Market wraps 27th May 2024

Morning Bell - Grady Wulff

Wall Street closed higher on Friday to overcome the inflation-driven sell-off on Thursday as investors welcomed Nvidia’s latest results as a positive sign of earnings growth inflation especially in the AI sector. The Nasdaq ended Friday’s session up 1.1% at a record high of 16,920.79 points, the Dow Jones ended the day up 0.01%, and the S&P500 rose 0.7%. For the week was a mixed result across the key indices with the Dow falling 2.33%, while the S&P500 rose just 0.03%, and the Nasdaq advanced 1.41%. Nvidia’s shares climbed 2.6% on Friday to top US$1000 for the first time, as investors celebrated its stellar Q1 results including eps of $6.12/share on revenues of US$26bn, which beat analysts’ expectations, and issued guidance for Q2 of US$28bn which also came in ahead of expectations. The results boosted investor sentiment and offset any market concerns of delayed interest rate cuts out of the Fed on Friday, following the release of hotter-than-expected services and manufacturing data for May in the US released on Thursday.

Over in Europe, markets closed lower as sentiment in the region around rate cuts remains a concern. The STOXX600 fell 0.17% on Friday, Germany’s DAX closed flat, the French CAC fell 0.09%, and, in the UK, the FTSE100 ended the day down 0.26%. The Bank of England’s rate cute outlook was thrown into doubt last week after hotter-than-expected inflation data was released in the region.

Across the Asia markets on Friday, stocks fell as investors digested the latest inflation reading out of Japan and assessed rate cut outlook concerns both locally and in the U.S. Hong Kong’s Hang Seng fell 1.71%, China’s CSI 300 lost 1.11%, and Japan’s Nikkei ended the day down 1.17%. Japan’s core inflation eased to 2.2% from 2.6% in March, while the headline inflation rate slowed to 2.5% down from 2.7%.

Locally on Friday, the ASX200 fell 1.1% as Wall Street’s tumble on Thursday reignited local investor concerns of a prolonged rate cut outlook, which sent rate-sensitive sectors sliding on Friday including technology, retail and banking stocks. Australian government bonds rose on Friday as investors turned to safe-haven investments on uncertain rate cut outlook.

Investors took profits from the big banks on Friday with CBA falling 2%, NAB sliding 1.5%, ANZ losing 0.95% and Westpac ending the day down 1.15%.

Regional Express is expanding its competitive share of Australia’s domestic market as the airline announced on Friday that it is launching flights from Perth to Melbourne starting next month. Investors sold out of the airline’s shares over concerns its domestic expansion will hurt its regional network dominance.

What to watch today:

  • Ahead of the first trading session of the new trading week, the SPI futures are anticipating the ASX to open up 0.61% following Wall Street’s rally on Friday.
  • On the commodities front this morning, oil is down 0.06% at US$77.75/barrel, gold is up just 0.03% at US$2334/ounce, iron ore is up 0.11% at US$117.66/tonne and uranium is down 0.11% at US$91.65/pound.
  • AU$1.00 dollar is buying US$0.66, 104.09 Japanese Yen, 52.04 British Pence and NZ$1.08.

Trading Ideas:

  • Bell Potter has downgraded the rating on Paladin Energy (ASX:PDN) from a buy to a hold and have decreased the 12-month price target on the uranium miner from $16.50 to $15.70 after Bell Potter’s resources analyst visited the company’s Langer Heinrich Mine in Namibia. The team were surprised by the quality of the site and regional infrastructure competency however are cautious about operation costs which seem to be the biggest downside risk at this point. Bell Potter also noted that the upcoming November election in the region carries key risks around the potential for an introduction of a government free-carry interest and/or an increase in mining taxes in the region.
  • And Trading Central has identified a bearish signal on TPG Telecom (ASX:TPG) following the formation of a pattern over a period of 20-days which is roughly the same amount of time the share price may fall from the close of $4.60 to the range of $4.05-$4.15 according to standard principles of technical analysis.