Market Highlights: Stoxx 600 hits 2-year high, is Magnificent 7 a bubble, and 5 ASX small caps to watch

Wall Street closed for Presidents’ Day, Stoxx 600 hits 2-year high
AstraZeneca says its Tagrisso drug is effective on lung cancer
And is Magnificent Seven a growing bubble?

The ASX is poised to open flattish on Tuesday as Wall Street was closed for Presidents’ Day.

Europe’s benchmark stock index, the STOXX 600, hit a two-year high, led by healthcare stocks. The STOXX 600 had earlier notched its fourth consecutive weekly gain on Friday.

London-listed AstraZeneca rose by +3% after the pharma company said its Tagrisso drug shows ‘highly impactful’ results in a lung cancer trial.

Paris-listed Forvia, the world’s seventh-largest automotive supplier, slumped by -13% after announcing that it will cut 10,000 jobs to better compete in the EV transition.

Commodity prices meanwhile were mostly lower overnight on concerns about China’s outlook.

Iron ore shed -3%, copper dropped -1%, and crude prices eased by -0.5% as markets focused on China’s ailing property market.

Back home, earnings season continues, and ASX stocks on the docket to report their earnings today include BHP, Megaport, Sonic Healthcare, and Judo Bank.

Is the Magnificent 7 a bubble?

Meanwhile, the dominance of Meta, Microsoft, and Nvidia, along with Apple, Alphabet, Amazon, and Tesla, the so-called Magnificent Seven, is beginning to rattle nerves among some investors.

Analysts fear that a speculative bubble is forming as the S&P 500 keeps hitting record highs.

Nvidia, in particular, has been making headlines with an astonishing 50% surge in its stock value within the first two months of the year.

However, Nigel Green of de Vere Group says the surge in these stocks is indicative of “a fundamental shift”, primarily propelled by advancements in artificial intelligence (AI).

“Rather than a speculative mania, the market’s response to the Magnificent Seven seems to be grounded in the transformative power of AI, which is reshaping entire industries, enhancing productivity, and paving the way for the creation of new ones.

“At the heart of this paradigm shift is the increasing integration of AI technologies across various sectors,” Green said.

As industries across the board integrate AI into their operations, the need for powerful hardware accelerators will become ever more paramount.

“We expect to see some more volatility in the markets than we’ve seen recently, but it’s almost inevitable that the longer-term winners will be stocks which are driven by AI,” said Green.

In other markets …

Gold price rose by +0.25% to US$2,017.98 an ounce.

Oil prices were down -0.5%, with Brent now trading at US$83.30 a barrel.

The benchmark 10-year US Treasury yield lifted by 5 basis points (bond prices lower) to 4.29%.

Iron ore futures slumped by -3% US$127.25 a tonne.

The Aussie dollar inched higher by +0.1% to US65.40c.

Meanwhile, Bitcoin fell by -0.2% in the last 24 hours to US$51,785.

5 ASX small caps to watch today

Step One Clothing (ASX:STP)
For the half, STP reported revenue of $45.1 million, representing a 25.5% increase on pcp. EBITDA was $10.1 million, up 35.6% vs pcp. STP closed the half in a strong financial position with closing cash of $43.9 million and no debt. Interim dividend was declared at 4 cents per share, fully franked.

Count (ASX:CUP)
The accounting services company booked a first half revenue increase of +6% compared to the pcp. Underlying EBITA was up by +9% to $5.436m. Statutory profit for the period increased by +135% to $2.014m. An interim dividend of 1.5 cents per share was declared.

Adelong Gold (ASX:ADG)
Adelong has appointed Ian Holland as Managing Director, effective 1 March 2024. This appointment introduces an experienced mining executive with a strong track record of operations management, who has successfully transitioned an exploration project to production, and will be charged with accelerating the development of the Adelong Gold Project.

Cyprium Metals (ASX:CYM)
Cyprium has made a shallow high-grade discovery near Cue at the Heeler Prospect approximately 10km southwest of the company’s Hollandaire copper-gold deposit. Highlights include: Drill intercept of 15m at 3.26% Cu, 0.70g/t Au, 7.4g/t Ag, 151ppm Co from 70 metres downhole in 24CURC004. Second intercept in 24CURC004 was: 3m at 1.09% Cu, 0.44g/t Au from 108m.

MLG Oz (ASX:MLG)
Mining services stock, MLG, announced materially stronger H1 profitability compared to the pcp. Statutory revenue was up 28.7% vs pcp to $226.4 million. Statutory NPAT was up 174.4% vs pcp to $7.1 million. In terms of FY24 outlook, MLG says demand for MLG service offerings is showing no immediate signs of slowing, but the company acknowledged the challenging commodity pricing environment currently being experienced across lithium and nickel producers. “Our industry exposure to the gold sector continues to be a material factor in the ongoing demand for higher volumes and broader satellite mine coverage,” said MLG.