Market Highlights: Rates sensitive stocks on watch today after Powell's remarks; IMF sees good times ahead

ASX to drop for fifth consecutive day
Jerome Powell shot down chances of imminent rate cuts
US treasury yields and US dollar spiked after his comments

Aussie shares are set to drop for the fifth consecutive day on Wednesday after comments from Fed Chair Jerome Powell weighed on Wall Street. At 8am AEST, the ASX 200 index futures contract was pointing down by -0.30%.

Overnight, the S&P 500 fell by -0.21%, the blue chips Dow Jones index was up by +0.17%, and the tech-heavy Nasdaq slipped by -0.12%. Major European stock markets also closed lower.

Powell used an event in Washington overnight to point out the lack of progress made on inflation after the rapid decline seen at the end of last year.

“The recent data have clearly not given us greater confidence, and instead indicate that is likely to take longer than expected to achieve that confidence,” he said.

He added that if inflation persists, the Fed will keep rates steady for “as long as needed.”

US Treasury yields soared to fresh 2024 highs after his comments, with the benchmark 10-year rising by 6 basis points to 4.67%.

The US dollar also gained against major currencies, pushing the Aussie dollar down -0.6% to US64.05c.

“Authorities are a little bit frozen around the world as to how do you react to a generalised dollar strengthening?” said market commentator, Mohamed El-Erian.

To stocks, investors digested more bank results. Bank of America fell -3.5% after Q1 profit dropped 18% year on year. Morgan Stanley rose +2.5% as Q1 results topped expectations.

Johnson & Johnson fell -2% after reporting a revenue miss, while United Airlines jumped more than +5% after the bell as the airliner posted Q1 results that beat analysts’ forecasts.

The IMF’s latest World Economic Outlook

The International Monetary Fund (IMF) has released its latest World Economic Outlook report overnight.

The IMF said the the global economy is approaching a soft landing after several years of geopolitical and economic turmoil.

“The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability,” noted the IMF.

The baseline forecast is for the world economy to continue growing at 3.2% during 2024 and 2025, at the same pace as in 2023.

A slight acceleration for advanced economies — where growth is expected to rise from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025 — will be offset by a modest slowdown in emerging market and developing economies from 4.3% in 2023 to 4.2% in both 2024 and 2025.

The forecast for global growth five years from now, at 3.1%, is at its lowest in decades.

Global inflation meanwhile is forecast to decline steadily, from 6.8% in 2023 to 5.9%in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually.

But the IMF warned that risks remain, including stubborn inflation, the threat of escalating global conflicts and rising protectionism.

In other markets …

Gold price traded -0.1% lower to US$2,384.60 an ounce.

Oil prices also fell -0.1%, with Brent crude now trading at US$89.99 a barrel.

The benchmark 10-year US Treasury yield rose a further by 6bp (bond prices lower) to 4.67%, its highest level this year.

Iron ore price weakened by -2% to S$109.90 a tonne.

The Aussie dollar fell -0.6% to US64.06 cents.

Bitcoin meanwhile was up +1.5% in the last 24 hours to US$63,730.

5 ASX small caps to watch today

Beacon Minerals (ASX:BCN)
Beacon Minerals has been granted exploration licences in Timor Leste totalling 300km2. The concessions occur in two contiguous groups referred to as the ‘Baucau’ and ‘Ossu’ concessions, and contain multiple polymetallic copper prospects. The company says this positions it as a first mover in unexplored, highly prospective terrain with district‐scale polymetallic copper discovery potential.

Next Science (ASX:NXS)
NXS released preliminary results from two retrospective studies by Dr Ravi K. Bashyal, an orthopaedic surgeon based in Chicago, which found XPERIENCE to be efficacious in preventing periprosthetic joint infection in patients undergoing knee and hip arthroplasties (joint replacement). The XPERIENCE No Rinse Antimicrobial Solution is a surgical irrigation product. It is a clear, colourless solution intended for cleansing and removal of debris, including microorganisms from wounds.

Tower (ASX: TWR)
The Kiwi insurer has today upgraded its earnings guidance on underlying NPAT for the year ending 30 September 2024. Full year underlying NPAT is expected to be greater than $35m, versus previous guidance of between $22m and $27m. The increased expectation follows lower than expected claims costs, and higher than expected gross written premiums from favourable retention.

BPM Minerals (ASX:BPM)
Latest assay results from AC drilling at the Louie Prospect validate a substantial +1km long, +100ppb Au gold anomaly in regolith, immediately along strike of Capricorn Metals’ 3.24Moz Mt Gibson Gold Project, located 300km NE of Perth. Drilling successfully delineated the gold anomaly, paving the way for RC drill testing of the primary mineralisation zone.

Turaco Gold (ASX:TCG)
Assays from the initial eight diamond holes drilled at the Jonction and Anuiri deposits along the ‘Afema Shear’ have delivered results, including: Hole 24ANDDM004 (Anuiri): [email protected]/t gold from 94m, and Hole 24ANDDM003 (Anuiri): [email protected]/t gold from 84m.

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