Melbourne had its largest earthquake within 40 kilometres of Melbourne in 120 years with a 3.8 magnitude. It wasn’t as large as the 5.8 magnitude that smashed Chapel St in 2021, nor did it have the same impact but it shook many people out of their slumber.
It certainly won’t shake the ASX, which is expected to rise today. ASX 200 futures were trading 70 points higher, up 0.97% as of 8:20 am AEDT.
Today’s lift will follow last week’s strong finish.
The ASX200 finished 0.17% higher on Friday, snapping a four-day losing streak.
The bump was led by IT (+1.55%), Materials (+0.93%) and Consumer Discretionary (+0.46%) sectors. On the downside were Health Care (-0.76%) and Real Estate (-0.71%) sectors.
While Friday was a day in the green, overall the ASX200 lost 1.71% to 7,155, for its lowest weekly close since March 20. The Materials (-3.52%), Consumer Discretionary (-3.21%) and Real Estate (-2.17%) sectors dragged the market down. The IT sector surged another 4.73% last week and is up 13.5% over the past three weeks.
“The Australia 200 closed on Saturday morning, pointing to a higher open today at 7,230,” IG analyst Tony Sycamore said. “However, with a tentative agreement to raise the debt ceiling reached, it will likely open higher near 7,250ish.”
In the US, megacaps including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia and Alphabet (NASDAQ:GOOGL) boosted US benchmarks to 9-month highs.
Meanwhile, the Democrats and Republicans reached 'agreement in principle' on the US debt ceiling.
President Joe Biden and Republican House Speaker Kevin McCarthy will now sit down to iron out the final elements of their agreement to raise the nation’s borrowing limit.
Lawmakers in the house could vote on it as soon as Wednesday.
Under the agreement, the debt ceiling would be raised for two years, past the 2024 election, and would curb the next two years of government spending.
There was conservative backlash, but the step forward did provide positive sentiment for the market. Lawmakers are trying to understand the details of the deal.
Congress has until June 5 to approve the legislation. That is when the Treasury Department says the government will run out of money to pay its bills.
The bill is necessary to avoid what Treasury Secretary Janet Yellen has said could be an unprecedented default on US government debt, which could create a cascade of problems through the global economy.
Here’s what we saw (source Commsec):
US markets
Sharemarkets ended higher on Friday on optimism about US debt ceiling negotiations.
Chip stocks continued to soar on optimism about artificial intelligence or AI. The Philadelphia Semiconductor Index jumped 6.3% with Broadcom (NASDAQ:AVGO) soaring 11.5% and Intel (NASDAQ:INTC) up 5.8%. Marvell Technology shares jumped 32.4% after the chipmaker said it would double its annual revenue related to AI.
Ford Motor (NYSE:F) shares rallied 6.2% following a deal to use Tesla (NASDAQ:TSLA)'s (+4.7%) electric vehicle charging stations.
The Dow Jones index rose by 329 points or 1%, the S&P 500 index gained 1.3% and the Nasdaq index added 278 points or 2.2%. For the week, the Dow fell by 1%, the S&P 500 rose by 0.3% and the Nasdaq jumped 2.5%.
European markets
Rose on Friday, with technology stocks jumping 3% and mining stocks up by 2.5%. Shares of Dutch chipmaker ASML gained 4.5% after US peer Nvidia's strong forecast.
The continent-wide FTSEurofirst 300 index rose by 1.2% but clocked its biggest weekly drop, down 1.5%, in more than two months.
The UK FTSE 100 index added 0.7% on Friday, boosted by a 3.5% jump in shares of Rio Tinto (ASX:RIO) after Morgan Stanley (NYSE:NYSE:MS) upgraded its rating to "overweight" from "equal-weight". The UK FTSE 100 fell by 1.7% over the week.
Currencies
Currencies were weaker against the US dollar in European and US trade.
- The Euro fell from US$1.0756 to US$1.0700 and was near US$1.0725 at the US close.
- The Aussie dollar dipped from US65.43 cents to US64.97 cents and was near US65.20 cents at the US close.
- The Japanese yen eased from 139.50 yen per US dollar to JPY140.70 and was near JPY140.65 at the US close.
Global oil prices gained 1% on Friday as US officials appeared close to striking a debt ceiling deal.
- The Brent crude price rose by US69 cents or 0.9% to US$76.95 a barrel.
- The US Nymex crude price added US84 cents or 1.2% to US$72.67 a barrel.
- On a weekly basis, Brent climbed 1.7%, while the Nymex rose 1.6%.
- Copper futures gained 2.5% and aluminium futures added 0.4%. Copper fell for a sixth straight week, down 1.3%. Aluminium lost 2.5% for the week.
