• Aussie shares are set to open higher again on Friday
  • China’s expected stimulus package buoyed the market
  • Australia to face an earnings recession in the second half, says expert


Aussie shares are poised to open higher again this morning after a rally on Wall Street. At 8am AEST, the ASX 200 index futures was pointing up by +0.3%.

Overnight, the S&P 500 finished +1.2% higher, while tech heavy Nasdaq rose +1.5% as traders shrugged off hawkish comments by Fed Chair Jerome Powell.

Traders also brushed aside strong retail sales data in the US, ECB’s 25bp rate hike and a recession in NZ, but instead focused on speculation of economic stimulus measures to be taken in China.

The Chinese government has slashed its cash rate and is reportedly mulling a big stimulus package to prop up key sectors.

The iron ore price as well as the AUD jumped on the news, with the AUD/USD now trading at 68.82c.

To stocks, Alibaba rose 4.5% after saying that it wants to expand rapidly outside of China.

Microsoft climbed to record highs, while Mediterranean restaurant chain Cava doubled to US$43 on its first day of IPO listing.


An ‘earnings recession’ in the second half?

T. Rowe Price’s portfolios managers overseeing Australian and China equity portfolios have shared their respective outlooks for the rest of 2023.

Randal Jenneke, head of Australian Equity, says global spillovers have proved manageable but maintains his view that Australia likely faces an earnings recession in H2 2023.

While he paints a subdued picture, he also says there are many quality growth companies that are both reasonably valued and well-positioned, noting that fallen angels in this environment present interesting opportunities for longer-term investors.

Jenneke says he remains cautious on consumer discretionary and less than enthusiastic about energy and natural resources as global growth slows, making an exception for lithium producers supplying demand for EV batteries.

Mega resource stocks are well positioned for any improvement in Chinese steel production, says Jenneke, but warns investors to be wary of high P/E names.

For China, Jaqueline Liu, portfolio manager of China Growth Opportunities Equity Strategy, says recent softness in macro data following China’s economic reopening is more a ‘temporary hiccup’, than any major trend likely to derail its 2023’s economic recovery trajectory.

She says a gradual and more broad-based recovery, albeit with some bumpiness, offers investors a full growth spectrum including fast-growing disruptors and high-quality compounders that can grow earnings and cashflow.


In other markets …

Crude oil prices surged by over +3% overnight, while gold price traded 0.75% higher to US$1,957.80.

“Gold is vulnerable to a plunge towards $1900 now that we are bracing for more tightening by both the Fed and ECB,” said Oanda analyst, Edward Moya.

Bitcoin meanwhile was up nearly 2% in the last 24 hours to US$25,543.

Asset management giant BlackRock has filed an application to the US SEC to launch a spot Bitcoin exchange-traded fund.

“The shares are intended to constitute a simple means of making an investment similar to an investment in Bitcoin rather than by acquiring, holding and trading Bitcoin directly on a peer-to-peer or other basis or via a digital asset exchange,” the filing said.


5 ASX small caps to watch today

Perpetual Resources (ASX:PEC)
Significant progress has been made in the Beharra environmental approvals, with the Government of Western Australia Environmental Protection Authority providing notice of decision to assess the Beharra proposal.  PEC says significant and comprehensive environmental studies all support Beharra as a “low risk” environmental impact project.

Dynamic Metals (ASX:DYM)
A rig and crew were engaged to complete an air core campaign at Widgiemooltha, with 48 drill holes planned to test three prospects across the project area. A total of 2,099m was drilled, and lll samples have been dispatched to the laboratory in Kalgoorlie for assaying, with results anticipated late July.

Austco Healthcare (ASX:AHC)
Austco’s subsidiary in Canada has secured a $7.4m contract to supply its industry-leading Tacera alarm management and clinical workflow solution for the new 548-bed St. Paul’s Hospital in Vancouver. The contract represents the largest single contract award in Austco’s history. Construction of the new hospital has commenced, with revenue recognition expected to begin in this current financial year.

Centrex (ASX:CXM)
Centrex announced positive developments regarding recent test work completed at its 100% owned Oxley Potassium Feldspar Project. In March 2022, the company engaged Nagrom Metallurgical to undertake testing to determine the potential to extract potassium from the Oxley potassic feldspar. Through this test work, Nagrom has successfully demonstrated at lab scale the extraction of potassium from Oxley potassic feldspar via a hydrothermal hydroxide leach process path. The hydrothermal process has the potential to lead to production of higher value potassium carbonate with further potential to produce other by-products.

Next Science (ASX:NXS)
The med tech company announced the appointment of Harry Thomas Hall, IV (commonly known as “I.V.”) as its new CEO starting on 10 July. Over the course of 28 years in the global medical device industry, I.V. has held diverse general management roles including product development, global strategic marketing, commercial operations, and sales leadership. I.V. joined DePuy Synthes, a subsidiary of Johnson and Johnson (NYSE: JNJ) in 1997 where he held senior roles.


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