Top 5 Things to Know in the Market on Monday, July 6th

By Geoffrey Smith 

Investing.com -- China's retail investors pile into stocks at Beijing's urging. Dominion and Duke abandon the Atlantic Coast gas pipeline citing regulatory risks. U.S. stocks are set to reopen higher after the holiday weekend, shrugging off further signs of a virus surge across the south and west. Oil prices are steady as Saudi Arabia signals confidence in the outlook for August. Here's what you need to know in financial markets on Monday, July 6th.

1. China's retail investors pile in

China’s benchmark stock index rose by the most in over a year on a wave of retail investor buying encouraged by state-owned media.

The Shanghai and Shenzhen Shanghai Shenzhen CSI 300 rose 5.7% to close at its highest level since May 2015, after the Chinese Securities Journal spoke of the need to foster a “healthy bull market” in domestic stocks.

The comments come against the background of threats to Chinese companies’ listings in the U.S. from the bubbling trade and geopolitical conflict between the two countries, something that seems likely to increase Chinese companies’ dependence on the domestic capital market in the medium term.

It’s less than five years since the last dramatic bubble in Chinese equities, a bubble that was likewise inflated by a combination of retail investor enthusiasm and strong state messaging.  

2. Dominion, Duke throw in the towel on Atlantic Coast pipeline; Buffett swoops

Dominion Energy Inc (NYSE:D) and Duke Energy (NYSE:DUK) said they will abandon their plan to build the $8 billion Atlantic Coast pipeline underneath the Appalachian Trail, citing “the increasing legal uncertainty that overhangs large-scale energy and industrial infrastructure development in the United States.”

Dominion will also sell its remaining gas transportation and storage business to Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) in a deal that values the assets at $9.7 billion including debt. The deal marks the end of a drought for Buffett, who has repeatedly complained about the lack of attractive valuations for U.S. companies in recent months.

Berkshire will also take a 25% in Dominion’s Cove Point LNG terminal, although Dominion will remain the largest shareholder.  

3. Stocks set to open higher; Uber (NYSE:UBER) in focus on Postmates deal report

U.S. stock markets are set to reopen after the long weekend in buoyant mood, as the narrative of economic reopening continues to dominate the ongoing increase in coronavirus infection rates across the south and west of the country.

By 6:30 AM ET, the Dow Jones 30 Futures contract was up 365 points or 1.4%, while the S&P 500 Futures contract was up 1.2% and the Nasdaq 100 futures contract was up 1.2%.

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Among the stocks likely to be in focus Monday are Uber (NYSE:UBER), which was reported at the weekend to be close to buying meal delivery service Postmates in an all-stock transaction worth $2.65 billion. The deal is ostensibly to strengthen the position of UberEats, which CEO Dara Khosroshahi had made a central part of his strategy for the ride-hailing group.

4. Virus cases continue to surge, both in U.S. and globally

Florida and Texas both registered their highest daily numbers to date for new cases of the Covid-19 virus, but state politicians indicated they won’t close down the local economy again.

Texas reported 8,076 new COVID-19 cases Saturday, the first time it has crossed the 8,000 threshold, while Florida reported 11,458 new cases for the same day, also a record.

Florida reported Saturday that 14.1% of those tested for the virus were positive while for Texas the number was 13.1%. The World Health Organization, which registered a new global daily high for new infections at the weekend due to ongoing surges in south Asia and Latin America as well as the U.S., says that governments shouldn’t reopen business if that rate is above 5%.

5. Oil steady as Saudi hikes official selling prices

Crude oil prices were steady above the $40 mark as price signalling from Saudi Arabia, the world’s largest exporter, reinforced confidence that the physical market is approaching balance (despite high levels of crude in storage across the world).

Reuters reported that Saudi Arabia had raised its official selling prices for all types of its crude in August by $1, relative to the Oman/Dubai average.

U.S. crude futures edged down 0.2% to $40.58 a barrel amid concern at the relative strength of U.S. demand in the light of developments in Texas and Florida, while the international benchmark Brent was up 0.9% at $43.20 a barrel.