Market Strategist
Summary: The Nasdaq 100 & S&P 500 snap their 3-day winning streak as big tech drags; with Alphabet down 9%, Microsoft down 8%, triggering a sell off that wiped off more than $400 billion in market value off some of the biggest US companies. After Microsoft posted its weakest quarterly sales growth in five years, crippled by the surging dollar, slumping PC demand and faltering advertising revenue, we wonder if these trends will continue and hurt businesses’ forward earnings. Meta plummeted 18% in late trade. Amazon and Apple report next. Crude oil pops up 3%. All eyes on Fortescue Metals and Lynas' results today for clues on the outlook for iron ore and rare earths.
Google-parent- Alphabet, Microsoft Corp and semiconductor giant Texas Instruments Inc., reported weaker than expected results, triggering a sell off, wiping off more than $400 billion in market value off some of the biggest US companies. The Bank of Canada (BOC) made a surprisingly dovish hike, pushing the US 10-year yields down 9 bps to 4.01%. That pressured the US dollar, with the Aussie and kiwi leading the G-10 basket higher. Oil continued to move up, rising 3.5%, which supported oil and gas stocks higher, while gold rose 0.8% to a two week-peak. And US-listed Chinese stocks rallied again, erasing most of Monday's record selloff; while most Asian-Pacific equity futures are higher with China and Australia’s markets tipped to rise the most.
...amid the ongoing ad market slowdown. Meta also expects higher expenses in 2023 as it pursues its ambitious, but costly, metaverse vision, saying operating losses will grow "significantly" year over year. "Prioritization and efficiency" are Meta's focus now, said Mark Zuckerberg, with some teams being downsized, and only priority teams getting to grow headcount.
WTI settled near $88 after EIA data showed the US exported a record amount of crude and fuel last week. The EIA noted Gasoline stockpiles on the US East Coast dwindled to their lowest seasonal level on a calendar basis since 2007. Overall reserves dropped by 1.48 million barrels. Crude inventory, by contrast, rose by 2.6 million barrels, the most since July 2021, with exports jumping to a new weekly high above 5.1 million b/d. JPMorgan maintained its price WTI forecast of $98 for next year. US natural gas futures clawed back losses. Metals gained and wheat rebounded.
On Thursday morning the S&P/ASX 200 futures suggest the market will lift 0.38% supported higher by oil prices rising over 3% to $88. Attention will be on Woodside, Santos, WorleyParsons and the like. Lots of quarterly results are on tap; with a focus on rare-earth giant Lynas, and iron ore major Fortescue, as well as gold miners Newcrest Mining, Gold Road Resources and Regis who also report results today. And in the thick of it, ANZ reports yearly results. Investors should pay attention to its net interest margin (a term that measures banking profitability). We think it will decline, given borrowing rates are declining and bad debts are rising. Markets will also pay attention to iron ore results from Fortescue Metals today, especially after China affirmed its zero-covid policy stance. As such the outlook for iron ore majors like FMG, BHP, Rio and Champion Iron might be downgraded by research houses.
Yesterday we spoke about the winners and losers of the Australian Federal Government Budget. Catch the video here or read the text here in 3 minutes.
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2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
