The ASX has lifted as expected.
The S&P/ASX200 gained 8.70 points or 0.54% to 7,216.50. Over the last five days, the index has gained 3.66% and 2.53% year to date.
Top-performing stocks in this index are Lake Resources NL (ASX:LKE, OTCQB:LLKKF) and Karoon Energy Ltd up 8.99% and 7.48% respectively.
3 things to watch for the week ahead
eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. RBA rate decision: Will the Reserve Bank pause?
Tomorrow sees what could arguably be the most hotly contested rate decision of the RBA’s hiking cycle. Last week’s weaker-than-expected inflation reading of 6.8% has market participants split over what the RBA will do, pause or raise interest rates again.
Inflation is moving in the right direction, which is the key takeaway, and the board will welcome this reading. However, the inflation fight isn’t over and there is still work to do to return inflation to the RBA’s target rate.
Although this number, alongside the global banking concerns, will more than likely give the board a tough conversation around a pause next week, I would anticipate another hike in April before the RBA looks to pause its rate hiking cycle in May.
One look overseas will show the RBA that inflation has proved to be sticky and although we’ve seen a few months of consecutive declines, inflation isn’t a one-way street.
On top of inflation, the labour market is tight, business conditions are resilient and consumer spending is falling but still robust. Even if another hike is on the cards, the bottom line is that the end of this tightening cycle is very close.
2. Tesla (NASDAQ:TSLA) quarterly: Delivers record quarter, sets the tone for the year
Tesla shares are up more than 50% YTD, a stark turnaround from its 2022 performance, with investors optimistic over ‘unprecedented’ demand.
That optimism has been met with the electric vehicle giant delivering a record 442,900 vehicles in Q1, a 36% increase year-over-year and above Wall Street expectations for 420,000.
Despite a murky macro backdrop, the broad price cuts earlier in the year have paid off, with a solid delivery number and will help to quash bearish calls over demand.
A ramp-up in production from Gigafactories in Berlin and Texas helped push production numbers higher, while the re-opening of China, a critical market for Tesla, helped lead to this quarterly beat.
This delivery number will please investors and will more than likely boost shares in early US trade this week.
The worry, though, will be over its impressive margins, which will likely be affected by these price cuts. The market expects gross profit to fall to 21%, a vast contrast to the 33% in Q1 2023, and anything below 20% would be bad news for investors.
This result is a win for Tesla bulls early in 2023, but the real test comes on April 19 when Tesla hands down its first-quarter earnings.
3. Retail Investor Beat: Aussies look overseas and diversify into commodities
eToro’s Retail Investor Beat Survey, taken from a quarterly survey of 10,000 retail investors across 13 countries, 1,000 of which are in Australia, indicates that after more than a year of highly turbulent markets, Australian retail investors have become better diversified. They are looking further afield for opportunities in different markets and asset classes, with less ‘home bias’.
The ASX200 was one of the world’s best-performing markets last year but this year, the local market has underperformed compared to the US or Europe. Therefore, it's no surprise to see investors looking overseas to diversify their portfolios and tap into global investment opportunities.
Commodities have been the best asset class performer for the past two years; therefore, it's clear why investors have diversified further into the asset.
On top of that, Australian investors know very well that China will be looking to Australia to restock on commodities after years of limited trade, particularly when it comes to copper and iron ore. Iron Ore is Australia’s most exported commodity and is one of just a handful of commodities in the green this year.
The markets react to OPEC
OPEC+’s surprise decision to cut oil of 1 million barrels per day, 500 MBDP of which are from Saudi Arabia has already had an impact.
The move was met with prompt criticism from the US, as it adds another unwanted inflationary pressure at a time central banks continue to fight high levels of CPI with higher interest rates at the expense of growth.
The cut has led Goldman Sachs (NYSE:NYSE:GS) to upgrade its Brent forecast by December 2023 to $95 and $100 for December 2024.
As you can expect, oil prices gapped aggressively higher at the open.
City Index senior market analyst Matt Simpson gives his take on the situation.
“Oil prices rallied over 8% in early Asian trade, following the surprise announcement by OPEC+ that they will cut oil production by over 1 million barrels per day, 500,000 of which will be from Saudi Arabia.
"Iraq, Kuwait, United Arab Emirates, Kazakhstan, Algeria and Oman are also cutting production which will reduce output by 1.15 million BPD.
“I imagine quite a few central bankers and politicians will be rolling their eyes or shaking their fists at this latest development, as it brings another bout of undesired inflation when central authorities have yet to tackle with the first batch.
"The White House was quick to respond, calling the move 'inadvisable', and it removes the positive sentiment seen on Friday following the softer PCE report from the US.”
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