The Overnight Report: Back To Inflation Fears

Daily Market Reports | May 24 2024

This story features APPEN LIMITED, and other companies. For more info SHARE ANALYSIS: APX

World Overnight
SPI Overnight 7759.00 – 83.00 – 1.06%
S&P ASX 200 7811.80 – 36.30 – 0.46%
S&P500 5267.84 – 39.17 – 0.74%
Nasdaq Comp 16736.03 – 65.51 – 0.39%
DJIA 39065.26 – 605.78 – 1.53%
S&P500 VIX 12.77 + 0.48 3.91%
US 10-year yield 4.48 + 0.04 0.92%
USD Index 105.03 + 0.12 0.11%
FTSE100 8339.23 – 31.10 – 0.37%
DAX30 18691.32 + 11.12 0.06%

Apologies: due to tech and other problems no report from Chris Weston today.

US share markets retreated on Thursday, as stronger-than-expected economic indicators spoiled the after-Nvidia party.

With inflation fears picking up again, the Dow Jones index fell by -606 points or -1.5%, the S&P 500 index retreated -0.7% and the Nasdaq shed -65.5 points or -0.4%.

Judging from the SPI futures locally, the Australian market is not poised for a happy ending for the week.

Nvidia shares jumped 9.3% to rise above US$1,000 per share mark, pushing both the Nasdaq and S&P500 to intraday records in the early stages of trading but it soon was all over, red rover with fresh data suggesting US business activity accelerated in May at the fastest pace in two years.

A pick up in inflation returned fears the US Federal Reserve might keep interest rates higher for longer.

The Dow Jones index was also dragged lower by a -7.6% tumble in Boeing shares after the troubled US planemaker forecast negative free cash flow in 2024 on the back of  sluggish deliveries.

In response to the economic data, US government bond yields rose on Thursday. The US 10 year Treasury yield rose 4 points to 4.48%. The US 2 year Treasury yield lifted 6 points to 4.94%. The US dollar strengthened.

The May US composite PMI jumped 3.2 points to 54.4, its highest level in 12 months. The services PMI rose 3.5pts to 54.8, which was the highest reading since October 2022. Incoming new service business rose 3.9pts to 52.0. The service employment sub-index rose 2.1pts to 49.4 but remained below 50 for the second consecutive month. This was the first time that has happened since July 2020.

In the euro area, the composite PMI index rose 0.6pts to 52.3, the highest level in 12 months and the third consecutive month above 50.

Economists at ANZ Bank commented as follows: "The message from the PMI data was that services sector activity continued to lead growth, manufacturing activity improved, and output prices were not accelerating despite the pick-up in growth momentum this month."

European markets were boosted by Nvidia's impact on the region's technology sector, but showed polarised divergence. The continent wide FTSEurofirst 300 index gained 0.1%. In London, the UK FTSE 100 index closed -0.4% lower as a surprise early election had been announced.

Global oil prices fell to their lowest level since February, weakening for a fourth consecutive session as the prospect of higher for longer US interest rates raised worries around demand growth in the world's biggest oil market. The Brent crude price fell -US54c or -0.7% to US$81.36/bbl. The US Nymex crude price slid -US70c or -0.9% to US$76.87/bbl.

There is, however, an ongoing rally in global gas prices. A heatwave in India has increased the country's power sector's LNG demand. China’s LNG imports on a 10-day moving average are up 11% y/y, according to ship tracking data.

Base metals retreated, as did precious metals, and even iron ore joined in.

For today, the local calendar includes AGMs for Appen ((APX)), Syrah Resources ((SYR)) and Vulcan Energy Resources ((VUL)) shareholders. Later on, US durable goods orders and consumer confidence data are scheduled.

Spot Metals,Minerals & Energy Futures
Gold (oz) 2329.10 – 49.10 – 2.06%
Silver (oz) 30.06 – 0.61 – 1.99%
Copper (lb) 4.67 – 0.18 – 3.72%
Aluminium (lb) 1.18 – 0.05 – 4.40%
Nickel (lb) 9.08 – 0.59 – 6.09%
Zinc (lb) 1.38 – 0.04 – 2.61%
West Texas Crude 76.94 – 0.25 – 0.32%
Brent Crude 81.52 – 0.20 – 0.24%
Iron Ore (t) 117.53

The Australian share market over the past thirty days…

Index 23 May 2024 Week To Date Month To Date (May) Quarter To Date (Apr-Jun) Year To Date (2024)
S&P ASX 200 (ex-div) 7811.80 -0.03% 1.93% -1.08% 2.91%
BRG Breville Group Upgrade to Outperform from Neutral Macquarie
DGL DGL Group Downgrade to Hold from Add Morgans
ELD Elders Downgrade to Neutral from Outperform Macquarie
FBU Fletcher Building Downgrade to Hold from Buy Ord Minnett
HVN Harvey Norman Upgrade to Outperform from Neutral Macquarie
JBH JB Hi-Fi Upgrade to Outperform from Neutral Macquarie
JHX James Hardie Industries Upgrade to Outperform from Neutral Macquarie
Downgrade to Neutral from Buy Citi
SCG Scentre Group Upgrade to Outperform from Neutral Macquarie
SIQ Smartgroup Corp Upgrade to Outperform from Neutral Macquarie
SNL Supply Network Downgrade to Accumulate from Buy Ord Minnett
TLS Telstra Group Downgrade to Neutral from Outperform Macquarie
Downgrade to Reduce from Hold Morgans
TNE TechnologyOne Upgrade to Outperform from Neutral Macquarie
Upgrade to Add from Hold Morgans

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)

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