Market Updates

US markets closed overnight for the Juneteenth holiday. Global equities are down, falling from 14-month highs hit last week as markets awaited testimony from Fed Chair Powell in markets dominated by monetary policy bets. No change in the broader narrative, European markets are in a holding pattern ahead of monetary decisions from BoE, Swiss National Bank and Norges Bank. European markets down, FTSE 100 -0.71%, DAX -0.96%, CAC40 -1.01%, and STOXX 600 -1.02%. SPI Futures up 12 points (+0.17%).

ECB officials continue to sound hawkish since last week’s policy decision to raise rates by 25bps as inflation could come in higher than it expects, two ECB officials said overnight, despite the banks chief economist opening the door to a pause and warnings that the Governing Council may be underestimating disinflationary trends and liquidity risks posed by TLTO repayments. Markets see a greater than 50% likelihood of terminal rate of 4%, with one more rate hike in September or October this year.

• Gold eased 0.39% as the US dollar strengthened ahead of Fed Chair Powell's congressional testimonies.
• The dollar index edged up 0.27% from a one-month low, making metals less attractive for buyers holding other currencies.
• Copper prices faced pressure, down 0.38% due to a lack of detail on economic stimulus in China and a firmer dollar.
• Nickel -1.83% Aluminium -1.21% Zinc -1.7%, Lead +0.16%, Tin +5.22%.
• WTI crude fell 2.11% and Brent fell 0.17% as China’s GDP growth forecast was downgraded.

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The ASX 200 started the week on a positive note, up 44 points to 7292 (+0.6%), rising for its sixth consecutive session and reaching its highest levels in six weeks. Healthcare and consumer stocks led the market today, bouncing back from last week’s losses with CSL +2.4%, RMD +1.5%, and MSB +6.8%. Supermarket giants WES +0.9% and COL +1.3% led the consumer staples rally as UBS upgraded the stock to buy. Insurers enjoyed the most gains in the financial sector, with SUN gaining 2.0% and QBE up 1.1%. Banks good, the big four banks all up over 1%, with ANZ leading the banks up 1.5%. Big Bank Basket up to $171.34 (+1.2%). Tech stocks rallied. All-Tech Index up 0.9%. Semiconductor company WBT is among the best performers up 8.7%, XRO +1.3% and WTC +0.6%.  Meanwhile, Energy and mining stocks were mostly down, falling in lockstep with oil, as WTI crude futures fell toward $71 a barrel, giving back some of last week’s gains. BHP down 0.7%, FMG off 1.0% and WHC -2.9%. In corporate news, KAR +1.5% despite the oil producer downgrading its production guidance, LKE fell 20.0% on news that its Argentina Lithium project would be delayed and cost more than originally anticipated. ABP +5.8% completes the institutional component of an equity raising for Abacus Storage King. ASB -1.6% secured a US$71.7m contract with the US Navy for the construction of a Navajo class ship. Nothing on the economic front. Asian markets down, Japan down 0.4%, HK down 1.1%, and China off 0.5%. Australia 10Y yield down to 3.98%. Bitcoin up 0.61%. Dow Jones futures down 43 points, and Nasdaq futures up 13 points.

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Dow Jones down 109 (-0.32%). Trade in a 300 point range, up 181 at best. S&P 500 -0.37% - close to a 14-month high. NASDAQ -0.68%. For the week the Dow Jones was up 422 points (+1.25%). NASDAQ +3.25%. S&P 500 +2.57%. Some of the big Tech stocks took a pause. Microsoft down 1.7%, Amazon down 1.3%. Microsoft was still up 4.8% for the week, Nvidia was up 10.1%, Tesla was up 6.6% and Meta was up 6.1%., United Health was the biggest drag on the Dow Jones this week down 7.1% after a guidance downgrade. Bond yields were higher, the yen hit a 15 year low. US consumers' near-term inflation expectations dropped to a two-year low in June and the outlook over the next five years improved slightly, according to the University of Michigan survey.

SPI Futures down three points. The ASX 200 was up 152 points for the week (+2.13%), closing at 7251. These are the support and resistance levels on the ASX 200 at the moment. Nex target 7391 (+4.4% from here). Let's see if it can get there and break that.

