Hello. RBA hangover is 50 basis points. I’m Melissa Darmawan for Finance News. This is your market outlook.
The Australian stock market is expected to rebound after a rally on Wall St.
S&P 500, the Nasdaq wins for the 2nd day
US stocks closed at session highs as investors shrugged off several headwinds. Weak earnings outlook for Target, the World Bank slashing its global growth forecast and questions whether inflation has peaked.
At the closing bell, the Dow Jones added 0.8% to 33,180, the S&P 500 gained nearly 1% to 4,161 and the Nasdaq rose 0.9% to 12,175.
It was a large rally led by energy after the United States issued a statement to the board of directors of the International Atomic Energy Agency, suggesting that the relaunch of the agreement on the Iranian nuclear power isn’t getting closer any time soon. The outlier of the session was consumer discretionary.
Why the reaction?
Investors found some stability in these oversold conditions. Last month we saw every sector get punished because finding the bottom of the market was a priority for investors. They are forward looking and it looks like they have factored in the number of rate hikes that may be unveiled by the Fed. Additionally, there is some optimism around China’s reopening and what that means for the global supply chain.
Either way, recession fears still linger, however, analysts have indicated that if the economy were to fall out of it, it would likely be next year. We saw this yield curve inversion flash earlier this year, which signaled a recession in 12-24 months. For now, that means corporate profits can grow, but at a slower pace.
Target, the retailer, has lowered its profit forecast for the current quarter as it seeks to eliminate inventory to reflect changing consumer habits. Why? Practically, customers go to stores and cannot find what they need. The company bought more stock to meet demand when people were locked up at home, but now that the economy is reopening, they are looking for products that meet seasonal needs and items that will continue to be needed like the products back to school.
The World Bank has cut its forecast for global growth by nearly a third for this year, attributing the main driver to Russia’s war in Ukraine. Officials said the war is expected to worsen the economic impacts of the pandemic, with China’s Covid-19 lockdowns remaining a wildcard, as well as a higher risk of stagflation referring to a period of slow growth and high inflation. .
Meanwhile, the Biden administration is pushing lawmakers to back a US$4.3 billion plan to buy enriched uranium directly from domestic producers to wean the United States off Russian imports.
Let’s see what this means for the Australian market today.
Numbers around the world
Across the Atlantic, European markets closed lower ahead of the ECB meeting later in the week. Paris and Frankfurt fell 0.7%, while London’s FTSE lost 0.1% after British Prime Minister Boris Johnson survived a confidence vote on Monday.
On the London Stock Exchange, Rio gained 2.3%, BP 1.4% and Shell 0.9%.
Asian markets closed mixed, Tokyo’s Nikkei gained 0.1%, Hong Kong’s Hang Seng fell 0.6% while China’s Shanghai Composite gained 0.2%.
Yesterday, the Australian stock market closed down 1.5% at 7,096.
SPI Futures Contracts
Taking all that into the equation, SPI futures point to a 0.6% gain.
What to pay attention to today
The Australian Bureau of Statistics is expected to release the March Quarter Labor Account.
Energy stocks could be in the winner’s seat, however, uranium stocks could be in favor today. Keep an eye on Paladin Energy (ASX: PDN)Energy resources (ASX:ERA)and Lotus resources (ASX: BATCH).
There could be more buying of coal and iron ore stocks after BHP upgrade by Jefferies analysts (ASX: BHP)Rio Tinto (ASX:RIO)South 32 (ASX: S32) due to optimism on Chinese demand. This could mean that other stocks in this sector could benefit from this momentum.
Wesfarmers office owner (ASX:WES)and First Owner of Smiggles (ASX: PMV) could be in the spotlight today amid news from Target.
Platinum Asset Management (ASX:PTM) posted net outflows of around $209 million in May to leave FUM at $19.6 million versus estimates of $19.8 million. There is one buy, four takes and six sells according to Bloomberg. The stock price closed down 1.1% at $1.73 yesterday.
Industrial minerals (ASX:IND), the silicon sand miner’s share price has continued to climb since its May 26 announcement. There have been positive results from their Stockyard project in WA that continues to hit the band. The shares closed at 41 cents.
Initial Public Offering
There’s a company set to debut on the ASX today. Keep an eye out for Southern Palladium (ASX: SPD) after raising $19 million at 50 cents per share.
Three companies are ready to pay eligible shareholders today.
Gryphon Capital Income Trust (ASX: GCI)
Metrics Income Opportunities Trust (ASX: WORD)
Principal Income Trust Metrics (ASX:MXT)
Iron ore futures are pointing to a 0.7% gain.
Gold gained $10.90 or 0.6% to US$1,855 an ounce. Silver was up $0.16 or 0.7% at US$22.25 an ounce.
Oil added $1.30 or 1.1% to US$119.80 a barrel.
The 7:00 Australian dollar has strengthened since yesterday, buying 72.33 US cents (Tuesday: 71.96 US cents), 57.45 pence sterling, 95.85 yen and 67.61 euro cents.
The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way, including negligence.
Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics