The Monday Report – 23 September 2024

This story features STRIKE ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: STX

The Australian share market is expected to start this week on the back foot as Wall Street’s post-Fed rate cut rally failed to follow-through on Friday.

Friday’s US equities trade did feature above-average volume due to the quarterly expiration of stock options, index options, single stock futures, and index futures.

In Europe, the Euro Stoxx50 lost -1.5% and the FTSE100 was off -1.2%. The yield on the US 10-yr note rose 3.0bp to 3.74%.

SPI futures are indicating a retreat of circa -0.8% at the open this morning. On Friday, the ASX200 rallied to a fresh all-time high as investors had digested the bold -50bp move and subsequent communication from Powell & Co and decided the balance was positive for risk assets.

This week the attention will shift to the RBA meeting on Tuesday when no change is expected, but what about the hawkish rhetoric?

Commodities held on to their weekly gains, though base metals retreated somewhat. Gold (if that’s still a commodity) touched a record high at US$2,625.59/oz an ounce while major oil benchmarks ended lower on Friday, but still gained more than 4% for the week.

Iron ore futures prices edged higher but logged a weekly loss, as traders weighed prospects of fresh monetary stimulus from China against the top consumer’s muted economic recovery.

Global oil prices also settled lower on Friday but recorded a second straight week of gains, garnering support from the long awaited US interest rate cut and a dip in US supply.

The Brent crude price fell -US39c or -0.5% to US$74.49/bbl. The US Nymex crude price slid -US3c or -0.04% to US$71.92/bbl. For the week, both benchmarks rose more than 4%.

Economists at ANZ Bank point out Fed Governor Waller painted a dovish assessment of the current economic landscape.

Waller noted inflation is potentially on a lower path than the Fed expected and that core PCE may actually be below target (three-month annualised 1.7%).

He said the size of future cuts will depend on the incoming data, and that he could consider another -50bp cut if the jobs market worsens.

Waller’s interview on CNBC provided some clarity behind the Fed’s decision to start with a -50bp cut and signalled the Fed will act swiftly in reducing rates if warranted, the economists suggest.

ANZ Bank also reports early consensus for September non-farm payrolls is 125k, with the unemployment rate holding steady at 4.2%.

Any downside miss may see the market price a -50bp cut on 7 November more firmly. Currently the market is fully priced for a -25bp cut and 46% priced for a -50bp cut.

On the calendar today:

-New Zealand Aug trade balance

-Japan Public Holiday

– Global PMIs

-Strike Energy ((STX)) earnings report

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Corporate news in Australia:

-According to The Australian, Incitec Pivot ((IPL)) has approached Elders ((ELD)), Nutrien, and Ridley Corp ((RIC)) for the sale of its fertilisers business

-UK target Rightmove has turned down REA Group’s ((REA)) enhanced $11.5bn takeover offer

-Star Entertainment’s ((SGR)) refinancing plan announcement may be delayed, with $100m in new funding offered after restrictions on a previous $150m working capital facility

-Fletcher Building ((FBU)) is moving forward with an equity raise of up to NZ$700m, after earlier dismissing such plans

-E&P Financial Group ((EP1)) is preparing a $10m placement and voluntary buyback as it plans to delist from the ASX

-Affinity Equity Partners has secured the $750m deal to buy Lumus Imaging from Healius ((HLS))

-Select Harvests ((SHV)) is raising $80m through an entitlement offer and placement

The Australian share market over the past thirty days

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

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