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Lacklustre ASX softens ahead of US inflation data

Daily Market Update

ASX falls on grocery retailers, Chinese business inflation hits record, Brickworks jumps on property  

The ASX 200 (ASX: XJO) fell 0.3% on Wednesday, driven lower by the consumer staples sector, which was down 1.4%.

The majority of the weakness came from Coles (ASX: COL) and Woolworths (ASX: WOW), with the latter down 1.9% as the rotation away from defensives continued.

Only three sectors finished in the black, with materials, industrials, and utilities benefitting from continued signs of a robust economic recovery; BHP (ASX: BHP) added 1% after the iron ore price reached US$210 once again.

The real estate sector was the other low light, falling 1.1% even as Dexus (ASX: DXS) announced a long-term partnership with Australian Unity’s healthcare property platform.

Unibail-Rodamco-Westfield (ASX: URW) continued its recent volatility jumping 7.7% as the UK lockdowns look set to be removed.

The Chinese seem to be facing the same issues as the rest of the world, with inflation just 1.3% higher in the year to May, below expectations and suggesting little risk that the economy is overheating.

On the other hand, producer price inflation, which measures input and other costs, hit a 2008 record, jumping 9% as commodity prices hit producers.

Brickworks property gains, Afterpay sales to slow, Monash converts LIC

Brickworks Limited (ASX: BKW) which owns 39% of Washington H. Soul Pattinson, runs its own building products dividend and controls a significant property portfolio, reached a record high jumping 11.3% today.

Management now expects record profits from its Joint Venture Industrial Property Trust, which includes the construction of warehouses for Amazon and Coles, to hit $100 million.

The profit is said to be sourced from the realisation of the full value of these assets once construction is complete and should send property earnings to $240 – 260 million.

Despite the massive building boom in Australia and the US, BKW did not offer any visibility on the earnings expectations for these divisions.

Monash Investors (ASX: MA1) today marks the dawning of a new future for listed investment companies, in my view at least.

Monash has decided to convert its listed investment company, which has traded at a discount to NTA for many years, into an exchange traded managed fund, the first of such to occur in Australia. This will make it more easily investable, remove the discount and likely reduce the costs.

Dow suffers third day of losses, inflation print ahead, banks dragging

US markets remain stuck in a tight trading range as bullish and bearish investors alike await key economic data in the coming weeks.

Last night it was the Dow Jones that fell 0.4% with the major banks selling off on signs the economic recovery may be more mixed than expected.

The Nasdaq outperformed, falling just 0.1%, with big tech once again seeing strong flows as investors seek ‘quality’. The S&P 500 was similarly down 0.2%.

After market US inflation data will be released with expectations pointing to a 0.5% monthly increase and a 4.8% year-on-year increase, a near-record.

Anyone seeking a new car or running a business that requires shipments around the world would be well aware of the inflation that already exists, with some experts still questioning whether it will be transitory.

Stepping back, it clearly appears so given the huge disruption to the global supply chain of almost every good.

The Japanese economy shrank worse than expected with an outbreak ahead of the Olympics, sending the economy 3.9% lower on an annualised basis. 

Target Group (NYSE: TGT) has increased its dividend by 32% after reporting strong traffic growth of 4.8% across its store network.

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