• The ASX is set to open higher after Wall Street lifted
  • Overnight, the Fed decided to pause its rate hikes
  • Are we in the middle of an AI bubble?

 

Australian shares are poised to open higher as Wall Street swung from losses to modest gains overnight. At 8am AEST, the ASX 200 index futures was pointing up by +0.3%.

The S&P 500 finished 0.1% higher, while tech heavy Nasdaq rose +0.3% as the Fed expectedly kept its cash rate at the same level.

Post meeting, Fed Chairman Jerome Powell delivered a hawkish statement, saying that although it was “prudent” to pause this time, future rate hikes may be needed to contain inflation.

“It may make sense for rates to move higher, but at a more moderate pace,” Powell told a press conference.

“Not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate,” he added.

The bond market tells us that traders are pricing in just one more 25bp rate hike this year, despite the two rate increases that the Fed has penciled in.

In stock news, Nvidia rose another 5% to its all time high, while another chipmaker Advanced Micro Devices also rose 2% after announcing its line of artificial intelligence processors.

Tesla fell -0.75%, snapping its record 13-day winning streak.

 

AI bubble?

Mistral AI, a French startup founded by former Meta and Google AI researchers, raised ~US$113 million in Europe’s biggest seed round ever.

The startup is set to take on OpenAI in developing generative AI.

The thing about this cap raise is that the startup is four weeks old, and its employees only started working five days ago.

It’s another sign that AI may be a bubble waiting to pop, with AI startups in the US alone having landed a massive US$25 billion in funding so far this year despite what’s happening in the overall market.

 

In other markets …

Crude oil prices tumbled -1% overnight.

“The Fed is going to have to kill this economy to conquer inflation and that should keep crude prices heavy,” said Oanda analyst, Edward Moya.

Gold price traded flat at US$1,944.63/ounce even after the Fed strongly signalled more tightening was coming.

“Gold is still holding onto the US$1,950 level as Powell’s constructive comments about inflation progress supports the markets’ case that the Fed may just have to deliver one more rate hike,” said Moya.

Bitcoin meanwhile was down nearly -3% in the last 24 hours to US$25,060.

MictraStrategy co-founder Michael Saylor told Bloomberg that Bitcoin’s (BTC) dominance is set to reach 80% in the long term as regulators crack down on other assets.

Currently, BTC’s crypto market dominance is around 48%, or around half of the over US$1 trillion market.

“So, the entire industry is kind of destined to be rationalized down to a Bitcoin-focussed industry with half a dozen to a dozen other proof-of-work tokens,” Saylor said.

 

5 ASX small caps to watch today

Biome Australia (ASX:BIO)
Biome says sales revenue growth continues to accelerate in Q4 FY23, driven by Biome’s Activated Probiotics in both pharmacy and independent practitioner sales channels. Biome has now surpassed its FY23 full year forecast of $7m with a half month of trading remaining in the financial year.

Retail Food Group (ASX:RFG)
RFG announced the appointment of Matthew Marshall to the role of CEO effective 1 July. Marshall is being promoted from his current position as head of Retail where he has been responsible for driving strong operational outcomes in difficult retail environments. Separately, RFG has affirmed its FY23 underlying EBITDA guidance of $26.0m to $29.0m.

Tyranna Resources (ASX:TYX)
Tyranna has executed a binding offtake agreement for both 50% of the spodumene and 50% of the pollucite from the Namibe Lithium Project with Sinomine Resource Group. The offtake agreement is key condition for Sinomine’s $31m investment into the Namibe Project, as announced on 3 May. Accelerated drilling programme has been planned, with two Sinomine drill rigs available to be mobilised to site.

Athena Resources (ASX:AHN)
Athena has received a bid from Adroit Capital Investments to acquire 1 out of every 5 Athena shares that Adroit Capital does not already hold at $0.006 per share less any dividends. Athena says shareholders are advised to ‘take no action’ in relation to the offer. AHN closed Wednesday at $0.004.

Wildcat Resources (ASX:WC8)
Assay results from RC drilling confirm a large gold system with significant gold mineralisation occurring beyond Hobbs Pipe at the Mt Adrah Gold Project in the Lachlan Fold Belt, NSW. Best intercepts include 103m at 0.4g/t Au from surface (WCRC003), and 51m at 0.34g/t Au from 95m (WCRC001).

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