Following a strong session yesterday, the ASX looks set to open flat this morning with the SPI futures trading just 4 points higher (+0.05%) at 8:45 am AEST.
Overnight, in the US the S&P 500 extended its gains for a fourth straight session, led by big tech. Falling government bond yields, along with renewed AI hype, a pickup in M&A and further stimulus measures out of China are fuelling bullish sentiment.
The US economy expanded at a 2.1% annual pace in the quarter through June, while below the expected 2.4% rate, GDP has shown continued resilience in the face of higher borrowing costs for consumers and businesses. Morgan Stanley (NYSE:MS) says the US economy is poised to decelerate dramatically in the final three months of 2023, in line with a drop in consumer spending.
Fundstrat Global’s Tom Lee said in a note that despite August being a tough month for US investors, “We see S&P 500 gaining 2%-3% in September, pushing back to July highs of greater than 460,” implying a gain of 100 to 150 points, reaching back to the highs in July.
Lee thinks the Federal Reserve is done lifting interest rates and investors are poised to agree: after rising to 23%, the odds of a rate rise next month have now settled at 14%.
Similarly, in Australia, the latest inflation data has increased the likelihood that the RBA’s tightening cycle is done. We’ll know more when the board meets on Tuesday.
China is set to release key August data later this morning, with TD Securities commenting:
“We expect China’s manufacturing PMI to weaken in August and stay in contraction for the fifth straight month at 49.0 (consensus: 49.1, July: 49.3).
“Similarly, we expect the non-manufacturing PMI to extend its decline to 50.8 (cons: 51.3, last: 51.5) with consumers staying cautious on spending amid the heightened uncertainty over the economic outlook, evident from the dismal July retail sales performance.
“Overall, we expect another poor set of PMIs which is likely to reinforce the bearish China narrative and should reinforce authorities taking quicker and bolder policy action to drive a turnaround in sentiment.”
What happened overnight?
Here’s what we saw (source CommSec):
US markets
US sharemarkets rose for a fourth straight day on Wednesday as fresh economic data signalled a cooling US economy, reinforcing expectations the US Federal Reserve will pause rate hikes in September.
The Dow Jones index rose by 38 points or 0.1%. The S&P 500 index gained 0.4% and the Nasdaq index added 76 points or 0.5%.
Apple (NASDAQ:AAPL) (+1.9%) and Nvidia (+1%) led the gains in megacaps.
European markets
European sharemarkets were mostly lower on Wednesday after Spanish and German inflation data kept the possibility of another European Central Bank rate hike firmly on the table. Germany's August consumer price inflation rose by an annual 6.4%, slipping from July's 6.5% but topping a 6.3% forecast. Spanish inflation rose to 2.6% year-on-year in August, higher than the 2.3% rate in July and above analysts' 2.5% forecast.
The continent-wide FTSEurofirst 300 index dipped by 0.2%. But in London, the UK FTSE 100 index edged up 0.1% as Asia-focused Prudential (LON:PRU) shares rose by 1.5% on higher first-half operating profit.
US government bond yields edged lower on Wednesday, as weaker-than-expected growth and labour market data toned down expectations the US Federal Reserve will raise rates later this year. The US 10-year Treasury yield fell by 1 point to 4.11%. The US 2-year Treasury yield dipped by 1 point to 4.88%.
Currencies
Currencies were weaker against the US dollar in European and US trade. The Euro fell from US$1.0932 to US$1.0870 and was near US$1.0875 at the US close.
The Aussie dollar dipped from US64.79 cents to US64.16 cents and was near US64.20 cents at the US close.
The Japanese yen eased from 145.30 yen per US dollar to JPY146.39 and was near JPY146.35 at the US close.
Commodities
Global oil prices rose on Wednesday as US Government data showed tighter-than-expected US crude supplies. Crude inventories fell by 10.6 million barrels in the last week to 422.9 million barrels. Analysts had expected a 3.3 million-barrel drop.
The Brent crude price rose by US37 cents or 0.4% to US$85.86 a barrel. And the US Nymex crude price gained US47 cents or 0.6% to US$81.63 a barrel.
Base metal prices were mixed on Wednesday. The copper futures price slid 0.3% but the aluminium futures price rose by 1.6%.
The gold futures price rose by US$7.90 or 0.4% to US$1,973 an ounce. Spot gold was trading near US$1,942 an ounce at the US close. Iron ore futures added US34 cents or 0.3% to US$108.99 a tonne.
Looking ahead
In Australia, data on private sector credit and business investment are due.
Atlas Arteria, Austal, Harvey Norman, IGO, Nickel Industries, PointsBet and Sandfire Resources all release earnings. Platinum Asset Management, REA Group, Tabcorp, Treasury Wine Estates, Whitehaven Coal (ASX:WHC), Woodside Energy and Woolworths shares all trade ex-dividend.
On the small cap front
The S&P ASX Small Ordinaries gained 1.09% yesterday. You can read more about the following throughout the day.