Market Highlights: Google, Microsoft boost Wall Street post-hours; and what's the risk for gold from here?

ASX to slump on Friday after Wall Street declined
The US market got a boost post-hours after Alphabet and Microsoft reported updates
And where will the gold price go from here?

Aussie shares are poised to open sharply lower on Friday as Wall Street declined overnight. At 8am AEST, the ASX200 futures contract was pointing down by -1%.

Overnight, the S&P 500 fell by -0.46%, The blue chips Dow Jones index was down by -0.98%, and the tech-heavy Nasdaq slumped by -0.64%.

But the market got a strong boost post-hours after Alphabet reported its quarterly update – crushing estimates of top and bottom lines and announcing a dividend. The Alphabet stock price popped +11% after the bell.

Fellow megacap Microsoft also beat forecasts, lifted by demand for its cloud and AI offerings. Its share price rose by +4% after the bell.

“Overall, both prints indicate that the innovation economy continues to benefit from heightened corporate spending and a strong consumer,” Tejas Dessai at Global X ETFs told Bloomberg.

Meta Platforms however didn’t fare too well and sank almost -11% after it reported plans to spend US$10bn to build AI products.

Meanwhile, Atlassian fell -7% post-hours after CEO and founder Scott Farquhar announced that he will step down after 23 years to spend more time with his family. Co-founder Mike Cannon-Brookes will now be the sole CEO.

These updates came as the US market was rattled following the latest round of economics data – including a soft US GDP of just 1.6%, and inflation increasing by 3.4% in Jan-Mar, compared to an increase of 1.8% in the final three months of 2023.

“If growth continues to slowly decelerate, but inflation strongly takes off again in the wrong direction, the expectation of a Fed interest rate cut in 2024 is starting to look increasingly more out of reach,” said Olu Sonola at Fitch.

What is the risk for gold?

Elsewhere, the gold price hit an all-time high of US$2,431.55/oz in April, and is still hovering around the US$2,330/oz level as we speak.

According to Hani Abuagla, senior market analyst at XTB MENA, the risk for the price of gold is a complete de-escalation of the geopolitical situation worldwide, which would reduce demand for safe haven assets.

“On the other hand, stock markets remain very overbought, so the risk in the market remains very high,” said Abuagla.

The second factor that threatens gold and other metals is the potential return of high inflation, which would force central banks to return to raising interest rates.

“Of course, it can be argued that gold seems overvalued after reaching historical highs, but looking at the metal in relation to the prices of other assets such as copper, oil, the S&P 500, or in relation to the still huge central bank balance sheets, it seems that gold still may have more upside ahead,” Abuagla added.

Abuagla says the level of US$2,500 does not seem distant, and more and more financial institutions present forecasts in which US$3,000 seems to be the base scenario even for 2024.

“Of course, it should be remembered that any investment in gold should only constitute a part of the entire investment portfolio, and the investment itself should be treated in a long-term context.

“Looking at 5- or 10-year investment periods in the last 30 years, there were very few situations where the return on such an investment was negative,” said Abuagla.

In other markets …

Gold price rose by +0.75% to US$2,333 an ounce.

Oil prices also rose around +1.5%, with Brent crude now trading at US$89.17 a barrel.

The benchmark 10-year US Treasury yield was up 6 basis points (bond prices lower) at 4.61%.

The Aussie dollar climbed further by +0.3% to US65.21 cents.

Bitcoin meanwhile was down -0.5% in the last 24 hours to US$64,645.

5 ASX small caps to watch today

Loyal Lithium (ASX:LLI)
LLI says Trieste Lithium Project is taking shape with Dyke #04 returning more thick near-surface high grade drill assay results. The now completed winter drilling program has recorded many notable near-surface sub-perpendicular results including: 32.8m of 1.2% Li2O from 27.6m, and 31.8m of 2.2% Li2O from 2.9m.

WA1 Resources (ASX:WA1)
Assays from broad-spaced RC and diamond drilling have extended the shallow high-grade blanket of niobium mineralisation to the east at Luni. Best new intersections from 200m spaced drill holes in the east include: 3m at 4.0% Nb2O5 and 73m at 0.8% Nb2O5.

European Metals (ASX:EMH)
EMH announced the selection of a new site for the Cinovec Lithium Processing Plant in the Czech Republic which is anticipated to provide improved permitting and project economics. The Prunéřov site has been selected, and is anticipated to enable positive outcomes for project economics including reductions in capex and opex per tonne. The new site has received preliminary agreement and support from the municipal and regional governments.

Vinyl Group (ASX:VNL)
Australia’s only ASX-listed music company announced that RealWise Group Holdings (RGH) has elected to convert its convertible note into VNL ordinary shares. Following this week’s EGM where shareholders approved the option to convert the convertible note in full or in part by RGH, the full principal balance of $6,955,413 will be converted into stock at a conversion price of $0.04482 per share. The resulting conversion will see RealWise Group Holdings become the largest shareholder of Vinyl with an approximate 34% holding.

American Rare Earths (ASX:ARR)
ARR has received an indicative, conditional and non-binding proposal from a NASDAQ-listed Special Purpose Acquisition Company (SPAC) to acquire the company’s 100% owned subsidiary Wyoming Rare (USA) Inc, which holds the company’s 2.34 billion tonne Halleck Creek Rare Earth Project. The proposal would have resulted in Wyoming Rare (USA) Inc. being listed (via a combination) with the SPAC as a separate entity on the NASDAQ. ARR’s board says it will look into the proposal to ensure optimal returns to shareholders.