Australian shares are poised to rise, catching a global melt-up in equities. Nvidia, Apple and Microsoft help power gains in New York, pacing the S&P 500 and Nasdaq Composite to record highs.
The S&P 500 was 1 per cent higher to 5633.91 at the close. The Nasdaq Composited added 1.2 per cent to 18,647.58. The Dow rose 1.1 per cent to 39,721.36.
Federal Reserve chairman Jerome Powell testified for a second day, reiterating that policymakers do not yet have enough confidence that inflation will continue to ease to pave the way for lower interest rates.
Evercore ISI’s Krisha Guha said Powell second day of testimony offered “little new insight on monetary policy but confirms our view that the key takeaway from his testimony is the Fed’s assessment of the balance of risks is shifting in ways that – if supported and sustained by incoming data starting with Thursday’s CPI inflation report for June – will deliver a rate cut in September”.
“Investors are anticipating two rate reductions this year,” said Erik Boekel, chief commercial officer at DHF Capital. Softer US June CPI data, set for release at 10.30pm Thursday AEST, could solidify expectations for a rate cut in September, he also said.
In a mid-year outlook note, Nikko Asset Management’s chief global strategist Naomi Fink said the firm’s investment committee has an overall positive view with some caveats.
“Earnings may remain healthy for some time, particularly if ongoing investment in technology continues alongside anticipation of future productivity growth. However, caution is warranted as lower-probability risks to growth have the potential to escalate from tail risks to higher probability downside scenarios. These include additional fiscal expansion or trade barriers in the US.”
Nvidia rose 2.7 per cent, Apple 1.9 per cent and Microsoft 1.5 per cent. Apple’s move was linked to a Bloomberg story saying the iPhone maker aims to ship 10 per cent more phones this year than in 2023. Apple’s stock has been on a tear the last month, rising 20 per cent.
In a note, DataTrek’s Nicholas Colas and Jessica Rabe argue that tech sector dominance is far from over. “The S&P is now so tech-focused that the future of this single group (writ large) will almost certainly determine the index’s returns over the next two decades.
“The technology sector plus the big tech names in other groups (Amazon, Tesla, Alphabet, Meta) are now 45 per cent of the S&P 500. It is not a stretch to believe this weighting will eventually be 50 per cent or even greater, especially once we get another tech IPO cycle.”
Colas and Rabe also said the Nasdaq Composite has risen 80 per cent since December 28th, 2022 and yet it continues to underperform its average recovery off its four prior cycle lows.
Stocks in focus
ANZ probes ‘$54b’ in inflated bond trades The bank overstated the value of government bonds it traded by over $50 billion in a year, boosting its chances of winning lucrative mandates to issue Commonwealth debts.
The mining stocks fundies think may outrun BHP and Rio The rout in the ASX’s largest mining companies this year has created a “screaming” buy for some of the sector’s biggest investors.
Macquarie says it’s time to buy real estate stocks before rate cuts The broker has warned that the “best” phases for ASX returns is behind us and is urging investors to buy more defensive companies amid signs that returns are starting to falter.
Anzac Day shopping ban restricts choice, retailers say Retail trade will be banned on Anzac Day in NSW, giving the state some of the nation’s most restrictive rules in a move to counter “creeping commercialism”.
Market highlights
- ASX futures up 72 points or 0.9% to 7872 near 6.45am AEST
- AUD +0.1% to 67.47 US cents
- Bitcoin -0.8% to $US57,401 at 6.52am AEST
- On Wall St at 4pm: Dow +1.1% S&P +1% Nasdaq +1.2%
- In New York: BHP +0.3% Rio +0.8% Atlassian -2%
- Tesla +0.4% Microsoft +1.5% Apple +1.9% Nvidia +2.7%
- Alphabet +1.2% Amazon +0.2% Meta +0.9%
- Micron +4% AMD +3.9% Arm +2.3% Crowdstrike -3%
- VIX +2.7% QQQ +1% TLT +0.3%
- Stoxx 50 +1.1% FTSE +0.7% DAX +0.9% CAC +0.9%
- Spot gold +0.3% to $US2371.23/oz at 2.18pm in New York
- Brent crude +0.5% to $US85.09 a barrel
- Iron ore -3.8% to $US105.30 a tonne
- 10-year yield: US 4.28% Australia 4.34% Germany 2.53%
- US prices as of 4.43pm in New York
Today’s agenda
Local data: NZ June monthly food prices
Overseas data: June CPI for Germany and the UK at 4pm; US June CPI and weekly jobless claims at 10.30pm
United States
In a second day of Congressional testimony, Federal Reserve chairman Jerome Powell said he was not yet ready to declare inflation had been beaten.
Powell and other Fed officials have said they will not cut interest rates until they have gained even greater confidence that inflation is headed back to the central bank’s 2 per cent target after a breakout surge during the pandemic.
“I do have some confidence of that,” Powell said when asked directly during a House Financial Services Committee hearing if he felt that bar to cutting interest rates had been cleared, but “I am not ready to say that yet”.
Powell said he felt the US was still heading towards a so-called soft landing where the Fed’s inflation target is met without a punishing rise in the unemployment rate - an achievement many thought impossible when inflation in 2022 hit a 40-year-high and the Fed responded with a rapid tightening of borrowing costs.
“There is a path to getting back to full price stability while keeping the unemployment rate low,” Powell said. “We’re on it. We’re very focused on staying on that path.”
Other top stories
Shipping crises ‘spanner in works’ for inflation fight Australian consumers and retailers are facing long delays and higher prices for goods from Europe and Asia amid an international shipping crisis that could stoke local inflation.
- Chinese exporters raise fears of Christmas freight crisis
- Retailers have bigger worries than possible interest rate rise
- Why Michele Bullock’s next rate call will be one of the toughest
Australia’s ‘Xennials’ earn 67pc more than their parents Australians have an easier time moving up the income ladder than workers in Scandinavia, the US, France and the UK, and new research shows two-thirds of people in their 40s earn more than their parents at the same age.
Australia will have 400,000 new millionaires by 2028. Are you one of them? Buoyed by property and super, Australians have become the second-richest people in the world, on paper at least.
Source: Financial Review
