The Overnight Report: Commodities Down

Daily Market Reports | Jul 09 2024

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World Overnight
SPI Overnight 7766.00 + 17.00 0.22%
S&P ASX 200 7763.20 – 59.10 – 0.76%
S&P500 5572.85 + 5.66 0.10%
Nasdaq Comp 18403.74 + 50.98 0.28%
DJIA 39344.79 – 31.08 – 0.08%
S&P500 VIX 12.37 – 0.11 – 0.88%
US 10-year yield 4.27 – 0.00 – 0.07%
USD Index 105.02 + 0.14 0.13%
FTSE100 8193.49 – 10.44 – 0.13%
DAX30 18472.05 – 3.40 – 0.02%

By Chris Weston, Head of Research, Pepperstone

Good morning.

-Traders repositioning French election hedges post 2nd round vote
-The USD halts a 7-day losing run cable sold again above 1.2820
-Gold longs liquidate and in broader commodity sell-off
-US equity held in by the AI-rated plays
-Opening calls for Asia equity

Traders have started the week off massaging positions – trimming longs in gold and silver, and cutting back on USD shorts, while activity in US equity indices has been balanced with two-way flows.

EU equity indices have closed modestly lower, while at stock level French banks saw some interest. 

The USD index (DXY) sits +0.1%, just enough to close out 7 consecutive down days, and getting some support from the US 2-year Treasury, which has gained 3bp to 4.62%. With limited US data out, one could argue this modest sell-off was coming off a slightly overbought position, but also some trimming by way of risk management purposes ahead of today’s event risk, with US NFIB small business Optimism survey (due at 8 pm AEST), and then Fed Chair Jay Powell testifying to the Senate Banking Committee (00:00 AEST).

Gold sits at US$2359 (-1.4%) which seems somewhat extreme relative to the moves in the USD or US bond markets we’d seen sellers play out all through European and early US trade, but when things got cranking in the meat of US trade, we saw the price drop from US$2374 to US$2351, and we’ve consolidated since. A flush out of longs after the run of form perhaps, but we see this as part of a broader commodity sell-off on the day

In equity land, small caps found some love with the Russell 2k closing +0.6%, while the NAS100 closed +0.2%. The S&P500 notched up its 35th record high, trading into 5583 in early cash trade, but ultimately closing little changed at 5572 the 50th percentile of the 21-points range seen in the cash equity session.

56% of S&P500 stocks closed higher, and while Apple came to the party (+0.7%), it were the AI-related plays that put in the points, with Nvidia (+1.9%), Super Micro Computers, AMD and Marvell feeding off moves from Taiwan Semi (+3%) which is in beast mode and receiving multiple broker upgrades. Hardware names worked well with Dell (+5%) finding a solid move off the 50-day MA. Energy and communication services sectors unperformed on the day.

Turning to the Asia equity open, and as we look ahead to comments from Jay Powell, our opening index calls look mixed, with the ASX200 eyed to open at 7784 +21p (0.3%)

Corporate news in Australia:

-Barrenjoey is reportedly seeking to acquire a 10% stake in Orora ((ORA)) and push for changes within the company

-Mayfield Childcare ((MFD)) has acquired Precious Cargo, a Montessori early education provider, for -$4.8m

-HMC Capital ((HMC)) is acquiring a majority stake in StorEnergy, a Victoria-based battery energy storage developer

-The Australian Takeovers Panel denied Ramelius Resources’ ((RMS)) request concerning Westgold’s ((WGX)) takeover of Karora ((KRR)), stating the termination fee does not raise anti-competitive issues

On the calendar today:

In Australia:

-NAB business confidence
-Westpac consumer confidence
-Red Hill Minerals ((RHI)) ex-div 150c (100%)


-Powell testifies to Senate banking

Spot Metals,Minerals & Energy Futures
Gold (oz) 2366.50 – 33.35 – 1.39%
Silver (oz) 31.04 – 0.48 – 1.52%
Copper (lb) 4.61 – 0.06 – 1.29%
Aluminium (lb) 1.14 – 0.01 – 0.47%
Nickel (lb) 7.85 – 0.06 – 0.81%
Zinc (lb) 1.33 – 0.03 – 1.86%
West Texas Crude 82.27 – 1.17 – 1.40%
Brent Crude 85.66 – 1.14 – 1.31%
Iron Ore (t) 110.02 – 1.29 – 1.16%

Hani Abuagla Senior Market Analyst at XTB MENA

The second half of this year will be marked by a change in monetary policy worldwide, with the start in rate cuts in the world’s main economies.

Wall Street is heading into a historic year with large companies driving the country’s main indices. The slowdown in inflation, the increase in corporate results and the strength of employment in the US allow us to be positive for the remainder of the year.

Politics will be another key point, while in Europe we still have doubts about the consequences of the election result in France, in the US Donald Trump is the clear favorite to return to the White House.

Key Dates

-September 12, 204: ECB meeting
-September 18, 2024: Fed Meeting
-August 19 to 22, 2024: Democratic convention in the US
-November 5, 2024: Elections in the US

Stock Markets

Most of the main world stock markets are in the zone of historical highs, accumulating increases of more than 20% since the lows of last October.