- The gold futures price rose by US60 cents or less than 0.1% to US$1,944.30 an ounce. Spot gold was trading near US$1,946 an ounce at the US close. Gold fell by 1.9% for the week.
- Iron ore futures slid US19 cents or 0.2% to US$105.41 a tonne after Chinese steel rebar prices hit their lowest in three years, weighing on steel mill profitability. Iron ore dipped 1.6% over the week.
Leo Lithium Ltd (ASX:LLL) has welcomed China’s largest lithium producer as a major shareholder.
Ganfeng will take a 9.9% stake, following a placement at 81c per share, as part of a $106.1 million deal that will see the ASX-lister fast-track its expanded development of the Goulamina Lithium Project in Mali, West Africa.
Leo has committed to expand capacity at Goulamina to 1 million tonnes per annum. The deal also includes cooperation on a downstream conversion facility to make lithium hydroxide in Europe or other locations close to West Africa and other beneficial business opportunities.
Through the deal, Leo will be fully funded for its share of Goulamina Stage 1 development and operational ramp-up costs.
The placement is subject to regulatory approvals in China.
"This is an exciting chapter for Leo Lithium with a number of near-term deliverables also underway, including our first spodumene product in 2024 and accelerated revenue from Direct Shipped Ore with shipments planned in the fourth quarter of this year," Leo Lithium managing director Simon Hay said.
Three 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. Australian CPI Monthly
It’s a big week on the economic front in Australia this week, with key inflation data being handed down (May 31). Investors’ focus will be on a fifth consecutive decline in monthly inflation after peaking at 8.4% in December.
The latest reading showed that inflation had slowed to 6.3% as the RBA raised rates to their highest level for a decade. However, that decline, along with the quarterly reading of 7%, wasn’t enough for the RBA as they hiked rates again in May to 3.85%.
Core inflation for both the monthly and quarterly reading came in below expectations, and this will be one of the areas the RBA will be looking at to see clear signs of a slowdown. This inflation data will be the key data point if the Reserve Bank is to keep rates on hold at its June meeting.
The RBA will have welcomed employment and wages data coming in weaker than expected earlier in May as well as lower than expected retail sales. Another decline in inflation will show that the RBA’s massive tightening cycle is having the desired effect, and the Reserve Bank can keep rates on hold to allow the lag of its 12 rate rises to have the full impact. However, investors shouldn’t get ahead of themselves with Governor Philip Lowe continuing to re-emphasise that further rate hikes may be ahead.
2. Qantas Airways (ASX:ASX:QAN) Investor Day
On May 30, Qantas is hosting its first Investor Day since 2019, where investors will be looking for an update on the group's strategy and what’s next for the airline after what looks set to be their best fiscal year on record. Investors will be hoping for some reassurance that this stellar performance can continue as Alan Joyce hands the reins over to Vanessa Hudson later this year after 15 years at the helm.
The good news for shareholders is the last time Qantas held its Investor Day, the market liked what it heard and shares jumped by 5% in the days after the event. Qantas announced last week it was on track to hand down a full-year profit of $2.5 billion thanks to soaring demand, falling fuel prices and higher airfares which we should hear more about next week. Investors should also watch out for any hints at a return of its dividend that stopped once the pandemic hit.
Given Qantas is on track to record its most profitable year ever, it would be a surprise not to see a return of the dividend when it hands down its full-year results later in the year. The day may also be a valuable opportunity for Qantas to give investors a better understanding of how they plan to improve relations between passengers and unions and keep growing competition from the likes of Virgin Australia (ASX:VAH) at bay.
3. Salesforce Earnings
Salesforce investors will be hoping for another inspired earnings result when it reports FQ2 earnings next week (June 1). Following its FQ1 earnings in March, shares soared by 11.5% after beating expectations across the board and raising its guidance for the full year.
It's been a ‘better than feared’ earnings season for US tech stocks this quarter, with some big surprises and solid results. The focus this quarter will be on the software companies' progress as they pivot from sales growth to profitability and how well management is executing this directional shift.
Margins will also be on watch after announcing its restructuring plan in January, which included a 10% cut to its workforce as they look to drive efficiency. Corporate spending across big tech peers remained resilient in the quarter, with Microsoft, Alphabet and HubSpot all reporting better-than-expected results, which should spell good news for Salesforce heading into the report.
As has been the focal point for most companies this earnings season, plenty of attention will be on AI, which Salesforce has been investing heavily in since 2016. Expectations are for Salesforce to report earnings of US$$1.37 a share on sales of US$$8 billion.