Daily Market Reports | Jun 26 2024
This story features TELSTRA GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: TLS
| World Overnight | |||
| SPI Overnight | 7801.00 | – 29.00 | – 0.37% |
| S&P ASX 200 | 7838.80 | + 105.10 | 1.36% |
| S&P500 | 5469.30 | + 21.43 | 0.39% |
| Nasdaq Comp | 17717.65 | + 220.84 | 1.26% |
| DJIA | 39112.16 | – 299.05 | – 0.76% |
| S&P500 VIX | 12.84 | – 0.49 | – 3.68% |
| US 10-year yield | 4.24 | – 0.01 | – 0.24% |
| USD Index | 105.63 | + 0.14 | 0.13% |
| FTSE100 | 8247.79 | – 33.76 | – 0.41% |
| DAX30 | 18177.62 | – 147.96 | – 0.81% |
After an unexpectedly strong session yesterday, and a rotation back into tech stocks in the US, the local market is poised for a pullback today, ahead of an update on inflation.
By Chris Weston, Head of Research, Pepperstone
-Big tech kicks back S&P500 and NAS100 close higher
-Nvidia feels the love in the pre-market
-Asia equity opening calls suggest a mixed picture of open
-FX movers and shakers Aussie CPI the highlight in the session ahead
-Commodities ease back after Monday’s gains
The tables turn once again, and the period of position adjustment into quarter-end takes another sinister turn. We see positive closes for the NAS100 cash +1.2%, S&P500 +0.4%, while the Dow and Russell 2k close lower.
The Nvidia effect strikes once again, taking tech higher on the day, while we see communication services the star performer within the S&P500 sectors led by Alphabet and Meta. Energy holds in well after the strong showing on Monday, while materials and REITs subtract points.
Looking at the intraday tape, those trading saw the S&P500 open on the front foot despite mild weakness in European equity markets (the CAC40 closed -0.4%), with the index trading to 5469, before rolling over to test Monday’s closing levels of 5447. This is where the buyers stepped in, and we saw a fairly solid move into the close.
The bears will point to shocking breadth, with only 22% of S&P500 stocks higher on the day. When Nvidia gains +6.8% and the full suite of Mag7 names close in the green, it’s not hard to see why the S&P500 closed higher, with obvious outperformance seen in the NAS100.
We had been arguing that nothing fundamentally had changed with Nivida (and AI-related names), and the -16% decline in Nvidia was driven by overly stretched technicals, and a saturated position, with month- and quarter-end a reason to take some length off the table.
As we see from the intraday chart of our 24-hour Nvidia CFD, the buyers stepped in hard as soon as the premarket opened at 18:00 AEST, with a 10.5% rally off the lows, with some 413m shares traded. Optionality played a part, with sizeable short-dated call buying resulting in dealers hedging through buying the underlying shares, so momentum is back.
Can we trust this one-day move?
I’d like to see an upside break of Friday’s cash session high of US$130.63 to offer a real belief this can push to new highs.
Nivida aside, Alphabet is the large-cap play of the day, with new highs and we see that the stock is flying long and strong, and the bulls will be gunning for US$200. FedEx sit up 15% in the post-market, guiding to higher revenues for 2025 and a buyback in the works typically a strong cyclical story, the devil is in the details, but this name should work well from here.
Crypto has also rebounded, aligning with the moves in Nvidia and we see Bitcoin testing US$62k, and this just cements the idea that momentum as a thematic was the underlying driver.
Given the moves we’ve seen and the three sectors working in the S&P500, our calls for Asia equity indices are once again mixed. The ASX200 looks to kick back some of the solid gains we saw yesterday, with the index expected to open -0.4%.
When value (as a factor) has taken a backseat to growth, the king of the global value indices will underperform. BHP’s ADR suggests the miner will open -1%, so this is indicative of the broader materials space, subsequently, we can expect the Aussie banks to open on a flat note to counter the weakness in the materials names. Tech will likely find some love, but given the low sector weights on the ASX200, tech won’t be the index bulls’ saviour today.