TODAY'S HEADLINES

• ASX to slip, policymakers front and centre.
• Wall St Week Ahead-Investor skepticism turns to optimism as U.S. stock rally rolls on.
• Blinken, Qin hold 'candid' talks, US and China agree to meet again.
• Biden makes re-election pitch in key swing state Pennsylvania.
• Mystery X9 helicopter takes shape as potential successor to Airbus H145.
• Intel to invest $25 bln in Israel factory in record deal, Netanyahu says.
• Argentina faces crunch IMF talks to defuse looming debt bomb.
• Binance, SEC strike deal to keep US customer assets in country.

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ASX 200 kicked 76 points higher to 7251 (+1.1%) as the BoJ kept policy unchanged, China on the precipice of stimulus and the US bull market rolling on. Banks led the charge higher with the Big Bank Basket up to $169.39(+1.2%). ANZ, a laggard, with a miserly 0.7% gain. MQG up strongly by 1.2% with money managers also putting on the Ritz, MFG up 0.9% and GQG up 1.0%. Insurers firmed with QBE up 1.0%. Industrials across the board looking very solid. TCL rallied 0.7%, WES up 1.2% and REA in ‘old skool platforms’ up 3.5%. Consumer stocks also finding some support, TWE up 0.7% and JBH up 1.1%. LOV better by 1.4% and APE up 2.6% on buyback news. Tech in demand as usual. XRO up 2.6% and WTC at all-time highs up 1.2%. REITs did well as yields fell, GMG up 1.6% and MGR rising 1.8%. Healthcare mildly better but CSL still bleeding slightly, down 0.6%. Big Resources were firm but unspectacular. BHP up only 0.4% and FMG unchanged. Gold miners better, NCM up 1.7% and lithium stocks back in demand. MIN up 3.7% and PLS putting on 4.9%. Oil and gas stocks rose on oils rebound.

In corporate news, AGL shocked the market with a serious upgrade, flying 9.7% higher. MIN confirmed a new gas discovery, ANZ agreed a deal with QLD to seal the SUN deal, DEG rallied 6.7% after denying it leaked information to the media.

Nothing major on the economic front, although Bill Evans at Westpac downgraded the GDP outlook. Asian markets better, BoJ holds and Nikkei heads for 10th week of gains. Only 0.3% but will take that. HK up 1.3% and China up 0.6%. Stimulus beckons. 10-year yields steady around 4.0%. Dow futures down 10 points. NASDAQ futures up 1 point.

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US equities rallied overnight, with all three major indices gaining over 1% on strong economic data. Dow up 429 points (+1.26%). Dow at best up 510 points. Dow at worst down 33 points. S&P 500 up 1.22%, moving firmly above the 4400 level. NASDAQ up 1.15%, closing at its highest level in 14 months. US treasury yields slid after economic data pointed to easing inflation, helping offset worries about future rate hikes and boosting Microsoft and Apple shares to record highs. USD Index stumbled, down 0.81% following the ECB rate rise of 25bps. SPI Futures up 29 points (+0.41%).

Big economic day overnight. Initial jobless claims were sharply above expectations at 262k vs consensus of 249k, the highest reading since October 2021. Results reflect some softening in the US labour market after a prolonged period of tightness. US retail sales unexpectedly rose 0.3%, exceeding expectations of a 0.1% decline, following April’s 0.4% rise. Philadelphia Fed manufacturing contracted largely in line with expectations, whereas the NY Empire manufacturing unexpectedly expanded.

European markets are broadly down, STOXX 50 -0.3%, FTSE +0.3%, CAC -0.5%, and DAX -0.1%. After the ECB rose rates by 25bps for the eighth straight time to 3.5%, the highest level in 22 years. Eurozone inflation is still hot at 6.1%, more than three times the ECB’s 2% target. The Euro hit a 15-year high against the yen and a five-week high against the dollar following the rate rise. Australian dollar flat, down 0.09% to 68.79c.

• Gold rebounded 0.82% from a 3-month low as USD index slid lower.
• Copper reached a 5-month high, up 0.72% overnight on increased economic support in China.
• WTI crude rose 3.51%, and Brent gained 2.87% as IEA predicted global oil demand to rise by 6% between 2022 and 2028.
• Zinc -0.4% Nickel +1.06%, Aluminium +-0.07%, Lead +0.61%, Tin +1.77%.
• Bitcoin rose 2.34% overnight.
• 10-year yield: US 3.72%, Australia 3.95%, and Germany 2.49%.

