The ASX is set to fall today ahead of the Reserve Bank of Australia’s (RBA) rates decision tomorrow.
ASX 200 futures are down 0.6 per cent to 8,456 points after its record close of 8,555.80 points on Friday.
The ASX200 ended last week 44 points (0.52%) higher at 8,555 after briefly touching a fresh record high of 8,615 on Friday morning. However, a wave of profit-taking saw the index retreat 60 points before the weekend.
This record high was driven by a strong start to earnings season with more companies exceeding expectations and fewer disappointments than usual. Additionally, anticipation is building that the RBA could initiate a rate-cutting cycle this week.
At the sector level, Industrials (+2.93%), Consumer Staples (+2.42%), Consumer Discretionary (+2.38%) and Financials (+0.86%) were the top performers. Conversely, Health Care (-3.75%), Energy (-1.14%), Information Technology (-0.73%) and Utilities (-0.49%) weighed on the index.
Among individual stocks, Temple & Webster Ltd surged 22.39%, Computershare Ltd climbed 20.70%, Mayne Pharma Ltd gained 19.66% and Nine Entertainment Ltd advanced 15.89%. On the downside, Cochlear Ltd dropped 15.20%, Silex Systems Ltd fell 14.02%, AMP Ltd declined 13.62% and IAG (LON:ICAG) Ltd lost 11.75%.
The upcoming week is set to be pivotal for the ASX200, with 35% of index-listed companies scheduled to report, including A2 Milk Ltd, Bluescope Ltd, BHP (ASX:BHP) Group Ltd, Mineral Resources Ltd, James Hardie Ltd, Santos Ltd (OTC:SSLZY), Bega Cheese Ltd, Magellan Ltd, Fortescue (ASX:FMG) Ltd, Wesfarmers (ASX:WES) Ltd and Rio Tinto Ltd (ASX:RIO).
BHP is set to release its earnings on Tuesday, with market expectations forecasting revenue of US$25.05 billion, EBITDA of US$12.42 billion and a dividend per share of US$0.60.
“Following the RBA’s dovish pivot and a cooler Q4 inflation reading amid sluggish growth, it is widely anticipated that the Reserve Bank of Australia will reduce the cash rate by 25 basis points to 3.85% at Tuesday’s Board meeting,” IG markets analyst Tony Sycamore noted.
“This would be the RBA's first rate cut since November 2020. A second 25bp rate cut is fully priced for May with a cumulative 75bp or rate cuts priced for 2025.
“The RBA’s updated forecasts are expected to revise lower near-term inflation and GDP forecasts before a recovery in GDP as real disposable incomes begin to rise and inflation decreases. The RBA’s forward guidance is expected to sound cautious and note that future cuts will be data dependent.”
US stocks advance
US stock markets advanced last week, driven by gains in technology stocks, a delay in new US tariffs and easing inflation concerns within the Producer Price Index. The Nasdaq led the rally, rising 2.9%, while the S&P 500 gained 1.43% and the Dow Jones added 0.55%.
However, momentum stalled on Friday night following an unexpected 0.9% drop in January retail sales — the largest decline in a year.
The key Retail Control group, which excludes categories such as autos and gasoline and factors into GDP calculations, fell 0.8%, missing expectations of a 0.3% increase. The decline may reflect a pullback after strong holiday spending and the impact of severe weather events, including wildfires and extreme cold.
Following the weaker data, the Atlanta Federal Reserve’s GDPNow estimate for first-quarter 2024 GDP growth was revised down to 2.3% from 2.9% in its previous estimate on February 7.
“Looking ahead, investor attention this week will focus on the FOMC minutes and speeches by several Federal Reserve officials, along with key housing data, including building permits, housing starts and existing home sales,” Sycamore notes.
“Meanwhile, the US Q4 2024 earnings season rolls on with reports set to drop from companies such as Trip Advisor, Dropbox, Rivian, Alibaba (NYSE:BABA) and Walmart (NYSE:WMT). The US rates market starts the week pricing in 40 basis points of Fed rate cuts for 2025.”
Europe retreats
European share markets retreated on Friday, halting a four-session winning streak as investors took a breather. Healthcare stocks declined 1.4%, weighed down by a 5.2% drop in Fresenius Medical (TASE:PMCN) Care after US-based Dialysis DaVita issued a weaker-than-expected profit forecast.
The continent-wide FTSEurofirst 300 index slipped 0.2% but advanced 1.8% over the week.
In London, the UK FTSE 100 index fell 0.4% after three consecutive record-high sessions, though it gained 0.4% for the week, marking its third straight weekly increase.
Currencies and commodities
Currencies
In currency markets, the euro strengthened from US$1.0446 to US$1.0512, trading near US$1.0490 at the US close.
- The Australian dollar rose from US63.14 cents to US63.66 cents and was near US63.50 cents late in the session.
- The Japanese yen firmed from JPY152.82 per US dollar to JPY152.01 before settling near JPY152.35.
Commodities
Global oil prices declined on Friday amid optimism over a potential Russia-Ukraine peace deal that could ease supply disruptions by lifting sanctions on Moscow. However, losses were contained by delays in US reciprocal tariffs.
- Brent crude slipped US28 cents, or 0.4%, to US$74.74 per barrel.
- US Nymex crude dropped US55 cents, or 0.8%, to US$70.74 per barrel.
- Over the week, Brent gained 0.1%, whereas Nymex lost 0.4%.
Base metal prices were mixed.
- Copper futures fell 2.4% as US retail sales data disappointed, while aluminium futures climbed 1.6% on tariff concerns. Weekly movements saw copper up 1.6% and aluminium down 0.4%.
- Gold futures dropped US$44.70, or 1.5%, to US$2,900.70 an ounce on profit-taking but still notched a 0.5% gain for a seventh consecutive weekly rise amid global trade war fears. Spot gold traded near US$2,883 at the US close.
- Iron ore futures edged up US6 cents, or 0.1%, to US$106.83 per tonne, supported by concerns over potential cyclone-related supply disruptions in Australia. The commodity gained 0.4% for the week.
What about small caps?
The S&P ASX Small Ordinaries gained 1.00% to close at 3,235.10 on Friday. It was up 0.19% over the week.
We have seen a slow but steady stream of news this morning and you can read about the following and more throughout the day.
- Pantoro Ltd has released initial results from the first phase of exploration drilling in the high-grade Butterfly area of the Southern Mainfield reef system.
- Great Boulder Resources Ltd’s extensional RC drilling has resumed at Mulga Bill North within the Side Well Gold Project, following up on existing high-grade hits identified in late 2024. Results from the program are expected to be incorporated into a resource update for the Mulga Bill area, extending the resource footprint northwards.
- Sprintex Ltd is making excellent progress on its strategic collaboration with leading European environmental technology company, Mest Water, which is focused on developing a custom compressor for reducing ammonia emissions from agriculture, in response to Dutch regulations.
- A test-work program undertaken by leading Japanese chemical processing specialists has returned battery-grade purification results from concentrates sourced from International Graphite Ltd’s Springdale Graphite Project in Western Australia.
- Cyclone Metals Ltd has signed a binding commercial agreement with Vale S.A. regarding the joint development of its Iron Bear Iron Ore Project in Canada. Under the terms of the agreement, Vale has the right to provide up to US$138 million of funding to the Iron Bear Project in two phases and earn 75% of the project.
- D3 Energy Ltd has been granted three new Technical Cooperation Permits adjacent to the company’s flagship exploration permit, ER315.