheat’.

 

 

Major movers

Three of the Big Four banks defied the sell-off in miners and tech stocks last week to trade at 52-week highs. In what is a stark contrast to scenes just under a year ago, the likes of National Australia Bank (ASX: NAB), ANZ (ASX: ANZ) and Westpac (ASX: WBC) have rallied on the back of unprecedented fiscal and stimulus support propping up the housing market and broader economy. As some of these measures are wound back later this month, it remains to be seen how the banks will trade thereafter.

Oil stocks have also been finding favour of late as the price of crude oil surges to its highest level in nearly two years. Current production cuts agreed to by OPEC+ members are being rolled over to the end of April, which has acted as a catalyst for oil prices. It helped Santos (ASX: STO) trade at a new 52-week high last week, but it is also good news for other energy names like Woodside Petroleum (ASX: WPL) and US oil majors such as BP (NYSE: BP) and Exxon Mobil (NYSE: XOM).

Gold prices are hovering below US$1,700/oz, the same level as that prior to COVID-19 taking hold across much of the world in late-February and March of 2020. Given the path to further stimulus in the US, as well as inflation data later this week, gold miners like Newcrest Mining (ASX: NCM) and Northern Star Resources (ASX: NST) could be on the radar of investors betting on an uptick in gold prices.

Tech stocks will still play a crucial role this week as far as broader market sentiment. Last week, Appen (ASX: APX) hit a new 52-week low, while other names like Zip Co (ASX: Z1P) were hit hard. Investors will be looking for a rebound from this sector this week, and while mega-tech names like Alphabet (NASDAQ: GOOGL) and Facebook (NASDAQ: FB) were actually up last week, the move may need to come from more volatile names such as Tesla (NASDAQ: TSLA) and Palantir (NYSE: PLTR) before sentiment turns.

A minor contraction in the price of iron ore to end last week may have been accounted for as the likes of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) both fell sharply during local trading, and not long after trading ex-dividend throughout the week. Along with Fortescue Metals Group (ASX: FMG), the trio are likely to be watched closely given the commodity is still trading at elevated levels and the COVID situation in Brazil spirals out of control.

Elsewhere, the dividends will continue to flow through for shareholders in a number of companies, as more names trade ex-dividend this week. This includes:

  • Monday: Kogan (ASX: KGN), Nick Scali (ASX: NCK), Northern Star Resources (ASX: NST), REA Group (ASX: REA) and Ramsay Health Care (ASX: RHC)
  • Tuesday: Iluka Resources (ASX: ILU), Lovisa Holdings (ASX: LOV), Qube Holdings (ASX: QUB) and Sonic Healthcare (ASX: SHL);
  • Wednesday: Brambles (ASX: BXB), Costa Group Holdings (ASX: CGC), Regis Resources (ASX: RRL) and Reliance Worldwide Corporation (ASX: RWC);
  • Thursday: OZ Minerals (ASX: OZL), South32 (ASX: S32) and Sealink Travel Group (ASX: SLK);
  • Friday: Contact Energy (ASX: CEN) and WiseTech Global (ASX: WTC)

At least one IPO will make it onto the boards this week. Drilling services provider DDH1 (ASX: DDH) is expected to list on Tuesday, March 9, after raising $150 million through a number of brokers. Shares in the company were priced at $1.10 each, with existing shareholders hoping for a solid opening day. 

 

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