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US equities closed mixed overnight after some choppiness and heavy trading volume in the afternoon following the FOMC meeting. The Dow fell 233 points (-0.68%), weighed down by United Health. Dow at worst down 429 points. S&P 500 flat, up 0.08%, and the NASDAQ rose 0.39%. Long-dated US treasuries fell, 10Y and 30Y yields slipped 4.9bps and 6.4bps. USD Index off 0.38%, and Walls Streets fear gauge the VIX fell 5.0%. European markets finished up, with the STOXX 50 +0.7%, FTSE +0.1%, CAC +0.5%, and DAX +0.5%.

The Fed Hits Pause
After ten consecutive rate hikes over the year, the Fed has officially hit “pause”. The Fed announced it will be leaving the benchmark federal funds rate at 5-5.25%, its highest level since 2007. The Fed’s new projections show policymakers at the median see the fund’s rate rising to a 5.5-5.75% range by the end of the year (another two hikes). Policymakers anticipate a 100 basis points of rate cuts next year, alongside fast-falling inflation. Futures markets are already pricing in 64.5% chance rates rise by 25bps at the July FOMC meeting.

• US Producer Price Inflation fell 0.3% MoM in May following April’s 0.2% rise, significantly exceeding forecasts for a 0.1% fall.
• Chipmakers Nvidia and Broadcom are both up more than 4%, closing at highest levels ever.
• Philadelphia Semiconductor Index up 1.5%, bringing its YTD gain to 48%.
• United Health down 6.4%, after the company announced its costs were on the rise due to an increase in surgeries among older adults. Wiping out ~US$29bn in market capitalisation.
• Gold steadied as the Fed signalled more rate hikes ahead.
• Copper gained 0.46% on expectations of Chinese growth.
• WTI crude dropped 1.69%, and Brent lost 0.89% as US inventories surged ahead of expectations.
• Zinc rose 4.35% overnight as Boliden suspended operations at a major Zinc mine in Ireland.
• Nickel +3.5%, Aluminium +0.83%, Lead +1.73%, Tin +2.6%.
• Bitcoin fell 2.9% overnight.
• 10-year yield: US 3.79%, Australia 3.96%, and Germany 2.46%.
• Shell PLC rose 1.2% overnight after announcing it will hold oil output steady, grow gas and LNG business and increase dividends.
• EU regulators may order Google to sell part of its adtech business to address anti-competitive practices, potentially facing a fine of up to 10% of its annual global turnover.

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ASX 200closed up 23 to 7162 (+0.3%) buoyed by positive sentiment following softer-than-expected US CPI numbers. Banks rose, riding positive market sentiment. The Big Bank Basket up to $166.36 (+0.8%) led by MQG up 1.4%, and WBC up 1.3%. Money managers doing well. Insurers also had a good day, IAG up 2.6% and QBE rose 0.9%. REITs lower as bond yields climbed, SCG down 1.2% and MGR down 2.2%. The Healthcare sector got slammed as CSL reduced profit guidance, CSL dropping 6.9% knocking 35 points off the market. Resources regained yesterday’s losses and then some as China lowered their short-term lending rate in a bid to stimulate the economy, boosting commodity prices. Iron ore miners performed well, BHP up 3.6%, RIO up 2.9% and FMG up 4.3%. Lithium boosted on Chinese optimism, MIN up 5% and PLS up 3%. Gold miners were sold off for a second day now that markets are convinced the Fed will ‘skip’ June’s rate hike. EVN -0.6% and NST -0.9%. Oil and gas rose as the US announced overnight, they would be purchasing an additional 12m barrels to replenish depleted national reserves. WDS +1.1% and STO +1%. In corporate news, CSL fell 6.9% after it reduced FY23 profit guidance, noting a significant hit from FX exposure. MAQ rose 1.1% after completing a $160m institution share placement at $58.50 per share. AIA dropped 3.8% after adjusting their dividend policy to be in line with industry standards. DMP continued to drop as brokers downgraded their ratings, down 0.9%. On the economic front today, Consumer confidence fell to a 3-year low, as inflation and interest rates hit home. Asian markets mixed ahead of the Fed rate decision, Japan’s Nikkei Index rallied 0.9% by midday, currently up 1.3% looking to extend its gains for a fourth session. HK down 0.6% with China down 0.1%. Australian bond yields remain inverted, 10Y yield at 3.99% and 2Y yield at 4.1%. USD Index flat at $103.4. Dow Jones futures down 74 points and Nasdaq futures down 6 points.

