The Dow Jones closed above the 40,000 level for the first time on Friday, as US indexes hovered near their record highs, concluding another winning week.
A combination of softer-than-expected inflation and sluggish retail sales in the United States provided investors with the impetus to buy stocks and bonds.
Warren Buffett, otherwise known as the Oracle (NYSE:ORCL) of Omaha, had his say having now built a stake exceeding US$6 billion in the home security business Chubb (NYSE:CB), driving its shares to all-time highs.
Meanwhile, Walmart (NYSE:WMT) shareholders also celebrated as a robust earnings outlook propelled the stock to record levels.
However, the sentiment in Australia, particularly within the local corporate sector, was more restrained last week. Anglo American (JO:AGLJ) rejected BHP (ASX:BHP) Group's second takeover offer. Additionally, Fletcher Building Ltd, GrainCorp Ltd, and CSR Ltd reported weaker-than-expected earnings due to macroeconomic headwinds.
That said, the success in the US on Friday augers well for the ASX today, which is expected to start the week in the green.
A positive start could be tempered later in the week, although signs are positive.
“The release of the minutes from the RBA's board meeting in May is the key event on the local calendar," IG Markets analyst Tony Sycamore said
"At its Board Meeting in May, the RBA kept its official cash rate on hold at 4.35%, as widely expected. Despite a higher-than-expected Q1 inflation read, the RBA was less hawkish than feared as it retained a balanced bias, noting that it is not "ruling anything in or out."
“The minutes will be closely scrutinised to determine what options the RBA Board considered at its May meeting and any clues behind the RBA's less hawkish-than-expected tone.
"After starting last week with a 20% probability of a 25bp RBA rate hike before year-end, the interest rate market starts this week pricing in a 50% chance of a 25bp RBA rate cut before year-end.”
Futures point to a gain of 35 points, or 0.5%, at the open.
What happened last week
(source Commsec):
US sharemarkets
The Dow Jones Industrial Average, featuring 30 American blue-chip stocks, closed above the 40,000-point mark for the first time in its 128-year history.
Walmart and Caterpillar (NYSE:CAT), both up about 1%, propelled the Dow higher. Chubb and Valero Energy (NYSE:VLO) surged more than 3% and 4%, respectively, making them the biggest gainers in the benchmark S&P 500 index.
Reddit (NYSE:RDDT) shares jumped 10% following a partnership with OpenAI to integrate its content with ChatGPT. Among megacaps, Tesla (NASDAQ:TSLA) rose 1.5%, while Nvidia declined 2%. GameStop (NYSE:GME) plummeted 19.7% on plans to sell shares.
- The Dow Jones index climbed by 134 points or 0.3%.
- The S&P 500 index edged up 0.1%.
- The Nasdaq index dropped 12 points or 0.1%.
- For the week, the Dow Jones gained 1.2%, the S&P 500 rose 1.5% and the Nasdaq climbed 2.1%.
European sharemarkets
Closed lower on Friday, with most sectors trading in negative territory. Utilities stocks declined by 0.9%, while basic resources added 1.6%.
European Central Bank board member Isabel Schnabel cautioned against further interest rate cuts after an expected initial reduction in June. Data confirmed that eurozone inflation rose by 2.4% annually in April, aligning with earlier reports.
- The continent-wide FTSEurofirst 300 index fell by 0.1% but was up 0.3% for the week.
- In London, the UK FTSE 100 index dropped by 0.2%, also down 0.2% for the week, ending three consecutive weeks of gains.
Currencies
Strengthened against the US dollar in European and US trading.
- The Euro rose from US$1.0835 to US$1.0878, settling near US$1.0870 at the US close.
- The Australian dollar increased from US$0.6646 to US$0.6700, ending near US$0.6690.
- The Japanese yen firmed from JPY155.96 per US dollar to JPY155.27, closing near JPY155.65.
Commodities
Global oil prices climbed about 1% on Friday, with Brent crude achieving its first weekly gain in three weeks. Positive economic indicators from China and the United States bolstered hopes for increased demand.
- Brent crude rose by US$0.71 or 0.9% to US$83.98 a barrel.
- The US Nymex crude price increased by US$0.83 or 1% to US$80.06 a barrel.
- For the week, Brent gained 1.4% and US Nymex rose 2.3%.
Base metal prices advanced on Friday.
- Copper futures gained 3.4%, soaring 7.7% over the week after China announced new support for its struggling property sector.
- Aluminium futures increased by 0.2% and were up 1.8% over the week.
- Gold futures rose by US$31.90 or 1.3% to US$2,417.40 an ounce on Friday, boosted by China's stimulus measures.
- Spot gold was trading near US$2,415 an ounce at the US close. Bullion posted a second consecutive weekly gain, up 1.8%, amid renewed hopes for US interest rate cuts.
- Iron ore futures increased by US$0.17 or 0.1% to US$117.02 a tonne on Friday, supported by resilient consumption and a brighter demand outlook in China due to its latest property stimulus efforts. The steel-making ingredient edged up 0.1% for the week.
What's next for Australian market?
Wealth Within chief analyst Dale Gillham runs the ruler over what to expect from the Australian market in the coming weeks.
Last week, the All-Ordinaries index rose strongly, trading up over 1.5% as of writing. This is great news, especially after the previous week's nice rise, as it showcases that the strength of buyers may be here for the longer term.
In my previous report, I highlighted the resurgence of buyer dominance was particularly evident after finding support at the critical 7,800 level. However, despite this support, uncertainty loomed, given that last week marked the first up week since late March.
So, with the continued momentum from buyers, it's becoming increasingly evident that we're on the brink of breaking the all-time high in the next week or so.
Additionally, while I previously entertained the possibility of a mid-year low in May or June, the current strength of buyer activity suggests otherwise. It's now more plausible that April marked our mid-year low, signalling a potential entry into the next bullish phase—a particularly thrilling prospect.
In light of this development, the crucial question arises: what lies ahead as we venture into uncharted territory?
While I've previously identified 8,200 to 8,400 as probable next targets for our market, it's imperative to closely monitor the reaction of the All Ords when it breaks the all-time high.
This will offer insights into the level of bullish sentiment that we can anticipate heading into the third quarter, which historically is a period marked by market declines, notably into September or October.
If the market breaks above the all-time high and maintains its strength beyond June, the next significant market falls will likely be postponed until September to November.
Therefore, if you haven't already prepared to seize the market opportunities that will present, now is the time, or you risk missing out on one of the few significant buying opportunities remaining this year.
What about small caps?
The S&P/ASX Small Ordinaries finished Friday 1.03% in the red to 3,043.60. Over the five days, it lost 0.15%.
There has been moderate news flow this morning and you can read about the following and more throughout the day.