We’ve seen several Fed speakers, and various US tier 2 economic data releases, with consumer confidence coming in line with expectations at 100.4, while the Philly Fed manufacturing index improved a touch to -15.1.
AUDUSD takes focus today with the monthly CPI read due at 11:30 AEST, with expectations headline CPI rises 20bp to 3.8%. Aussie interest rates markets price 4bp of hikes for the August RBA meeting, so today’s CPI data could influence that pricing, notably if we get an upside surprise above 4%, with troubling services inflation, and then we could be looking at rates pricing closer to 10bp of implied hikes – although it’s the Q2 CPI print on 31 July that will really matter to the August hike debate.
Conversely, a CPI number closer to 3.5% would see any pricing of hikes coming out of the market and we’d be back to thinking the next move is firmly down for the cash rate, but not until late 2024, and more likely 2025.
AUDUSD sits at 0.6640 and continues to trade in a sideways range on the higher timeframes. On the day, I’d see the moves capped into 0.6675 and 0.6615 and would look to fade the moves here accordingly, but that depends on the CPI data. AUDNZD grinds lower, and big CPI numbers could set this higher. I am a buyer of strength in this cross.
Commodities have found sellers after seeing upside potential in crude given the bullish price action. The bulls have failed to push on and we see price -1%. Gold closed -0.6% at US$2319 and remains a frustrating one for those trading on the higher timeframes. Silver is -2.2%, with copper -1.2% at US$4.37 p/lb.
Corporate news in Australia:
-Telstra ((TLS)) is selling off its failed Telstra Ventures investments
-Bain Capital still looking to list Virgin Australia by year-end
On the calendar today:
-Australia: CPI (May)
-RBA’s Kent speech
-Aristocrat Leisure ((ALL)) investor briefing
Fisher & Paykel Healthcare ((FPH)) ex-div 21.84c
In the USA:
-June Consumer Confidence
-May New home sales
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 2331.60 | – 15.70 | – 0.67% |
| Silver (oz) | 29.24 | – 0.06 | – 0.20% |
| Copper (lb) | 4.37 | – 0.05 | – 1.15% |
| Aluminium (lb) | 1.12 | – 0.00 | – 0.16% |
| Nickel (lb) | 7.75 | – 0.01 | – 0.09% |
| Zinc (lb) | 1.29 | + 0.01 | 0.70% |
| West Texas Crude | 80.77 | – 0.99 | – 1.21% |
| Brent Crude | 84.11 | – 1.12 | – 1.31% |
| Iron Ore (t) | 106.55 | 0.00 | 0.00% |
Andreas Thalassinos, Senior Market Analyst at Neotrades:
Gold prices attempted to rebound on Monday, while the market’s attention is now focused on the upcoming inflation data expected later this week, which could significantly affect the Federal Reserve’s decisions on interest rates.
The Personal Consumption Expenditures (PCE) data is scheduled for release this Friday and could affect traders’ expectations in addition to a series of Federal Reserve governors’ speeches during the week.
While last Friday’s data revealed a slight increase in US business activity, presenting a challenge for gold, the market still anticipates the possibility of two interest rate cuts this year, potentially supporting the asset.
Meanwhile, Swiss gold exports declined in May 2024 due to reduced shipments to India and Hong Kong, while exports to China and Turkey saw minor decreases which could create some concerns about demand in those countries.
However, gold could continue to benefit from escalating geopolitical tensions in Eastern Europe and the Middle East, in addition to political uncertainty in Europe which are likely to support the demand for safe-haven assets.
Upcoming elections in the US could further provide upside momentum to gold in the latter half of the year.
Abuagla Senior Market Analyst at XTB MENA:
Crude oil started the European session in the red after reaching two-month highs. Prices could remain under some pressure if traders remain cautious ahead of the release of several US economic data later this week, including PCE figures.
