Daily Market Reports | Jun 04 2024
This story features MESOBLAST LIMITED, and other companies. For more info SHARE ANALYSIS: MSB
World Overnight | |||
SPI Overnight | 7769.00 | – 12.00 | – 0.15% |
S&P ASX 200 | 7761.00 | + 59.30 | 0.77% |
S&P500 | 5283.40 | + 5.89 | 0.11% |
Nasdaq Comp | 16828.67 | + 93.65 | 0.56% |
DJIA | 38571.03 | – 115.29 | – 0.30% |
S&P500 VIX | 13.11 | + 0.19 | 1.47% |
US 10-year yield | 4.40 | – 0.11 | – 2.48% |
USD Index | 104.08 | – 0.55 | – 0.53% |
FTSE100 | 8262.75 | – 12.63 | – 0.15% |
DAX30 | 18608.16 | + 110.22 | 0.60% |
By Chris Weston, Head of Research, Pepperstone
-A weaker US ISM Manufacturing sees the US growth trajectory called into question
-A solid rally seen in US Treasuries (yields lower)
-The USD finds few friends – EURUSD above 1.0900
-US equity rallies into the close with Nvidia and Apple leading the charge
-GameStop getting attention from the market and the SEC
-Asia equity opening calls
It was a day when the US economic exceptionalism theme was called into question, with the US ISM manufacturing report causing some to raise concerns about the trajectory of US growth.
The US ISM manufacturing report came in below expectations at 48.7 and while the employment component was a bright spot at 51.1, new orders (printing 45.4) were the weakest since May 2023, while production (at 50.2) came in at the lowest levels since February.
In response, we saw the Atlanta Fed Q2 GDP Nowcast model reduced to a run rate of 1.846%, from 2.66%. The manufacturing report has put us on notice that the various employment data points this week, and ISM services could all be genuine market-moving risk events, and the market will likely be sensitive to any downside surprises.
The reaction in the US Treasury market was clear cut, and while we saw buyers going into the ISM manufacturing report, in response yields on the US 10yr fell from 4.45% to a low of 4.39% and are now eyeing a re-test of the 200-day MA at 4.34%.
Yields in the 5 to 30-year part of the curve sit -10-11bp lower – so a solid rally on the day with yields settling at session lows, showing a limited appetite to fade the rally. The US 2yr settled -6bp at 4.81%, with swaps pricing an additional -3bp of cuts for the December FOMC meeting and now pricing -39bp of cuts by year-end.
The USD index has followed Treasury yields lower, with the DXY -0.6% and eyeing a test of 104. EURUSD has pushed through the recent supply zone of 1.0880 and holds above 1.0900, with USDJPY looking to take out 156 round number support – an outcome that could see trend support at 154.05 come into play. AUDUSD looks to test the top of its recent range of 0.6700 and I wouldn’t bet against a break here near-term.
The big move came in the MXN, with the peso savaged to the tune of -4%, with rising concerns that the Mareno Party could be on track for a super majority, where the concern is that over the medium term, we could see anti-business policies put in place. I am not sure I’d be chasing USDMXN higher here.
Gold has worked well as a hedge against economic fragility, with the yellow metal hitting a high of US$2354 (currently +1%) and eyeing a move into the range highs of US$2364. A weaker US JOLTS job openings report (consensus is for 8.35m openings) in the session ahead may see momentum take us there.
Staying in the commodity theme crude has been well traded, and while the market sliced and diced the OPEC-Plus decision, the sell-down really kicked in an hour before the manufacturing data, with WTI crude falling from US$77.20 and through the recent lows of US$76.15 – we see the net change -3.6%, with Brent -3.7%.
In US equity, we again saw a solid rebound from session lows into the back half of the cash session, with the S&P500 hitting a low of 5234, before rallying 0.9% to close at 5283. Tech is where the capital has rotated to, as is typically the way when we see signs of economic fragility, backed by buying in healthcare and comms services names.
However, it were Nvidia, Meta and Apple that led the charge – Nvidia in beast mode once again, closing +4.9% at US$1150, with some 759k call options traded on the day relative to 472k puts. Energy stocks naturally struggled, with the sector closing -2.6% and this will spill over into Asian energy equity plays.
GameStop stole the attention of many, trading into US$40.50 on open, although it didn’t stay there long, and a decent fade pulled the stock lower to close to US$28.162m shares traded hands, and while cries of “manipulation” from some circles are deafening, and while we await the findings from reports that the SEC’s investigation into trading in GME call options and trades around the time of Keith Gill’s social posts, the other side to this is Gill isn’t doing much differently from what many big names money manager are doing.
