• ASX to open much higher on Thursday 
  • Fed’s message sparked rallies in most assets – stocks, gold, oil, cryptos
  • And here’s Morningstar’s outlook for Q1 2024

 

Aussie shares are poised to open much higher on Thursday after the US Fed signalled it could cut interest rates next year. At 8am AEDT, the ASX 200 index futures was pointing up by +1%.

Overnight, US stocks were firmly in the green after the Fed comments. The S&P 500 rose by +1.18%, the blue chips Dow Jones index was up by +1.25% and the tech-heavy Nasdaq lifted by +1.08%.

The US Fed decided to leave interest rates unchanged again this month, and in the post-meeting release was the central bank’s Summary of Economic Projections, which includes the projections for interest rates next year.

The Fed now sees a total of 75 basis points of rate cuts coming in 2024 from three separate cuts.

Chair Jerome Powell also said at a press conference in Washington D.C. that leaving rates high for a prolonged period may not be the best thing to do.

“Inflation keeps coming down, the labour market keeps getting back into balance and, it’s so far, so good,” Powell said.

“We’re aware of the risk that we would hang on too long before reducing borrowing rates. We know that’s a risk, and we’re very focused on not making that mistake.”

The US dollar was clipped against major currencies as Powell spoke, with the Aussie dollar advancing by +1.6% to US66.69 cents.

To stock news, Pfizer fell almost -7% after revealing that full year FY24 earnings per share will come in below prior forecasts.

Tesla rose 1% despite news that it will recall more than 2 million vehicles following an investigation by the National Highway Traffic Safety Administration which found a defect in its autopilot driver-assistance system.

And online marketplace retailer Etsy fell -2% as the company announced it will cut 11% of its workforce.

 

Market outlook for Q1 2024

Morningstar’s Head of Equities Research Peter Warnes has released an outlook report for Q1 2024.

“Our forecast for the Australian market to “remain under pressure and trade in a narrow band” over the past three months has been reasonably accurate to date,” writes Warnes.

“A Santa Claus rally is possible before the quarter ends. However, the outlook for first quarter 2024 is challenging as deteriorating economic data balances optimism around hopes of rate cuts.

“The risk of disappointment is elevated. We expect the market [ASX200] to trade in a narrow band between 6,900 and 7,300,” he added.

For Warnes, that outlook will be dependent on the December quarter Consumer Price Index due January 31, and the RBA’s reaction on February 6.

“But the dismal September quarter GDP report could be a game changer. The half-yearly reporting season in February and earnings guidance for the second half will also determine the overall direction,” he said.

According to Warnes, the real estate sector is most undervalued on fears of rising debt costs and the potential for discounted equity raisings.

“While a headwind to earnings, we think most REITs are in sound financial health and see good long-term value,” Warnes said.

“We also see plenty of opportunities across healthcare, consumer cyclical, financials, technology, energy, and communications.”

 

In other markets …

Gold price rose by +2.3% to US$2,024.73 an ounce, on the back of Fed comments.

Oil prices also surged +2%, with Brent now trading at US$74.67 a barrel.

US 10-year Treasury yield fell 3 basis points to at 4.20%.

Iron ore futures was down -0.5% to US$135.03 a tonne.

The Aussie dollar climbed by +1.6% to US66.69c.

Meanwhile, Bitcoin rose +4% in the last 24 hours to US$42,869.

 

5 ASX small caps to watch today

Calidus Resources (ASX:CAI)
Calidus has executed a binding profit share agreement with Haoma Mining NL covering the Blue Bar Deposit. As a result, the Calidus Board has approved the development of the Blue Bar Project. This allows agreements to be finalised with the Blue Bar mining contract partners and pre-mobilisation activities to commence for a planned mobilisation in mid to late January.

Kin Mining (ASX:KIN)
Kin has accepted an offer from mid-tier gold producer Genesis Minerals (ASX: GMD) for the purchase of tenements hosting 610,000 JORC compliant ounces that comprise part of Kin’s 100%-owned Cardinia Gold Project in WA for $53.5 million in cash and Genesis shares.

Vista Group (ASX:VGL)
The film industry tech company announced that Major Cineplex, one of the largest cinema exhibitors in Southeast Asia, has become the latest existing Vista Group client to commit to Vista Cloud. The three-year agreement will see Vista Cloud deployed across all of Major Cineplex 182 sites throughout Thailand, Cambodia and Laos. The project is expected to be completed by the end of 2024.

Agrimin (ASX:AMN)
Native Title Agreement has been signed with the Tjurabalan native title holders in relation to the haul road for the Mackay Potash Project. The Agreement is a major milestone that allows the granting of requisite haul road licences within the Tjurabalan determination area. The Agreement is also the final major Native Title Agreement required for both the project and the haul road, and supports the creation of significant road infrastructure in the region.

Argenica Therapeutics (ASX:AGN)
The manufacturing of the ARG-007 drug substance required for the Phase 2 clinical trial has now been completed, with the finalised sterile drug product manufacturing to be completed by the end of Q4 CY 2023. The completion of the manufacturing of the clinical trial batch of ARG-007 ensures Argenica can commence first patient dosing in Q1 CY 2024.

 

At Stockhead we tell it like it is. While Argenica Therapeutics is a Stockhead advertiser, it did not sponsor this article.

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