The Overnight Report: Sunshine Friday

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This story features LIFE360 INC, and other companies.
For more info SHARE ANALYSIS: 360
The company is included in ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH

Indications are the ASX is poised for a strong session today.

By Chris Weston, Head of Research, Pepperstone

Good morning.

Through late EU and early US trade, traders covered short positions, reduced hedges, and sold volatility, with the more aggressive traders/investors initiating longs with increased organic buying of risk, as the market’ climbed the mythical wall of worry.

One could feel the underlying bid in the market through Asia, but everything moved as one on the release of US weekly jobless claims, which came in slightly better-than-feared at 233k. The fact that many have reacted and seen the US weekly jobless claims report as a signal shows how open-minded many who had recently subscribed to the US recession trade are – and how dynamic the collective can be to the notion that perhaps, yet again, economics may not be as bad as feared.

The real test will be the outcome in next week’s data releases, with US NFIB small business optimism survey, US CPI inflation, retail sales and University of Michigan sentiment survey all in play. Relying on a further moderation in inflation and a hotter retail sales print is a big ask, but good numbers here and we could be looking at a solid rally playing through the week in equity, and risky markets more broadly. Conversely, poor numbers and anxiety levels could rise, and the market’ could easily resume ramping up portfolio hedges and head back into recession trades.

On the day, US Treasuries pared back recent gains, with US 2-year Treasury yields +8bp to 4.03%, with US interest rate swaps now pricing -37bp of cuts for the September FOMC meeting, and therefore torn between a -25bp and -50bp cut at this meeting. The equity market saw the lift in yields as a positive development, and the result was a textbook trend day with the intraday chart of the S&P500 and NAS100 futures starting at the bottom right and closing at the highs the would-be sellers of risk stood aside, and it’s been a blanket buy-everything day, with 90% of S&P500 companies higher.

The technical set-ups need work to really get the momentum traders interested, and while NAS100 futures saw strong support at the 200-day MA, and we’ve seen the index pushing through to print a 3-day high – similar in the S&P500 – both now need to kick out of this consolidation phase, so should that play out then we should see levels of cross-market volatility pull lower, and this will encourage increased capital into these markets.

US Tech led the charge, with semis and the AI-related names firing up, with Tesla also finding some love.

Asia should respond to the leads, with a very constructive open eyed for all the major bourses. Our call for the ASX200 suggests an open some 1.2% higher at 5777, and again the price action sees the bulls stating their case, where the focus for intraday traders is whether the market builds on this positive open and carries risk into the weekend.

Moves in commodities should support resource stocks on the open, although it’s the ASX200 tech plays that should see the bigger percentage moves. Gold has been well traded on the day, where we have seen a solid trend day, with the yellow metal following moves in the NAS100. It’s not often you see US bond yields and gold holding a strong positive relationship, but gold had been heavily caught up in the rampant reduction of crowded trades’ – so it makes some sense that when these positions are rebuilt gold also takes part.

At least in the period ahead, if we see Asia equity further fire up, and NAS100 futures rising in sympathy, we could see gold push into US$2450/oz.

Looking ahead at risks to navigate on the day, there is little to truly concern, with China CPI/PPI (11:30 AEST), Norway CPI, and Canadian employment data.

On the calendar today:

-Life 360 ((360)) earnings report

-Avita Medical ((AVH)) earnings report

-James Hardie ((JHX)) AGM

-Nick Scali ((NCK)) earnings report

News Corp ((NWS)) earnings report

QBE Insurance ((QBE)) earnings report

-REA Group ((REA)) earnings report

Transurban Group ((TCL)) earnings report

-China July CPI/PPI

Corporate news in Australia:

-News Corp ((NWS)) has put majority interest in Foxtel up for sale. Telstra ((TLS)) owns 35%

-BHP Group ((BHP)) looking to sell Brazilian copper and gold assets from its Oz Minerals acquisition

-IGO Ltd ((IGO)) might sell assets from its Forrestania Nickel Operation to Medallion Metal ((MM8))

-Pacific Smiles ((PSQ)) shareholders rejected a board-recommended takeover by NDC BidCo, favoring a private equity offer instead

-Fujitsu is reportedly selling its Australian data centre portfolio, valued at $500m to $1bn

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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