That is, getting set in a big position and disclosing it for others to piggyback – but in this case, the stock in question has comparatively poor liquidity, half of Reddit are chasing the move, and options market makers are hedging exposures which creates a perpetual gamma squeeze. Either way, he’s a hero to some and a villain to others, which is understandable given he has an edge that is seen as almost free money.
Our opening calls for Asia equity suggest a slightly weaker open with the ASX200 called -0.1%, while the HK50 and NKY225 are eyed at -0.6%. While we look ahead at US data releases, in Asia today we get the China Caixin PMI data (due 11:45 AEST) and additional partials for tomorrow’s Aussie Q1 GDP calculation, with net exports (as a % of GDP) and inventories due – as well as the Balance of Payments.
-Looking Ahead in Australia:
-Scheduled data: Home prices, manufacturing, and inflation, plus Caixin China manufacturing PMI
-Corporate updates: Mesoblast ((MSB)) earnings, DroneShield ((DRO)) AGM
-In corporate news:
-NZ-born biotech, AFT Pharmaceuticals ((AFP)) will distribute non-opiod pain relief medication Combogesic through new found partner Alexso in the US. Combogesic is known as Maxigesic Rapid Tablets
-Yesterday, shares in Lovisa ((LOV)) dropped -10.4% to $30.40 as the CEO is leeaving in 2025
-Premier Investments ((PMV)) shares closed down -4.1% to $28.83 as the Smiggle CEO is preparing to join Lovisa
-Vulcan Energy Resources ((VUL)) shares gained 7.2% to $5.08 as Gina Rinehart's stake increased
-Galileo Mining ((GAL)) jumped 12.3% to 27.5c on JV with Mineral Resources ((MIN))
-Fletcher Building ((FBU)) shares closed up 3.5% to $2.94 on debt facility extension
-Immutep ((IMM)) shares were halted for $100m capital raise
-Looking Ahead in the US:
-Scheduled data: S&P Global manufacturing PMI, and construction spending data
Spot Metals,Minerals & Energy Futures | |||
Gold (oz) | 2350.50 | + 23.80 | 1.02% |
Silver (oz) | 30.68 | + 0.29 | 0.95% |
Copper (lb) | 4.59 | + 0.05 | 1.15% |
Aluminium (lb) | 1.20 | + 0.00 | 0.15% |
Nickel (lb) | 8.79 | – 0.05 | – 0.60% |
Zinc (lb) | 1.32 | – 0.02 | – 1.67% |
West Texas Crude | 74.00 | – 3.18 | – 4.12% |
Brent Crude | 78.17 | – 3.20 | – 3.93% |
Iron Ore (t) | 110.10 | – 8.48 | – 7.15% |
The Australian share market over the past thirty days…
Index | 03 Jun 2024 | Week To Date | Month To Date (Jun) | Quarter To Date (Apr-Jun) | Year To Date (2024) |
---|---|---|---|---|---|
S&P ASX 200 (ex-div) | 7761.00 | 0.77% | 0.77% | -1.72% | 2.24% |
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
BKW | Brickworks | Upgrade to Buy from Hold | Bell Potter |
LOV | Lovisa Holdings | Downgrade to Neutral from Buy | Citi |
PME | Pro Medicus | Upgrade to Hold from Sell | Bell Potter |
PWR | Peter Warren Automotive | Downgrade to Equal-weight from Overweight | Morgan Stanley |
TLC | Lottery Corp | Add | Morgans |
For more detail go to FNArena's Australian Broker Call Report, which is updated each morning, Mon-Fri.
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CHARTS
For more info SHARE ANALYSIS: AFP - AFT PHARMACEUTICALS LIMITED
For more info SHARE ANALYSIS: DRO - DRONESHIELD LIMITED
For more info SHARE ANALYSIS: FBU - FLETCHER BUILDING LIMITED
For more info SHARE ANALYSIS: GAL - GALILEO MINING LIMITED
For more info SHARE ANALYSIS: IMM - IMMUTEP LIMITED
For more info SHARE ANALYSIS: LOV - LOVISA HOLDINGS LIMITED
For more info SHARE ANALYSIS: MIN - MINERAL RESOURCES LIMITED
For more info SHARE ANALYSIS: MSB - MESOBLAST LIMITED
For more info SHARE ANALYSIS: PMV - PREMIER INVESTMENTS LIMITED
For more info SHARE ANALYSIS: VUL - VULCAN ENERGY RESOURCES LIMITED