US stocks recovered from their dip to hit new heights on Friday, leaving the ASX poised to overturn last week’s losses, notwithstanding concerns tied to the COVID situation in NSW. Banks will hand down earnings in the US, while macroeconomic data is set to span the Australian unemployment rate, US inflation and Chinese GDP.

 

Economic calendar and news

Locally, the economic calendar will feature data on building permits, new home sales, business and consumer confidence readings, consumer inflation expectations, and the latest jobs report.

The employment figures for June will come at a time when Greater Sydney has been caught in the midst of a worsening COVID outbreak that all but looks certain to see an extended lockdown ahead. Nonetheless, looking in the rear-view mirror, economists are still forecasting a drop in the unemployment rate to 5% on the back of an expected 25,000 to 30,000 new jobs across the economy. 

Overseas, China’s second-quarter GDP reading will be published on Thursday, alongside a host of other data spanning industrial production, retail sales and the unemployment rate. Consensus data suggests the world’s second-largest economy may have grown 8% year-on-year in the June quarter, which would take into account the lower base in last year’s reference period when the economy was slowly reopening.

Inflation is the big-ticket item in the US, with figures due to be released on Tuesday morning local time. Core inflation for June is tipped to show 3.8% growth versus a year ago, or 0.4% compared with the month prior. If the latter transpires, that would be a modest pull-back from the 0.7% reading tied to May, and may soothe some concerns around inflation running hot. On the contrary, an above-forecast reading could cast doubts on whether it is a transitory issue.

 

 

Stocks on watch

Wild movements in the 10-year Treasury yield could shape the next movement for tech stocks. Last Thursday, the key rate touched 1.25%, its lowest level since February and sapping confidence across the market amid concerns of a global economic slowdown. Even though tech stocks were vulnerable to rising yields earlier in the year, the decline playing out over recent weeks has been central to the likes of Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) hitting all-time highs.

America’s largest banks will step up and report earnings for the June quarter. It will come amid lofty expectations given the low base period that will serve as comparison for growth. On that account, earnings across the S&P 500 financial sector are expected to double. Some of the stocks that will be under scrutiny include JPMorgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Bank of America (NYSE: BAC), Morgan Stanley (NYSE: MS) and Wells Fargo (ASX: WFC), which have also proven susceptible to movements in bond yields over recent trading sessions.

US-listed Chinese tech stocks were savaged last week, albeit things turned around on Friday. Sentiment has shifted against some of the region’s biggest names amid ongoing regulatory crackdowns by Chinese officials. The latest of which, detailed over the weekend, places greater burdens on companies that hold public data for more than 1 million users and may be looking to list overseas, with a cybersecurity approval set to be required.

Amid the drama, names like Alibaba (NYSE: BABA), JD.com (NASDAQ: JD), Pinduoduo (NASDAQ: PDD) and Baidu (NASDAQ: BIDU) have been rocked. Weakness has extended to other companies listed in Hong Kong, such as Tencent Holdings and Meituan, which pushed the ASX-listed Betashares Asia Technology Tigers ETF (ASX: ASIA) down by more than 6% at one stage last week.

Quarterly reports from a host of ASX resources stocks are also on the cards. Woodside Petroleum (ASX: WPL) and Rio Tinto (ASX: RIO) are the biggest names of the bunch, set to report on Thursday and Friday respectively.

Elsewhere, travel stocks including Qantas (ASX: QAN) and Flight Centre (ASX: FLT) face an uphill battle with the situation in New South Wales looking as though the state will be locked out of travel for a considerable period of time.

Turning to some of the most-traded names from last week, and across the ASX that included the likes of Assetowl (ASX: AO1), 88 Energy (ASX: 88E) and Classic Minerals (ASX: CLZ), while overseas it was Didi Global (NYSE: DIDI) and Toughbuilt Industries (NASDAQ: TBLT).

 

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