Market Highlights: ASX to extend gains as gold hits new high and PPI sparks Wall Street rally

ASX to rise this morning on Wall Street rally
Fed likely to cut rates next week after PPI release, gold hits all-time high
Who will be the ASX winners from the Fed rate cut?

The ASX is set to climb again when the market opens on Friday following a Wall Street surge. At 8am AEST, the SPI ASX200 futures contract was pointing up by 0.6%.

Overnight, Wall Street rallied after the US producer price (PPI) data solidified expectations for a small rate cut by the Fed next week.

The S&P 500 closed 0.75% higher, the Dow Jones rose by 0.58% and the tech heavy Nasdaq lifted by 1%.

The PPI for August came in at 2.4%, falling short of the 2.5% forecast and matching the figure from July.

The Fed Reserve keeps a close eye on the PPI data because it provides insights into price pressures at the factory before they reach consumers.

Following the release, spot gold touched a new all-time high of US$2,559 during the US session, while the US dollar weakened.

“We are headed towards a lower interest rate environment so gold is becoming a lot more attractive,” said Alex Ebkarian at Allegiance Gold.

Right now, markets are betting there’s an 85% chance the Fed will cut rates by 25 basis points at its meeting on September 17-18. There’s only a 15% chance of a bigger 50 basis point-cut, according to the CME FedWatch tool.

Across the Atlantic, the European Central Bank has cut its key deposit rate by 25 basis points to 3.5%, as expected, but didn’t provide much insight on future cuts.

Oil prices surged by 3% more as concerns grew over potential supply disruptions caused by Hurricane Francine in the Gulf of Mexico.

To stock news, Adobe tumbled 9% in post-market after releasing disappointing revenue outlook.

Supermarket chain Kroger rose 8% after raising its full-year sales forecast.

And, American Airlines rose 1% after its flight attendants approved a new labour contract which helped avoid a potential strike.

Potential winners from Fed rate cuts

In a note this morning, Morningstar’s equity market strategist Lochlan Halloway says US recession fears are overblown.

He reckons the Fed Reserve has done enough to hit a ‘soft landing’—getting inflation back on track without crashing the economy.

Halloway says he’s expecting a slight slowdown in US GDP growth until mid-2025, which should bring inflation down below the Fed’s 2% target.

Halloway also anticipates more rate cuts than the market does.

“We forecast more than 3 percentage points of cuts by the end of 2026,” he said. “That would bring the fed funds rate to roughly 2%, from 5.5% currently.”

But even if US rates drop, Halloway says Australia might not follow suit, saying that the RBA has previously shown it is willing to break ranks with the Fed.

“For example, between 2015 and 2018, the Reserve Bank was cutting rates at the same time the Fed was aggressively hiking,” said Halloway.

For investors, the key takeaway here is, which stocks could benefit from lower interest rates.

“The obvious winners would be infrastructure and real estate. APA Group would be one potential winner. Dexus could also benefit.”

To other markets …

Gold price jumped by 2% to US$2,558.86 an ounce after the PPI data release.

Oil prices rebounded by almost 3%, with Brent crude now trading at US$72.30 a barrel.

The benchmark 10-year US Treasury yield was 2 basis points higher (bond prices lower) to 3.67%.

The Aussie dollar rose by 0.75% to US67.25 cents as the US dollar weakened against major currencies following the PPI data.

The iron ore price rose a further 2.5% to US$95.05 a tonne.

Bitcoin meanwhile was up 1% over the past 24 hours to US$58,198 and Ethereum also rose by 1% to US$2,361.

5 ASX small caps to watch today

Mount Burgess Mining (ASX:MTB)
MTB says the Botswanan Department of Environmental Protection has approved the draft EIA (Environmental Impact Assessment) for the Nxuu Deposit Infill Drilling Programme and requested a final version. The final EIA was submitted in February, and as of September 4, the DEP has moved the project to public review, seeking comments on the drilling’s negligible impact. If no issues arise, the EIA review will finish in about four to six weeks, allowing the drilling program to proceed and leading to the preparation of a Pre-feasibility and Definitive Feasibility Study. MTB is exploring its Kihabe and Nxuu zinc/lead/silver/germanium and vanadium deposits in Botswana.

Altech Batteries (ASX:ATC)
Altech has secured its first Offtake Letter of Intent (LOI) for CERENERGY GridPacks with the Schwarze Pumpe Industrial Park Association (ZISP). This agreement outlines ZISP’s commitment to purchase 30MWh annually, made up of 1MWh GridPacks, for the first five years of production. The LOI also includes a collaborative effort to transition the industrial park from coal to renewable energy sources, using a mix of wind, solar, and Altech’s CERENERGY GridPack Battery Energy Storage System (BESS). Deliveries of the GridPacks are expected to start by mid-2027 or when the plant is operational.

Metals Australia (ASX:MLS)
MLS is advancing its Lac Carheil graphite project in Quebec, moving towards a Pre-Feasibility Study (PFS). Recent tests show increased high-value coarse flake graphite. The company has expanded its land holdings by 62% and is preparing to assess graphite purification technologies. MLS says the project’s value may rise due to potential Canadian tariffs on Chinese critical mineral imports, boosting its market position amid current trade tensions.

Antipa Minerals (ASX:AZY)
Antipa has agreed to sell its 32% non-controlling interest in the Citadel Joint Venture Project to Rio Tinto for $17 million in cash. This sale will boost Antipa’s cash reserves to around $23 million, allowing the company to focus on advancing its 100%-owned Minyari Dome Gold-Copper Project. The transaction, expected to complete by November, involves minimal conditions and no anticipated tax liability. Antipa’s CEO Roger Mason said the sale will provide solid financial support to accelerate development at Minyari Dome, with updates to resource estimates and a revised Scoping Study underway.

Medallion Metals (ASX:MM8)
Medallion is set to begin a 15,000-meter drilling program at its Ravensthorpe Gold Project in WA, focusing on both Reverse Circulation (RC) and Diamond Drill Hole (DDH) techniques. This drilling aims to enhance the confidence in the high-grade sulphide resource and support metallurgical testwork for processing at the Cosmic Boy Process Plant. It will also explore potential extensions at the Flag/Harbour View deposits and assess the large copper anomaly at Flanders. Initial results are anticipated by early Q4 2024.

At Stockhead we tell it like it is. While Altech Batteries and Antipa Minerals are Stockhead advertisers, they did not sponsor this article.