Desktop Broker TV

Market wraps 8th May 2024

Morning Bell - Grady Wulff

Wall Street closed mixed on Tuesday as investors questioned whether the recent rally can be maintained given the latest economic data readings painting a mixed picture about the rate cut outlook in the US with the odds for a cut in September currently sitting at 67%. The Dow Jones rose 0.08% for a fifth consecutive winning day, the S&P500 added 0.13%, and the tech-heavy Nasdaq ended the session down 0.1%. Treasury yields declining on Tuesday was also key driver of the Dow and S&P500 rising as investor optimism for rate cuts boosted appetite for equities. Disney shares plunged 9.5% after the media and entertainment giant missed on revenue expectations, while Peleton shares rose 15.5% on speculation that private equity firms have been considering buying out the company.

In Europe overnight, markets closed in the green as investors responded to the release of corporate earnings results in the region. The STOXX600 rose 1.15% boosted by financial services stocks, Germany’s DAX added 1.4%, the French CAC rose just under 1% and, in the UK, the FTSE100 ended the day up 1.22%. Swiss banking giant UBS rallied 9.5% on Tuesday after beating expectations by returning to a quarterly net profit in the latest results while Italian bank UniCredit rose 3.6% on reporting a net profit of $2.6bn euros for the first quarter which beat consensus estimates.

The Asia markets closed mostly in positive territory on Tuesday led by South Korea’s Kospi index gaining 2.16% as heavyweights like Samsung Electronics and SK Hynix did most of the heavy lifting. Japan’s Nikkei rose 1.57% and Hong Kong’s Hang Seng ended the day down 0.51%

Locally, the ASX extended the recent rally into Tuesday’s session with the key index closing the day up 1.44% with all 11 sectors ending the session in the green led by the utilities sector jumping 2.82%. Investor sentiment was boosted on Tuesday by the RBA maintaining Australia’s cash rate at the current level of 4.35% for the next period which was widely expected.

The market didn’t appear to respond to the RBA’s upward revision for inflation expectations over the remainder of 2024 though. Services and fuel inflation remain elevated and are the key drivers of inflation remaining sticky, however, Australia’s central bank drastically revised the inflation outlook upwards from the previous expectation of inflation hitting 3.2% by the December quarter of 2024 to now expecting inflation to remain at 3.8% in the December quarter. This is expected to be driven by wage price index remaining elevated, subdued economic growth, higher imports, higher employment, higher household income, and lower labour productivity.

The utilities rally on Tuesday was led by AGL Energy jumping 7.4% on the energy giant upgrading its earnings guidance for FY24 to a new range of 56% to 62% increase on the reported EBITDA in FY23 with management attributing the upgrade and strong results to date to ongoing strength in operational performance due to improved plant availability, flexibility and generation and higher consumer demand over the summer period.

Uranium miner Paladin Energy was the leading stock on the ASX200 on Tuesday, rising an impressive 8.44% on rising demand for uranium globally and fears of critical undersupply for years to come. The price of uranium also jumped 0.71% overnight to trade at US$92.40/pound, the highest level since early March.

What to watch today:

  • Ahead of the midweek trading session here in Australia the SPI futures are anticipating the ASX to open the day up 0.18% tracking the gains from some key market regions overnight.
  • On the commodities front this morning, oil is trading flat at US$78.48/barrel, gold is down 0.53% at US$2313.61/ounce and iron ore is up 1.3% at US$119.56/tonne.
  • AU$1.00 is buying US$0.66, 101.96 Japanese Yen, 52.67 British Pence and NZ$1.10 cents.

Trading Ideas:

  • Bell Potter has downgraded Imdex (ASX:IMD) to a sell rating from a hold and lowered the 12-month price target on the global provider of end-to-end mining services and products company following the release of a soft Q3 update from the company including revenue up 4% YoY but down 6% on a like-for-like basis, and ongoing weakness in global exploration activity is expected to impact the business into FY25.
  • And Trading Central has identified a bullish signal on Car Group (ASX:CAR) following the formation of a pattern over a period of 19-days which is roughly the same amount of time the share price may rise from the close of $34.83 to $36.40 according to standard principles of technical analysis.