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All three major US indices closed in the green overnight, following the US inflation report that indicated a slowdown in price pressures in May, raising the probability of a ‘skip’ at the next FOMC meeting tomorrow to 93.1% from 79.1% the day before. The Dow added 146 points (+0.43%). Dow, at best up 244 points. The S&P 500 and NASDAQ gained 0.69% and 0.83%, respectively, hitting their highest levels since April 2022. The Russell 2000 Index rose 1.23%, jumping to a three-month high. VIX down 2.7%. US treasury yields rose, and gold prices fell. USD Index down 0.30%, while base metals and oil found support on the weaker dollar. Australian market set to rally at open, with SPI futures up 44 points (+0.62%).

European markets are broadly up, STOXX 50 +0.7%, FTSE +0.3%, CAC +0.6%, and DAX +0.8%. The ECB is holding its policy meeting on Thursday, where it is expected to raise rates by another 25bps. In currencies, the Euro hits a three-week high reaching $1.08, and the British pound hits a one-month high, touching $1.26, while the Aussie dollar remains flat, down 0.03% to 67.64c.

HEADLINES

• Trump pleads not guilty in federal documents case.
• US consumer price increases slow; underlying inflation sticky.
• US small business sentiment edges up in May, NFIB says.
• In challenge to Nvidia, AMD will ramp up AI chip production this year.
• US plans to purchase 12m barrels of oil for reserve this year.
• Toyota unveils sweeping plans for new battery tech, EV innovation.
• Tesla taps brakes on job ads after Musk clamps down on hiring.
• Wells Fargo CFO expects upside in net interest income.

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ASX 200closed up 16 points to 7139 (+0.2%) as the market returned from a long weekend. Global equity markets remain subdued ahead of the FOMC meeting and interest rate decision later in the week. Tech rallied following the NASDAQ, with the All-Tech Index up 3.8%, XRO up 4.2% and up 62.25% YTD, WTC +5.2%, and BRN +3.7%. Banks gaining ahead of US CPI tonight, led by MQG up 2.1%, and CBA up 0.8%. The Big Bank Basket up to $164.97 (+0.5%). Money managers found support, VUK up 1.0% and MFG up 1.1%. REITs mixed, GMG up 0.1% and HCW up 3.2% on a revaluation of assets. Resources struggling on demand concerns. Iron ore miners BHP and RIO are down 1.0% and 1.5%, respectively. Gold sold off as the probability of a rate pause by the Fed increased to 80.4%. EVN is down 2.3%, and NCM off 1.4%. Lithium is broadly down, AKE down 1.2%, and IGO up 0.8% on the appointment of the new CEO Ivan Vella. Coal stocks got sold off, YAL dropped 4.5%, and WHC down 1.9% as the Queensland government announced an increase in royalty payments in a bid to transition to renewable energy. Oil prices near lowest level in three months on demand concerns in China and the US. Energy stocks fell in lockstep with oil prices WDS -1.3%, BPT -1.9% and KAR -5.3%.

In corporate news, DMP fell 5.9% after the company announced sales to fall below expectations for FY23, TNT +145% on 13c cash offer ($176m) from Thales, and MIN down 2.7% after reporting a fatality at Onslow Iron project, site operations have been suspended.

In economic news, Westpac-Melbourne Institute Consumer Sentiment Index unexpectedly rose 0.2%, exceeding consensus for a flat reading while steadying near recession lows. NAB business confidence index unexpectedly fell to -4, below market expectation. Asian markets mixed; Japan’s Nikkei hits 33,000 during trade, the first time since 1990 down, currently up 1.2%, HK up 0.2%, with China down 0.1%. Australian bond yields remain inverted, 10Y yield at 3.92%, and 2Y yield at 1.03%. Dow Jones futures up 28 points, and Nasdaq futures up 64 points.

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