The Monday Report – 24 June 2024

This story features GOODMAN GROUP, and other companies. For more info SHARE ANALYSIS: GMG

World Overnight
SPI Overnight	7765.00	– 16.00	– 0.21%
S&P ASX 200	7796.00	+ 26.60	0.34%
S&P500	5464.62	– 8.55	– 0.16%
Nasdaq Comp	17689.36	– 32.23	– 0.18%
DJIA	39150.33	+ 15.57	0.04%
S&P500 VIX	13.20	– 0.08	– 0.60%
US 10-year yield	4.26	+ 0.00	0.07%
USD Index	105.80	+ 0.15	0.14%
FTSE100	8237.72	– 34.74	– 0.42%
DAX30	18163.52	– 90.66	– 0.50%

On Friday, the S&P500 traded past the 5,500 level for the first time after reaching record highs on light volume through most of the week.  Friday’s session featured heavy volume due to the quadruple witching options expiration. SPI futures are signalling a rather lacklustre start to the week for equities locally.

By Chris Weston, Head of Research, Pepperstone

Good morning,

-Month and quarter-end flows to impact price action
-The US Presidential elections kick up a gear
-US Core PCE is the marquee data point of the week
-Australia’s monthly CPI a potential kicker for the AUD
-Central bank meetings due this week

For the week ahead there is a fair bit for traders to prepare for and to manage, with event risk spanning economic data, politics, and central bank meetings.

We also gear up for month- and quarter-end, so the usual opaque portfolio rebalancing flows impacting price action, as well as the aftermath of a monster options expiry (OPEX) and ETF rebalance on Friday.

I’ve never personally found any edge aligning trades to what I’m hearing for the needs of portfolio rebalancing flows. However, as the big portfolios rebalance (e.g. from pension funds) the flows can impact equity, FX and fixed income and produce moves that can’t readily be explained by the data and news flow any factor that alters our trading environment needs to be considered.

The US election kicks into gear

 On the political front, the US Presidential election kicks into gear with the first debate held between Biden and Trump (21:00 EST / 02:00 BST / 11:00 AEST) likely getting sizeable attention.

Prediction markets currently have Trump ahead by 5ppt, which is partly a function of Trump’s superior polling in the six key battleground/swing states (Michigan, Wisconsin, Pennsylvania, Nevada, Arizona, and Georgia).

While the debate may not stoke market volatility, it will be symbolic given it’s the earliest live debate since 1960, and Biden will be out to prove a point to the American voters. As the gloves come off, it could get ugly on the podium, and we watch to see if the debate affects polling.

US core PCE inflation a risk event

On the US data side, US core PCE inflation is on Friday and is the marquee event risk, with expectations the Fed’s inflation gauge prints +0.1% m/m, and +2.6% y/y.

The last two US PCE inflation prints have come in above expectations, but historically the outcome of the data falls in line with consensus. That said, if we do get an upside surprise and a year-on-year pace at or above 2.8%, this outcome would likely impact be taken badly by equity markets and result in solid USD buying.

We get relief in risky assets, USD selling, should we see the month-on-month pace come in at 0.00% m/m and certainly if we see a decline.

We also get US consumer confidence where the consensus sees a lower read at 100 (vs 102 in the prior read), a Q1 GDP revision, personal income, and spending. We also get nine Fed speakers through the week, although I don’t see these being too much of a risk, and we need to hear speeches post-PCE inflation data.

On the data side, we see Japan’s Tokyo CPI (due Friday) and China PMIs (on Sunday), where the latter offers some degree of gapping risk in Chinese markets and the China proxies (AUD, NZD, CLP) on Monday.

Aussie CPI in play

AUD and AUS200 traders will be watching the May monthly CPI read, with the consensus eyeing a lift in headline CPI to 3.8% (from 3.6%).

The notable focus will be on services inflation, which keeps the threat of an August hike on the table, so this monthly print will set expectations for the all-important Aus Q2 CPI (due 31 July), which could go some way in influencing if the RBA do consider a hike in August.

We also hear from RBA members Kent (Wed 09:35 AEST) and Hauser (Thursday 20:00 AEST). 

On the central bank front, we see meetings in Sweden (expected to leave rates at 3.75%), Mexico (unchanged at 11%), Turkey (unchanged at 50%) and Columbia (-50bp cut to 11.25%).

With the moves seen in US equity on Friday, we start the week with the ASX200, HK50, and NKY225 all looking like they open on the back foot, with our opening call -0.2% lower a piece. I remain biased to trade a range in the ASX200 (7850 to 7650) and NKY225 of 39,340 to 37,860, with a small bias that we see lower levels of these ranges tested.

Brief recap:

-S&P 500: +0.6% for the week / +14.6% YTD

-Nasdaq Composite: UNCH for the week / +17.8% YTD

-S&P Midcap 400: +1.3% for the week / +5.4% YTD

-Dow Jones Industrial Average: +1.5% for the week / +3.9% YTD

-Russell 2000: +0.8% for the week / -0.3% YTD

The ASX200 is up 2.70% since January 1st, ex-dividends, with last week adding 0.93%.

Corporate news in Australia:

-Goodman Group ((GMG)) and Macquarie Group ((MQG)) have teamed up with Microsoft for multi-billion dollar investments in data centres

-Macquarie’s auction of data centres operator AirTrunk is reportedly worth more than $15bn

-Bapcor ((BAP)) board demands a higher price from suitor Bain Capital

-Anglo American is preparing to the divestment of Australian coal assets

On the calendar today:

-Metcash ((MTS)) earnings
-GUD Holdings ((GUD)) EGM to change name to Amotiv
-Steadfast Group ((SDF)) investor briefing

In the US:

-Dallas Federal Reserve manufacturing activity index

Spot Metals,Minerals & Energy Futures
Gold (oz)	2334.70	– 38.90	– 1.64%
Silver (oz)	29.58	– 1.20	– 3.90%
Copper (lb)	4.43	– 0.13	– 2.94%
Aluminium (lb)	1.13	– 0.00	– 0.36%
Nickel (lb)	7.74	– 0.09	– 1.19%
Zinc (lb)	1.29	– 0.01	– 0.39%
West Texas Crude	80.59	– 0.66	– 0.81%
Brent Crude	85.02	– 0.81	– 0.94%
Iron Ore (t)	106.96	– 0.15	– 0.14%

The Australian share market over the past thirty days

Index	21 Jun 2024	Week To Date	Month To Date (Jun)	Quarter To Date (Apr-Jun)	Year To Date (2024)
S&P ASX 200 (ex-div)	7796.00	0.93%	1.22%	-1.28%	2.70%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BPT	Beach Energy	Downgrade to Sell from Neutral	Citi
		Downgrade to Neutral from Outperform	Macquarie
HLI	Helia Group	Upgrade to Outperform from Neutral	Macquarie
ILU	Iluka Resources	Upgrade to Buy from Neutral	Citi
REA	REA Group	Upgrade to Buy from Neutral	Citi
WOW	Woolworths Group	Upgrade to Overweight from Underweight	Morgan Stanley

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author’s and not by association FNArena’s – see disclaimer on the website)

All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts on the website and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.

Find out why FNArena subscribers like the service so much: “Your Feedback (Thank You)” – Warning this story contains unashamedly positive feedback on the service provided. www.fnarena.com

FNArena is proud about its track record and past achievements: Ten Years On

Click to view our Glossary of Financial Terms