The global economy has held up surprisingly well to high interest rates. Europe’s economic improvement has been one of the main surprises of the year, although we believe that in this case it is a mere mirage.

The two main economies in the region, Germany and France, offer doubts at an economic level, which in the case of the latter adds to the political instability of its latest electoral results. The rest of the countries in the euro zone are not in a privileged position either, while the increase in debt is a common constant. These circumstances, added to the slowdown in inflation, seem to us sufficient reasons for the ECB to decide to make at least two rate cuts by the end of the year.

On Wall Street we see clear differences. The reported data show the Fed is getting closer to meeting its main objectives. On the one hand, employment has begun to show some signs of normalisation, with wages growing at their lowest rate since early 2022, which puts less pressure on business results, favoring a “soft landing” scenario.

In addition, inflation continues its deceleration process and is gradually moving towards the 2% objective, something that will allow us to have at least one rate cut before the end of the year.

Large cap stocks have led the current rises and it is expected that, as their growth moderates and interest rate cuts begin, smaller stocks are expected to take over.

The S&P500 currently continues to appear as one of the best alternatives. It should be noted in favor of the index that economic growth continues, and that the valuations, although high, are lower than during other economic crises. Furthermore, we have already been able to see how the market could be affected by a Trump victory since, after the electoral debate, the dollar and the indices have reacted upward.


In this section we select the following areas:

-Health care
-Real estate


One of the sectors that is bearing the greatest weight on the index is semiconductors, an industry that is expected to grow at a compound annual rate of more than 10% until 2030.

So far, we have seen the beginning of chatbots, cloud computing or the Internet of Things, but this is spreading to other markets such as industrial automation, healthcare or electric vehicles.

This business has very high barriers to entry, so the market will continue to be distributed among a few participants, who generate very high cash flows, allowing them to continue investing in greater growth. Unlike the previous dotcom crisis, these companies are justifying their valuations with their profit growth on a quarterly basis.


We believe technology will also cause advances in other sectors, such as health. The sector invests in Research and Development more than any other industry, exceeding US$250bn last year.

An example of this are treatments against obesity and diabetes, related to more than 200 chronic diseases, so if they meet their expectations, their sales could multiply by 15x over the next five years.

Technological advances and cost reduction are driving its revenues and it is expected that for this quarter its results will grow at a rate of more than 20%. Furthermore, its defensive nature seems to us to be an important catalyst for the sector in the face of a possible increase in volatility at a global level.

European Real Estate

In Europe, we expect several rate cuts, an idyllic scenario for real estate. By reducing financing costs, profits will increase, which translates into more cash to invest in new assets, and increase the dividend payment, a strategy that could benefit from the fall in bond yields, and which is more defensive.

It also helps boost economic activity, which drives demand for real estate space. Although the emergence of remote work poses a threat, the hybrid model predominates in Europe. The European REIT market is trading at an average discount to the net value of its assets of more than -30%; they currently have occupancy rates in their properties above 90%. Most rental contracts are long-term with large companies and linked to inflation.


Finally, we consider it interesting to be able to diversify our investment portfolios, and we believe that gold is ready to start a new bullish rally.

Over the past few years, it has been driven by fears of recession, geopolitical conflicts and rising inflation. Recently, it has been the purchases of central banks in their desire to diversify their dollar reserves and small Chinese investors wary of the real estate sector and the stock market, which have led it to be quoted at historical highs.

In addition to providing a reserve of value against the continuous depreciation of traditional currencies, it is a source of liquidity at times when volatility increases. It is also expected to benefit from the rate cut, as unlike bonds, gold does not offer a fixed return, so as bond yields fall, more investors will return to buying gold.

The Australian share market over the past thirty days

Index 08 Jul 2024 Week To Date Month To Date (Jul) Quarter To Date (Jul-Sep) Year To Date (2024)
S&P ASX 200 (ex-div) 7763.20 -0.76% -0.06% -0.06% 2.27%
ARF Arena REIT Downgrade to Neutral from Buy UBS
BWP BWP Trust Downgrade to Neutral from Buy UBS
CNI Centuria Capital Downgrade to Sell from Neutral UBS
CSL CSL Upgrade to Buy from Neutral Citi
DRR Deterra Royalties Upgrade to Buy from Neutral UBS
EBO Ebos Group Upgrade to Neutral from Sell Citi
GMG Goodman Group Downgrade to Sell from Neutral UBS
LLC Lendlease Group Upgrade to Neutral from Sell UBS
MGR Mirvac Group Upgrade to Buy from Neutral UBS
REA REA Group Upgrade to Outperform from Neutral Macquarie
SCG Scentre Group Downgrade to Sell from Neutral UBS
STX Strike Energy Upgrade to Neutral from Underperform Macquarie
SUN Suncorp Group Downgrade to Neutral from Outperform Macquarie
VCX Vicinity Centres Upgrade to Neutral from Sell UBS

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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