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The morning catch up: ASX to start in the green despite growing concerns over China’s economic weakness

Published 25/01/2024, 09:26 am
The morning catch up: ASX to start in the green despite growing concerns over China’s economic weakness
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The ASX is set to start the last day of this short trading week in the green – ASX Futures point to an 18-point or 0.2% gain for the bourse in early trading, although it remains to be seen whether that momentum will continue throughout the day.

Economic troubles in China are likely to put a damper on things. The central bank recently signalled the beginning of monetary easing, cutting the reserve ratio requirements for banks by 50 basis points from February 5 and freeing up about 1 trillion yuan in long-term capital.

Stock markets in China and Hong Kong slumped to multi-year lows yesterday, as the weakness in China’s economy continues to erode its economic position globally.

Ranmore Fund Management chief investment officer Andrew Lapping has been monitoring the situation and believes the downturn represents a powerful opportunity.

“As an investor, it is important to take advantage of opportunities when they arise, this is often difficult as the crowd is usually moving in the opposite direction,” Lapping said.

“For sure, there are risks in China, but then there are risks everywhere, and it depends on what is in the price.

“Over the past year, the S&P500 is up over 20% while the Hang Seng is down 30%. There is no way the underlying business values have diverged to this degree.

“This underperformance, particularly over the past month, has given us the opportunity to buy high quality, well-capitalised businesses at very low prices - an exciting opportunity.”

US and European markets

US markets had a mixed performance overnight – Netflix’s success drove the Nasdaq up as the streaming service stock added a full 10.7% to its share price, having increased its subscriber base by a record 260.8 million.

Rising megacap and semi-conductor chip shares also did their part, although telecom AT&T weighed on the other side of the scales with a 2.9% slip, and chemicals company DuPont (NYSE:DD) De Nemours even more so with a 14% slide.

At close, the Dow had shed 0.3% or 99 points, the S&P500 gained 0.1% to another new all-time high and the Nasdaq added 0.4% or 56 points.

In Europe, the markets were in more solidly positive territory. Tech stocks again led gains, climbing 4.7%. Siemens Energy gained 9.2%, German software company SAP 7% and Dutch semiconductor equipment company ASML (AS:ASML) 9.7%.

The FTSE300 rose 1.2% in response, while the UK FTSE100 lifted 0.6%.

Currencies and commodities

The US dollar weakened overnight. The Euro rose from US$1.0860 to US$1.0930 and stabilised around US$1.0885.

The Aussie lifted from US65.65 cents to around US66.20 cents and later settled near US65.80 cents, while the Japanese Yen gained from 148 Yen per US Dollar to JPY146.66 and finished the trading session around JPY147.60.

Global oil prices continued to lift overnight, adding 1% during US trading. Stimulus in China and a slowdown in US production prompted the lift, with the Energy Information Agency estimating a drop of 1 million barrels per day in US production, bringing the total to 12.3 million barrels per day over the past week.

Brent lifted US49 cents, or 0.6%, reaching US$80.04 a barrel and US Nymex rose US72 cents, or 1.0% to hit US$75.09 a barrel.

Base metals were also on the up in overnight trading, lifting between 0.3% and 2.7%. Copper futures rose by 2.4%.

Gold went the other way, shedding 0.5% or US$9.80 to US$2,016 an ounce. Spot gold was trading at US$2,012 an ounce in late US trade.

Finally, iron ore futures edged marginally higher with a US1cent increase to US$135.49 a tonne.

On the small cap front

The Small Ordinaries lifted by 6.2 points or 0.22% yesterday, beating out the ASX’s 0.05% gain in the same period.

You can read about the following and more throughout the day.

  • Andromeda Metals Ltd (ASX:ADN) has completed the sale of its Moonta Copper-Gold Project, securing $50,000 in cash upfront alongside several share and royalty considerations.
  • Provaris Energy Ltd (ASX:PV1, OTC:GBBLF) has welcomed a tender from Thyssenkrupp (ETR:TKAG) Steel for 151,000 tonnes of low-carbon hydrogen annually in Germany.
  • Read more on Proactive Investors AU

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