The local market is poised to open higher this morning after US sharemarkets ended higher overnight with both the S&P 500 and the Nasdaq indexes closing at fresh record highs.
US strength came amid a number of quarterly results from big retailers and the market looked ahead to earnings from Nvidia Corp. on Wednesday afternoon.
The ASX SPI 200 Futures are currently trading up 21 points (0.27%) to 7,899.
US Federal Reserve governor Christopher Waller says US inflation data from April — inflation moderated after several higher-than-anticipated readings — shows progress in bringing prices down. However, it is so modest that several more months of benign readings will be needed to entertain lowering interest rates.
He added that with the US economy slowing in line with officials’ expectations, a return to raising rates is “probably unnecessary”.
Telstra downgraded
Following Telstra’s announcement yesterday that it was scrapping 2,800 jobs, the company’s shares face multiple broker downgrades. Macquarie has cut to Neutral and lowered its target price 15% to $3.70.
Macquarie analyst Darren Leung said: “While Telstra indicated this provides them with greater flexibility to respond to market conditions, we view it as a negative for the industry when the market leader is no longer leading the upward price trajectory.
"Put another way, pricing decisions are now increasingly dependent on Telstra's peers, who have had a mixed track record.”
Bloomberg's 12-month target on the Telco drops to $4.15 from $4.45. Jefferies has cut to Hold with a $4.00 target and Morgans Financial has cut its rating to Reduce with a $3.00, the lowest target among sell-side analysts. Yet the consensus rating remains Buy, although Telstra remains at risk of further downgrades.
Read more: Telstra cuts jobs in move to improve productivity
Webjet considers demerger
After delivering record results that include a massive jump in profit to $72.7 million, Webjet is exploring a separation of its WebBeds and Webjet B2C businesses into a new listed ASX entity.
Webjet chair Roger Sharp said the board had “carefully weighed up the arguments for and against a demerger".
“Our B2C businesses will continue to deliver organic growth through the shift to online, while separation will support our WebBeds business in its relentless focus on achieving scale in all markets, in a post-pandemic landscape characterised by a reduced number of smaller competitors.”
What happened overnight?
(Source Commsec):
US markets
US sharemarkets ticked higher on Tuesday.
The Dow Jones index rose by 66 points or 0.2%, the S&P 500 index gained 0.3% and the Nasdaq index added 38 points or 0.2%.
- Nvidia shares advanced 0.6% ahead of its quarterly earnings. Nvidia, Wall Street's third-largest firm by market capitalisation will report results after the closing bell on Wednesday in what is likely to be a significant market catalyst and will test whether the outsized rally in artificial intelligence-related stocks can be sustained.
- IBM (NYSE:IBM) climbed 2.1% on plans to release a family of artificial intelligence models as open-source software and help Saudi Arabia train an AI system in Arabic.
- Tesla (NASDAQ:TSLA) jumped 6.7% after the car maker increased its 72-month loan rate in the US - in a positive sign for rallied 5.1% after handily beating profit estimates.
- Lowe's fell 1.9% after the home improvement company warned of operating margin pressure in the current quarter.
- Automotive parts retailer AutoZone (NYSE:AZO) lost 3.5% after a third-quarter sales miss.
- Palo Alto Networks tumbled 3.7% on a downbeat forecast.
US government bond yields fell on Tuesday as investors waited on Wednesday for any fresh clues on when the US central bank is likely to begin cutting interest rates.
The market also kept a close eye on a handful of US Federal Reserve speakers, with governor Christopher Waller saying a continued softening in data over the next three to five months would allow the Fed to consider cutting rates at the end of 2024.
The US 10-year Treasury yield fell 2 points to 4.41% and the US 2-year Treasury yield dipped 1 point to 4.83%.
European markets
European sharemarkets closed slightly lower on Tuesday, their third out of four sessions in the red, as caution around interest rate reductions dominated, with investors waiting for economic data due later in the week. Food and beverage stocks fell 0.8%, while mining stocks rose 0.6%.
European Central Bank (ECB) president Christine Lagarde said she was "really confident" that eurozone inflation was under control as the impact of the energy crisis and supply-chain bottlenecks faded away.
- The continent-wide FTSEurofirst 300 index dipped 0.2%.
- In London, the UK FTSE 100 index inched down 0.1%.
Currencies
Currencies were mixed against the US dollar in European and US trade.
- The Euro fell from US$1.0874 to US$1.0843 and was near US$1.0855 at the US close.
- The Aussie dollar rose from US66.52 cents to US66.78 cents and was near US66.65 cents at the US close.
- The Japanese yen lifted from 156.38 yen per US dollar to JPY155.86 and was near JPY156.20 at the US close.
Commodities
Global oil prices settled 1% lower on Tuesday as lingering US inflation poised to keep interest rates higher for longer and likely weighed on consumer demand at the pump, while little support came from geopolitical risk.
The Brent crude price fell US83 cents or 1% to US$82.88 a barrel. The US Nymex crude price slid US54 cents or 0.7% to US$79.26 a barrel.
Base metal prices advanced on Tuesday.
- Copper futures rose 0.6%.
- Aluminium futures jumped 3.7% to near two-year highs on concerns about raw material supply.
The gold futures price fell US$12.60 or 0.5% to US$2,425.90 an ounce on Tuesday as the US dollar held firm. Spot gold was trading near US$2,421 an ounce at the US close, after scaling record highs of US$2,449.89 on Monday.
Iron ore futures gained US33 cents or 0.3% to US$117.57 a tonne on Tuesday, as resilient demand and improved prospects in top consumer China continued to support the market.
What’s on?
In Australia, Webjet releases earnings. Eagers Automotive, Telix Pharmaceuticals and Virgin Money (LON:VM) UK all host AGMs.
The Reserve Bank of New Zealand hands down its interest rate decision.
UK consumer prices data are scheduled.
In the US, existing home sales data is issued with the latest Federal Reserve (FOMC) meeting minutes. Nvidia and Target (NYSE:TGT) both release earnings results.
On the small cap front
The S&P ASX Small Ordinaries ended 0.32% higher yesterday, while the ASX200 lost 0.15%.
You can read more about the following throughout the day.