Market Highlights: ASX to rise again; Goldman says US mega cap rally to broaden outside of AI

The ASX is set to open higher, as Wall Street was out on holidays
In Europe, stock market indexes fell across the board
Goldman Sachs has raised its S&P 500 year-end forecast to 4,500 from 4,000

Australian shares are poised to edge higher at the open, as Wall Street was closed for the Juneteenth holiday. At 8am AEST, the ASX 200 index futures was pointing up by +0.2%.

In Europe, stock market indexes mainly fell with the Stoxx 50 closing -0.74% lower, the UK FTSE by -0.71% and French CAC by -1.01%.

Markets have been anxiously anticipating the rollout of China’s stimulus package, which looks to be facing an uncertain delay right now.

China sensitive stocks like luxury retailer LVMH fell -1.75% in Paris, along with construction stocks amid a UK mortgage crunch.

Analysts say the Bank of England is caught between a rock and a hard place, as it has to choose between pushing mortgage borrowers towards the brink, or letting inflation run riot.

Britain’s mortgage crisis is far more serious than those of the 1980s and 1990s, because mortgages are bigger in relation to people’s earnings now than they were 25 years ago.

Elsewhere, Warren Buffett’s Berkshire Hathaway has raised its stake in five of Japan’s trading houses to an average of over 8.5%. Berkshire has bought stakes in Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo.

The Japanese stock market index Nikkei 225 is currently at a 33-year high.

US Secretary of State Antony Blinken has meanwhile wrapped up his two-day visit to Beijing where he met President Xi.

“He did a hell of a job,” Biden told a reporter. “We’re on the right trail here.”

GS says rally to broaden to other sectors

Goldman Sachs Research has raised its S&P 500 year-end forecast to 4,500 from 4,000, expecting the index to hold its ground. The S&P 500 index is currently at 4,409.

GS says the market will be led by a handful of mega cap stocks other than those related to artificial intelligence (AI).

“Following nine other episodes of sharply narrowing breadth since 1980, the S&P 500 typically traded sideways during subsequent months as rotations continued within the market,” said the note from GS.

“Eventually, however, a ‘catch up’ has been most common, with S&P 500 valuations and prices increasing alongside a reversal of intra-market momentum.”

According to GS, the potential profit boost from AI has increased the possibility for further upside in equities, while risks from recession and hawkish Fed policy remain.

In other markets …

Crude oil prices were down by -1.5% as Saudi Arabia’s oil exports slumped to 7.32 million barrels per day in April, the lowest level in five months.

Gold price fell -0.3% at US$1,950.62.

“Gold is getting picked on as investors brace for more central bank tightening and record highs for stocks,” said Oanda analyst, Edward Moya.

Bitcoin meanwhile rallied 1.25% in the last 24 hours to US$26,745.

Crypto expert Allen Farrington says that no one really understands Bitcoin.

“For literally every other financial asset, there’s always a price people will be willing to sell at, and there’s always an opportunity cost of some other asset that they could have instead…

“… but a decent proportion of the supply of Bitcoin will never be sold, and that creates a completely new market dynamic.”

5 ASX small caps to watch today

K2fly (ASX:K2F)
The tech company focusing on the resources industry says BHP has extended its Ground Disturbance Solution contract, used across its WA iron ore operations in the Pilbara. This follows an initial one-year contract signed in May 2022. The three-year contract has a Total Contract Value (TCV) of $1.99m, and Annual Recurring Revenue of $664k.

Talga Group (ASX:TLG)
Battery materials company Talga says that the European Investment Bank (EIB) has approved a €150 million senior debt funding to underpin Talga’s Vittangi Anode Project in Sweden. The Project will use 100% renewable electricity to produce an initial 19,500tpa of green anode for lithium-ion batteries from an integrated mine and anode refinery operation in northern Sweden.

Cyclone Metals (ASX:CLE)
Cyclone announced the release of a JORC compliant Mineral Resource Statement at its 100% owned Block 103 Magnetite Iron Ore Project in Canada. Results include: Inferred mineral resource of 7.2 billion tonnes containing 29.2% total Fe and 18.9% magnetic Fe.

Voltaic Strategic Resources (ASX:VSR)
VSR says step one (beneficiation) of the two-step sighter metallurgical test program is complete for the REE-enriched clays identified at the Neo prospect, Paddy’s Well Project, and the results are very encouraging. CEO Michael Walshe said the ‘size by assay’ analysis work has demonstrated that the majority of REEs within the clay system at Neo are hosted in the ultrafine (<20µm) size fraction, and are highly amendable to upstream beneficiation.

Coventry Group (ASX:CYG)
The distributor of industrial supply products says that based on year to date trading, the FY23 forecast sales guidance is around $355m, up 10.2% on FY22. The FY23 forecast before significant items is around $17m, up 9.7% on FY22.

At Stockhead we tell it like it is. While Cyclone Metals and Voltaic Strategic Resources are Stockhead advertisers, they did not sponsor this article.