ASX to rise, RBA takes centre stage, Microsoft rallies
Australian shares are poised to rise, in line with New York as Microsoft paced the tech sector higher after announcing that it hired Sam Altman to lead a new in-house AI team. Apple is set to retop the $US3 trillion mark.
A well received 20-year US government debt auction helped bolster sentiment. The sale drew yields of 4.78 per cent, compared with the pre-sale level of 4.79 per cent, according to Bloomberg.
“We view Microsoft now even in a stronger position from an AI perspective,” Wedbush Securities said in a note. Overnight, Microsoft reset its record high at $US378.87. It closed 2.1 per cent higher to $US377.44.
Apple finished the session with a market valuation of $US2.98 trillion; Microsoft reached $US2.81 trillion. The NYSE Fang + Index was 1.6 per cent higher. Nvidia rose 2.3 per cent; it’s poised to report results on Tuesday.
It wasn’t just the megacap techs that advanced: Palo Alto Networks rose 5.2 per cent, Palantir gained 4.2 per cent and Zscaler was 2.4 per cent higher.
Boeing was the biggest advance in the Dow Jones, rising 4.6 per cent to $US217.71. Reuters reported that Deutsche Bank upgraded the aerospace company to “buy” from “hold” and raised its price target to $US270 from $US204.
For local investors, the focus on Tuesday morning is all about the RBA. Governor Michele Bullock will speak as part of a panel at the ASIC Annual Forum in Melbourne and Carl Schwartz will speak at an event in Sydney.
In addition, the latest board meeting minutes are scheduled to be released at 11.30am.
Stocks in focus
Technology One is scheduled to release earnings.
On the AGM front, AGL Energy, BlueScope Steel, Brickworks, Fortescue Metals, Monadelphous and Perseus Mining.
Elders and Amcor trade ex-dividend.
ASX futures up 19 points or 0.3% to 7101 near 8am AEDT
- AUD +0.7% to 65.59 US cents
- Bitcoin +1.5% to $US37,444 at 8.09am AEDT
- On Wall St: Dow +0.6% S&P +0.7% Nasdaq +1.1%
- In New York: BHP +1.2% Rio +1.5% Atlassian +0.6%
- Tesla +0.6% Apple +0.9% Amazon +0.7% Microsoft +2.1%
- VIX -2.8% QQQ +1.2% TLT +0.6%
- Stoxx 50 +0.04% FTSE -0.1% DAX -0.1% CAC +0.2%
- Spot gold -0.2% to $US1977.58/oz at 1.58pm in New York
- Brent crude +2.7% to $US82.80 a barrel
- Iron ore +1.7% to $US130.70 a tonne
- 10-year yield: US 4.42% Australia 4.50% Germany 2.61%
- US prices as of 4.02pm in New York
What’s driving markets
In a weekly note, Morgan Stanley Wealth Management’s investment committee said: “Remember, market traders buy the rumour and sell the news. Consider that the bond bear market may be ending.
“Use volatility to execute tax management strategies, rebalancing toward yield and quality cash flows priced for earnings achievability. Value is emerging among financials, US small- and mid-cap stocks and international equities, and defensives like utilities and staples should provide ballast if rates continue to fall.”
Strategas Securities issued a warning for investors. “Examining Fed rate cycles since the 1970s has revealed that, generally speaking, investors have more to fear from the first rate cut in a cycle than the ‘pause’ – the period in which the central bank stops tightening and has yet to ease.
“On average, the S&P 500 is up about 5 per cent over 100 days between the last Fed tightening and the first rate cut. But, the trough in the broader market is more than 23 per cent over 200 days after the first rate cut in a series.”
Oppenheimer chief investment strategist John Stoltzfus said he remains “positive on equities and expect a broadening of the rallies recently experienced as the US economy continues on a sustainable economic expansion albeit at a modest pace.
“Our call for US investors to favour US equities over international equities this year and in recent years has worked well particularly when performance is reconciled in dollars.”
Stoltzfus also pushed back against rising expectations that the Fed is poised to pivot to rate cuts soon, saying he does not expect the first cut until the fourth quarter of 2024. “Our expectations persist for the Fed to stick with its 2 per cent inflation rate target for now keeping the potential for one or two more rate hikes on the table into next year should inflation remain sticky.”
Strategists at Societe Generale, according to Bloomberg, forecast that the S&P 500 will rise toward 4750 in the first quarter of 2024 and then dropping to 4200 mid-year as a mild recession ensues. That 12 per cent drop will mark a buying opportunity, the firm said. The S&P 500 last hit a record of 4796 on January 3, 2022.
Local: Michele Bullock will be on a panel at the ASIC Annual Forum at 10am in Melbourne; Carl Schwartz, RBA acting head of domestic markets, will speak at 10.45am at the Australian Securitisation Forum’s Conference in Sydney. Minutes of the RBA’s latest board meeting at 11.30am.
Overseas data: NZ trade balance October at 8.45am; UK public sector borrowing October at 6pm; US October Chicago Fed national index and existing home sales.
The Conference Board’s leading index fell again, sliding 0.8 per cent in October following a 0.7 per cent decline in September.
“The US LEI trajectory remained negative,” CB senior manager Justyna Zabinska-La Monica said. “Among the leading indicators, deteriorating consumers’ expectations for business conditions, lower index of new orders, falling equities, and tighter credit conditions drove the index’s most recent decline.”
Wells Fargo said For more than a year and a half this bellwether has signalled a recession that has yet to arrive. “The sustained warning from the LEI has been at odds with the resilience in broad economic activity, but we remain cautious to wave it all off as an anomaly no matter how fast the economy grew in third quarter.”
LPL Financial chief economist Jeffrey Roach said: “The efficacy of the Conference Board data waned in recent years but, nonetheless, leading indicators suggest the economy will slow in the fourth quarter. The Fed will likely stay on hold in December as business activity is weakening and the inflation trajectory is improving.”
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