US earnings and outlook wobbles point to a soft post-Anzac Day opening for the Australian share market today, in what has been a quiet week so far.
ASX futures were down 38 points or 0.52% to 7,316 this morning.
Earnings postings weigh on markets
There was some post-bell positivity when Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) posted strong first-quarter results and enjoyed a late rally on their shares.
Overall on Wall Street, there was a slump, with the Dow (-1%), the S&P (-1.6%) and the Nasdaq (-2%) all down.
Materials led the downward trajectory on the S&P 500, dropping 2.15%, while IT and Consumer Discretionary fell 2.1% apiece.
Losses were endured by BHP (ASX:BHP) (-3.4%), Atlassian (NASDAQ:TEAM) (-7.6%) and Amazon (NASDAQ:AMZN) (-3.4%) – all paling in comparison to First Republic Bank (NYSE:FRC), which shed close to half its value (-49%) in the session.
IG analyst Tony Sycamore describes the day’s play this way:
“A session of pure risk aversion overnight as US equities and yields fell, while the US dollar, gold, the Yen and Bitcoin all gained on weak economic data and a return of banking jitters.
“The share price of First Republic closed 49.38% lower at $8.10 after it reported deposits fell by 41% to $104.5 billion last quarter and said it is looking to offload $100 billion of long-dated mortgages and securities to help shore up what appears to be a sinking ship.
“Elsewhere GM, McDonald’s, Visa (NYSE:V), Alphabet and Microsoft reported earnings beats. Microsoft’s share price is trading 8.2% higher in after-hours trading at $298.00, supporting a higher re-opening for US equity futures this morning.
“Turning to the economic data, the Conference Board’s Consumer Confidence index fell to 101.3 vs 104 exp, its lowest level since July 2022 ahead of next week’s FOMC meeting, 76% price for a 25-basis-point rate hike.
Big tech – room for optimism
The big tech companies are reporting their quarterly earnings this week – Microsoft and Alphabet have done so, and made a share price comeback as a result, while Meta will report today and Amazon on Thursday.
The CEO of global independent fintech advisory deVere Group believes there is room for optimism.
“Five tech companies have made up two-thirds of the S&P 500’s gains this year, so global investors are watching carefully the earnings reports of Big Tech this week,” Nigel Green said.
“Of course, not all the titans will have performed to the same level, however, in general terms, tech remains surprisingly robust.
“Despite the sharp rise in the cost of capital over the last year, tech and other growth sectors have shared in the broader stock market gains since the start of the year.
“Guidance will be critical as indicators show the economy is headed for a downturn and investors will be eager to know which companies are best positioned to manage this.”
“Cost-cutting measures and their efficacy will be poured over too. Have the recent mass lay-offs, following the mass hiring spree during and post-COVID had an impact on the bottom line?
“Plus, the AI (artificial intelligence) race will be closely monitored by investors.
“The total market cap of the top six tech companies in the US is an estimated $7 trillion. It’s a hugely critical sector and, as such, its surprising robustness will cheer markets and global investors.”
Gas intervention likely to stay
The Federal Government is consulting on the economics of extending the gas price cap through to mid-2025 following its intervention in the market last year when it set a $12-per-gigajoule limit on pricing to head off a potential 50% rise over the next year and a half.
The government took action after it was warned that power bills would soar by hundreds of dollars, saying it would establish a code of conduct for the industry in 2024, which would include a reasonable pricing provision.
In other news
The dollar dropped by more than 1% overnight.
Iron ore experienced another fall, towards $100 a tonne, which affected the big miners – Fortescue (ASX:FMG) fell 3.4% to $20.76; Rio Tinto (ASX:RIO) fell 3.26% to $113.18, and BHP group fell 1.9% to $44.17.
Elsewhere, Core Lithium gained 1.82% to $0.98, and after four weeks of gains, its share price is 35% above its March lows.
WTI Crude Oil moved down to $77.51 (-2.04%) on the back of weaker economics and the continued threat of rate hikes.
Gold was trading higher at $1,997 (+0.41%) as investors retreated to safer ground.
“A sustained break above the top of gold’s three-year range at $2070/75ish is needed to open a move higher towards $2350,” Sycamore predicted. “Until then, the $1,670/$2,070 range remains in play.”