Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
US PCE Inflation
While sticky inflation continues to be an issue globally, figures from the US continue to affirm that the nation is creeping closer to rate cuts than we are down under.
Globally, many markets are cutting or getting closer to rate cuts, a completely different trend to what we have here in Australia. Positive downward pressure on inflation in the US has created good economic conditions in the months leading up to the election.
PCE, or ‘Personal Consumption Expenditures’, differs from Core CPI in that it measures goods and services exclusively consumed by individuals, providing crucial detail around consumer spending behaviour.
While the broader CPI reading, released earlier in every month, is generally the element that will grab the most headlines, PCE is really the key to the Fed’s decision-making process when it comes to individual spending and the economy.
A low PCE figure this Friday will signal that the Fed is effectively in the clear to commence its easing cycle, with a September rate cut looking highly likely.
A repeat of last month’s 0.1% CPE figure will be good news for Jerome Powell and would likely see markets pricing in three rate cuts in 2024, barring any disastrous circumstances in August.
Of course, with the economy a central focus in the election race and last week’s highly turbulent political atmosphere, nothing is out of the question just yet.
ETH ETF
A whopping 10 Ethereum ETFs are slated to go live in the US this week, following SEC approval. Most notably, the Grayscale Ethereum Mini Trust and the ProShares Ethereum ETF are tentatively set to go live on Tuesday.
Broadly speaking, crypto ETF approval is a huge boon for the asset class as it signals institutional acceptance and provides greater investor accessibility.
Bitcoin’s ETF launch proved hugely beneficial for the asset and despite some turbulence earlier this year, it has helped BTC move from strength to strength.
Ether could do with a boost, frankly. The 2022 Ethereum merge failed to inspire market hype despite a highly-publicised rollout and the asset did not experience much volatility in either direction for quite a while. ETH has performed well so far in 2024 but still is yet to surpass its November 2021 highs.
Ethereum is still lagging behind bitcoin in performance terms over the last 12 months and the launch of these ETFs may be the catalyst to see the asset outperform. However, it may take some time.
The bitcoin ETFs launched in January of this year but a new high wasn’t recorded until March. We could expect to see the same with ethereum as investors digest the launch, and institutions get to grips with the new offerings.
Either way, the runway ahead for crypto assets looks positive with this launch, another sign of strong demand and Federal Reserve rate cuts within sight.
The news this morning of Joe Biden stepping down as the Democrat Nominee is also pushing crypto assets higher with the view that a Trump reelection is growing more likely.
This will likely cause some volatility throughout the week, but if markets continue to view Trump as the front-runner, then crypto assets will move higher.
Tesla (NASDAQ:TSLA) and Alphabet (NASDAQ:GOOGL) earnings
Q2 earnings reports continue in full swing his week as tech giants Tesla and Alphabet report their earnings on July 23. After falling short of revenue estimates for Q1, Tesla has had a few positive weeks thanks to investor optimism around Q2’s better-than-expected vehicle delivery numbers, with shares up 70% in the last three months, leaving little margin for error this week.
Last month, Tesla shareholders showed strong support for Elon Musk by approving his $56 billion pay package. However, Musk’s announcement of plans to donate $45 million a month to a political action committee supporting former President Trump, alongside recent headlines surrounding the company’s controversial cybertruck, may cast a shadow on earnings forecasts for Q2.
Tesla continues to be the most held stock on the eToro platform in Australia despite underwhelming Q1 results. Therefore this week’s results are a must-watch for investors.
AI will once again be front and centre, with Elon Musk a pioneer of the AI revolution. Margins, cyber truck production, robotaxi and guidance will all be key focal points.
Alphabet, which significantly surpassed earnings estimates for Q1, is expected to continue this positive streak, with the company rumoured to acquire cybersecurity startup Wiz and ramp up its presence in the AI market through Google DeepMind. Alphabet is no stranger to the benefits of sustained AI hype, with shares up 27% in 2024.
Although not miles ahead in the AI race, Alphabet’s work in AI advancement including Project Astra, AI model Veo and improvements to its Gemini Pro 1.5 model are promising signs for investors that the company is committed to progress and maintaining competition with the Magnificent Seven.
Google Cloud will likely be the focus, but investors should also have one eye on advertising revenue for any signs of weakness that could derail the stocks run this year.