• The ASX will open higher once again on Tuesday
  • Wall Street rose ahead of Big Tech earnings and Fed decision
  • Goldman says current US markets valuations are ‘reasonable’

 

Local shares are set to open higher again on Tuesday following a mini rally on Wall Street. At 8am AEST, the ASX 200 index futures was pointing up by +0.6%.

Overnight, the Dow Jones extended its winning streak to 11 straight days, rising by 0.52%. The S&P 500 was up +0.4%, and tech heavy Nasdaq climbed 0.19%.

Former meme stock AMC Entertainment jumped 33% after a judge ruled against its stock conversion plan which would have diluted investors’ stakes.

Toymaker Mattel rose 2% as the “Barbie” movie set a record for the biggest US debut of 2023. Tesla shares meanwhile rose 3.5%.

Earnings will be a big focus this week with over 150 companies on the S&P 500 reporting their numbers, including Big Tech results from Microsoft, Alphabet, and Meta.

Experts say the stakes are high for the “big seven” — Apple, Amazon, Nvidia Corp, Meta, Alphabet, Tesla and Microsoft — which are trading at a record premium to the bottom 493 stocks in the S&P 500.

Investors are also bracing for the Fed’s rates decision later today (US time), with a 25bp hike already priced in by money market traders.

“People are probably looking past the Fed announcement itself and trying to glean some read in terms of what happens later this year,” said George Mateyo, chief investment officer of Key Private Bank.

 

Equities have more room to rise this year – Goldman

Goldman strategists said the S&P 500’s current valuation is reasonable, and the index could even see a further rise this year.

Goldman believes US stocks that are currently laggards could join the surge in winners from artificial intelligence.

“While the base-case scenario is for the S&P 500’s price-to-earnings ratio to shrink slightly to 19 times from the current level of about 20 by the end of 2023, the risks to valuations are now skewed to the upside,” strategists led by David J Kostin wrote to Bloomberg.

Meanwhile, the outlook for the US economy will hinge on the Fed’s willingness to tolerate inflation.

“The big question facing Fed policymakers and financial markets at this stage is what comes next.”

 

In other markets …

Gold fell -0.3% to US$1955/ounce as traders await the Fed’s decision.

Crude prices surged by over 2%, with WTI now trading at US$78.90 a barrel.

The oil market has been boosted by the announcement earlier this month that Saudi Arabia and Russia, the two biggest oil producers, will deepen cuts starting in August.

Also helping oil sentiment is expectations that the world’s largest oil importer China would roll out fresh stimulus.

Iron ore (62% Fe) was trading flat to US$112.51 a tonne.

Meanwhile, Bitcoin tumbled almost -3% in the last 24 hours to US$29,171.

Worldcoin, the token of the crypto project co-founded by OpenAI CEO Sam Altman, soared to US$3.58 shortly after launching.

Worldcoin uses a small device called an “orb” to scan people’s eyeballs in order to generate a unique digital identity, which then grants its holder “proof of personhood”.

 

5 ASX small caps to watch today

Nexion Group (ASX:NNG)
Nexion has extended its relationship with IBM Australia to become a business partner selling IBM’s software solutions including the Artificial Intelligence (AI) platform, Watson and the Sustainability Suite incorporating Asset Management and ESG reporting. Nexion believes this partnership will pave the way to faster revenue growth and higher margins, with a specific focus on AI and ESG in asset-intensive industries including mining and energy.

Mad Paws (ASX:MPA)
The online pet company delivered continued strong revenue growth in the quarter, with Group Operating Revenues of $6.5m, up 41% on pcp. Marketplace Operating Revenue was $1.7m, up 24% on pcp. Ecommerce Revenue was $4.7m revenue, up 48% on pcp.

Osteopore (ASX:OSX)
Osteopore has signed a non-binding term sheet with CellHeal which will commit $10m to accelerate commercialisation in China. Under the deal, CellHeal will set up manufacturing facilities, attain regulatory approvals and commercialise Osteopore’s regenerative medicine technology applications in China. The term sheet includes a proposed royalty per product of 10-20% for Osteopore as a percentage of net sales.

Buru Energy (ASX:BRU)
Buru says its wholly owned business, 2H Resources, has substantially advanced its natural hydrogen exploration program through a research agreement with the Commonwealth Scientific and Industrial Research Organisation (CSIRO). As part of this study, 2H Resources will get access to autonomous soil gas sensors developed by the CSIRO, which will measure the flow of hydrogen and other gases in the soil.

Strandline Resources (ASX:STA)
Strandline announced the appointment of Jozsef Patarica as CEO. Patarica, who has extensive mineral sands experience, will bolster Strandline’s operational and management ranks as it ramps up production at Coburn. The appointment will enable MD Luke Graham to dedicate more time to strategy and growth initiatives.

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