Wall Street surges after US PPI data. Picture Getty
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The ASX is set to open sharply higher when the market opens on Wednesday after US inflation data bolstered hopes for a Fed rate cut in September.
At 8am AEST, the SPI ASX200 futures contract was pointing up by 0.8%.
Overnight, the S&P 500 surged by 1.68%, the blue chips Dow Jones was up by 1.04%, while the tech-heavy Nasdaq rose by 2.43%.
US producer prices (PPI) rose less than anticipated in July, suggesting inflation is still easing, according to the much anticipated data released last night. This comes as service costs dropped the most in nearly 18 months, evidence of waning inflation pressures.
Traders are now awaiting the US July consumer price index (CPI) data tonight (US time) and retail sales data on Thursday for clues about the Fed Reserve’s next policy move.
A 22V Research survey revealed that 52% of traders anticipate a “risk-on” reaction to tonight’s CPI report.
“However, the percentage of respondents expecting a recession has stayed elevated,” said Ian Lyngen at BMO Capital Markets.
Gold prices held steady at US$2,466 an ounce, hovering near July’s all-time high, following the PPI report; while the US dollar and Treasury yields edged lower.
Wall Street’s favoured volatility index, the VIX, dropped to about 18, signalling moderate volatility in the market.
To stock news, Starbucks surged 24% after the surprising news that it was replacing its CEO with Chipotle’s Brian Niccol, while Chipotle shares fell over 7%.
Nvidia rose about 7%, adding to Monday’s 4% increase, after Bank of America analysts named it a top “rebound” stock.
Home Depot was the major earnings highlight last night. The home-improvement retailer’s stock rose 1% despite lowering its forecast for comparable same-store sales for the remainder of the year.
General Motors shares also rose about 1% after the company began laying off staff in China; while Paramount Global informed staff in a memo that it will be closing its renowned TV studio by the end of the week.
And Avon Products Inc, the unlisted company famous for its door-to-door sales of beauty products, filed for bankruptcy after being hit with numerous lawsuits claiming that the talc in its products caused cancer.
The recent Nasdaq rally seems driven by two key factors, according to Dilin Wu, a research strategist at Pepperstone.
First, a drop in initial jobless claims, which eased some economic concerns, and second, Japan’s decision to keep its market policies stable, avoiding further tightening in the near term.
However, while the relief from the yen’s carry trade unwind might look promising, a single positive jobs report doesn’t erase the looming risk of a US recession.
“I’m not convinced that a single improvement in US labor data can completely erase worries about a potential economic recession in the US,” Wu said.
In this sense, the Nasdaq situation is akin to the Chinese property sector: even if we’re not facing a full-blown recession, signs of a slowdown could trigger a downturn, with recession fears possibly becoming a self-fulfilling prophecy.
“I think the Nasdaq’s upward momentum requires a steady stream of positive economic data, not just a flash in the pan.”
For the bulls to stay optimistic, a gradual 25 basis point Fed rate cut in September would be ideal, avoiding the alarm that might come with a larger cut, he said.
“In my opinion, if we also see stronger growth data and better earnings from companies like Nvidia, my confidence in a bullish stance on the Nasdaq over the longer term would be bolstered.
“However, if these conditions aren’t met, I’d remain cautious,” Wu added.
Gold price fell by 0.5% to US$2,466 an ounce.
Oil prices tumbled by 1.5%, with Brent crude now trading at US$80.96 a barrel.
The benchmark 10-year US Treasury yield retreated by 6 basis points (bond prices higher) to 3.84%.
The Aussie dollar lifted by 0.7% to US66.35 cents.
The iron ore price rose by 0.5% to US$100.80 a tonne.
Bitcoin meanwhile gained by 2.5% in the last 24 hours to US$60,645, while Ethereum lifted 1% to US$2,720.
Immutep (ASX:IMM)
Immutep has commenced a Phase I trial for its new drug, IMP761, designed to balance the immune system by enhancing the “brake” function of the LAG-3 protein to treat autoimmune diseases. The trial, conducted in the Netherlands, will assess safety and drug effects, with initial results expected by the end of this year and more detailed data in early 2025. IMP761 has shown promise in reducing inflammation and controlling immune responses in early studies.
Kincora Copper (ASX:KCC)
Kincora is starting its first drilling program with AngloGold Ashanti at the Nyngan Project, focusing on new copper-gold targets. They plan to drill 6 to 8 holes, totalling about 4,000 to 5,000 meters, before summer. Kincora will manage the program and earn a 10% fee. AngloGold Ashanti could invest up to $50 million for an 80% stake in the project. Fleet Space Technologies is also conducting surveys to support the drilling.
Ragnar Metals (ASX:RAG)
Ragnar has pinpointed three promising drill targets at its Orrvik lithium project in Sweden. Recent analysis and fieldwork identified the Anundsbole, Stenback, and Orrvik prospects as high-potential areas. The company has received drilling approvals and found promising signs of lithium in pegmatites at these sites.
Bio-Gene Technology (ASX:BGT)
BGT and Envu are teaming up to test Flavocide for controlling mosquitoes in various professional and public health settings. Flavocide is a promising bio-insecticide that fits well with Envu’s range of products aimed at managing pests. The collaboration will leverage Bio-Gene’s innovative approach and Envu’s expertise in product development to ensure Flavocide is effective for mosquito control. Both companies are excited about the potential of this partnership to enhance mosquito management worldwide.
Evion Group (ASX:EVG)
Evion says that Madagascar has introduced a new Mining Code to streamline permits for graphite projects, starting August 1. With World Bank funding supporting these changes, Evion is working to secure the necessary permits. The company is also applying for EU funding to ensure a steady graphite supply. Madagascan officials and Evion’s team will visit Perth in September to discuss the developments.
At Stockhead we tell it like it is. While Leeuwin Metals is a Stockhead advertiser, it did not sponsor this article.
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