• The ASX to extend gains today after another rally on Wall Street
  • Bond and oil prices also surged overnight
  • The ECB left rates unchanged, as expected

 

Aussie shares are poised to open higher again on Friday after stocks in the US gained more ground. At 8am AEDT, the ASX 200 index futures was pointing up by 0.6%.

Overnight, the S&P 500 rose by +0.43%, the blue chips Dow Jones index was up by +1.25%, and the tech-heavy Nasdaq lifted by +0.19%.

Interest rates-sensitive stocks rallied once again amid a wave of optimism that the Fed would hand down multiple rate cuts next year.

US bonds also rallied (yields down) alongside stocks, sending the benchmark 10-year Treasury yield down 12bp to below 4% at 3.92%.

Traders were also buoyed by the retail sales data, which increased by 0.3% in November as US consumers spent more to kick off the holiday shopping season.

Among the biggest movers last night was Adobe, which shed 6% after forecasting that its annual and quarterly revenue would fall below estimates.

Moderna advanced 9% after reporting that its experimental mRNA cancer vaccine, when combined with Merck’s Keytruda drug, cut the chance of recurrence or death from melanoma by half after three years.

Occidental Petroleum gained 2.7% after Warren Buffett’s Berkshire Hathaway bought 10.5 million shares of the stock worth roughly US$590m.

Meanwhile, across the Atlantic, the European Central Bank (ECB) has kept its key interest rate at a record high Thursday, with ECB president Christine Lagarde saying she would leave it there for as long as necessary.

“We did not discuss rate cuts. Between hikes and cuts, there is a plateau of hold,” she said at a press conference.

The ECB’s decision to hold follows similar action this week by the US Fed, Bank of England and Swiss National Bank.

 

JP Morgan’s market outlook

JP Morgan Research sees only a modest risk the global economy slides into recession in the near term, but is forecasting an end to the global expansion by mid-2025.

“As we approach 2024, we expect both inflation data and economic demand to soften, as the tailwinds for growth and risk markets are fading,” wrote Marko Kolanovic, chief Global Markets strategist and global co-Head of Research, J.P. Morgan.

“Overall, we are cautious on the performance of risky assets and the broader macro outlook over the next 12 months, due to building monetary headwinds, geopolitical risks and expensive asset valuations.

“The primary reason is the interest rate shock (over the past 18 months) will negatively impact economic activity.

“Geopolitical developments are an additional challenge as they impact commodity prices, inflation, global trade in goods and services and financial flows. At the same time, valuations of risky assets are expensive on average,” Kolanovic added.

Kolanovic also said that it is hard to see an acceleration of the economy or a lasting rally without a significant reduction in interest rates.

“This is a catch-22 situation, in which risk assets can’t have a sustainable rally at this level of monetary restriction, and there will likely be no decisive easing unless risky assets correct (or inflation declines due to, for example, weaker demand, thus hurting corporate profits).

“This would imply that some market declines and volatility would need to take place first during 2024 before easing of monetary conditions and a more sustainable rally,” he wrote.

 

In other markets …

Gold price rose by +0.44% to US$2,036.53 an ounce.

Oil prices surged by over +3%, with Brent now trading at US$74.73 a barrel.

US 10-year Treasury yield fell 12 basis points to at 3.92%.

Iron ore futures was up +0.15% to US$135.22 a tonne.

The Aussie dollar climbed by +0.56% to US66.95c.

Meanwhile, Bitcoin rose +0.5% in the last 24 hours to US$43,012.

 

5 ASX small caps to watch today

Global Uranium and Enrichment (ASX:GUE)
GUE announced that the exploration licence for the Enmore Gold Project has been renewed for a further six years. Enmore is located in the New England Fold Belt, approximately 30km south of the regional centre of Armidale in NSW. The Project shows similar geological characteristics to the Hillgrove Gold Mine, which is located approximately 20km north of Enmore and has produced over 730,000oz of gold. The Hillgrove Project was recently acquired by Larvotto Resources (ASX:LRV).

SRJ Technologies (ASX:SRJ)
SRJ has signed a three-year strategic commercial partnership with UK-based specialised advanced robotic inspections company, Air Control Entech. The partnership is expected to strengthen SRJ’s product offering as part of its strategy to build a digital Asset Integrity Business. As part of the agreement, the two companies will develop new, innovative technologies for the energy sector and expand global reach of both entities. SRJ said the deal could lead to potential multi-million-dollar opportunities with global oil and gas operators.

Minbos Resources (ASX:MNB)
The fertiliser company has restructured its board in advance of Minbos becoming the first primary fertiliser producer in Angola and in the Economic Community of Central African States (ECCAS). Following the resignations of Peter Wall and Dganit Baldar as directors, Paul McKenzie will move from non-executive director to non-executive chairman, and Frank Si joins the board as non-executive dDirector. In a show of continued commitment to the company, the current CEO, Lindsay Reed, also moves onto the board as managing director.

Link Administration (ASX:LNK)
The superannuation funds administrator announced that it and its longstanding client AustralianSuper have entered into a memorandum of understanding (MOU) to negotiate an extension to Link Group and AustralianSuper’s partnership until at least 2028. Under the MOU, Link and AustralianSuper will agree on Link’s delivery of core administration and data services to AustralianSuper.

Red Hill Minerals (ASX:RHI)
Significant results have been received from exploration conducted at the Barkley Prospect within Red Hill Minerals West Pilbara Gold and Base Metal Project. Drillhole 23BKRC008 has intersected 4 metres at 4.1 grams per tonne gold from 65 to 69 metres. Drillhole 23BKRC007 has intersected 4 metres at 2.6 grams per tonne gold from 17 to 21 metres, and 4 metres at 2.1 grams per tonne gold from 88 to 92 metres. Mineralisation remains open in all directions.