The latter could affect monetary policy and oil demand expectations. At the same time, geopolitical tensions could remain a potent driver for prices and could support crude as tensions could continue to exacerbate.
Ukraine’s recent strikes on Crimea and the Russian response fueled some concerns. In the Middle East, the Israel-Hamas conflict continued unabated despite international mediation efforts, further contributing to market uncertainty in addition to the risks of a larger conflict.
Additionally, the upcoming Iranian election could significantly impact crude oil prices, and uncertainty around new Iranian policies could add to the volatility in prices.
If the new administration adopts a hardline stance or faces international sanctions, it could restrict oil supply, driving prices up. Conversely, a more moderate leadership open to negotiations might ease sanctions, increasing oil exports and potentially lowering prices.
Daniel Takieddine CEO MENA at BDSwiss:
US Treasury yields continued to move horizontally on Tuesday. Market participants are awaiting the release of key economic data later this week and remain attentive to insights from Federal Reserve officials scheduled throughout the week.
Without significant catalysts, the 10-year note yield remains capped below the 4.3% mark, while the 2-year Treasury yield remains relatively flat.
This week’s Upcoming economic indicators include durable goods orders and the Personal Consumption Expenditures (PCE) Price Index for May. The PCE Price Index is highly anticipated and markets expect the core PCE to decrease to 0.1% on a month-on-month basis.
Weaker-than-expected data could pull yields down and could weigh on the dollar. Speculation about the timing of the Fed’s first interest rate cut remains a key topic among investors.
Meanwhile, Treasury yields and the dollar could continue to find support until the Fed confirms its decision regarding the timing of its first rate cut. While a rate cut this summer appears unlikely, markets are pricing in several rate cuts starting September which could drive yields lower if they materialise.
The Australian share market over the past thirty days
| Index | 25 Jun 2024 | Week To Date | Month To Date (Jun) | Quarter To Date (Apr-Jun) | Year To Date (2024) |
|---|---|---|---|---|---|
| S&P ASX 200 (ex-div) | 7838.80 | 0.55% | 1.78% | -0.74% | 3.27% |
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| A11 | Atlantic Lithium | Downgrade to Neutral from Outperform | Macquarie |
| AGY | Argosy Minerals | Downgrade to Underperform from Neutral | Macquarie |
| BGL | Bellevue Gold | Upgrade to Outperform from Neutral | Macquarie |
| CAJ | Capitol Health | Downgrade to Hold from Buy | Bell Potter |
| CCX | City Chic Collective | Downgrade to Hold from Buy | Bell Potter |
| CMM | Capricorn Metals | Upgrade to Neutral from Underperform | Macquarie |
| DRR | Deterra Royalties | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| EVN | Evolution Mining | Upgrade to Outperform from Neutral | Macquarie |
| Downgrade to Neutral from Buy | UBS | ||
| GLN | Galan Lithium | Downgrade to Underperform from Neutral | Macquarie |
| GOR | Gold Road Resources | Upgrade to Outperform from Neutral | Macquarie |
| MIN | Mineral Resources | Downgrade to Neutral from Outperform | Macquarie |
| MTS | Metcash | Upgrade to Buy from Accumulate | Ord Minnett |
| NHC | New Hope | Upgrade to Neutral from Underperform | Macquarie |
| PME | Pro Medicus | Upgrade to Hold from Sell | Ord Minnett |
| REA | REA Group | Upgrade to Buy from Neutral | Citi |
| RMD | ResMed | Downgrade to Neutral from Buy | Citi |
| RMS | Ramelius Resources | Upgrade to Outperform from Neutral | Macquarie |
| S32 | South32 | Downgrade to Equal-weight from Overweight | Morgan Stanley |
| SBM | St. Barbara | Upgrade to Outperform from Neutral | Macquarie |
| SGR | Star Entertainment | Downgrade to Hold from Add | Morgans |
| WGX | Westgold Resources | Upgrade to Outperform from Neutral | Macquarie |
| 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.)
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