Traders’ Diary: Everything you need to get ready for the week ahead
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Judging by local markets, it was a decent week and an overall positive month for the ASX. Fully 60% of the market are worth more than at the end of last month, none more so than Megaport (ASX:MP1) which jumped 40% on Friday on a strong result and promising guidance.
Like me, the ASX 200 put on nearly 2 kegs in April (+1.85%), with lower interest rate stocks doing well and Materials (sans gold), Property and Tech less so.
A few tidbits worth chewing over:
Wall Street stocks looked shaky to start the week but ended on a Meta Platform high.
Japanese shares rose and Chinese shares fell. Finally EU markets took a step back.
Bond yields were mostly flat to down, as oil, metal and iron ore prices fell.
The Australian dollar fell despite a similar move for the greenback.
In the States, this US spending bill can be a problem, but we’re a bit far out to wind up the anxiety on that one yet.
Best keep the stress focused on US bank stress. That’s continuing to be an adolescent ulcer in the bottom for Wall Street with previously put to bed fears around a wobbly First Republic Bank remerging.
“(The) US debt ceiling issue is starting to hot up, recession risks remain and the period from May to September is often rougher for shares,” says the Shane Oliver of AMP Capital.
“Australian shares are likely to be caught up in this as the recovery in China is so far less commodity intensive than thought earlier this year which partly explains the local market’s relative underperformance so far this year.”
US economic data was mixed over the last week. Consumer confidence fell, but March quarter GDP growth was less weaker than the deceptively weak read according to Dr Oliver. US jobless claims fell but are still pretty good.
In the upside down world of rising rates vs inflation this is largely bad bad news with some good bad news.
The point being it’s possible The Fed might need to whack the robust US economy with the inflation stick one or two more times.
And that’s terrific news for the few fans of monetary policy here at Stockhead, because we have an absolute orgy of global inflation-related data and full blown rates decisions to keep things steamy.
First up, there’s the RBA May Board meeting on Tuesday. Last time they left the cash rate on hold in April, but reiterated their ‘hiking bias’, so this one could go either way.
The RBA Board will debate the case to extend the pause in the tightening cycle or raise the cash rate by 25bp to 3.85%, says CBA’s top economist Gareth Aird.
“We (CBA) expect a 25bp rate hike, but acknowledge it’s a very close call.”
“Money markets disagree with our view. As we go to press just 3bp is priced for the May Board meeting (i.e. a 12% chance of a 25bp rate increase). It is not the first time we have gone into a Board meeting with a call not supported by the markets. And undoubtedly it won’t be the last!” Aird exclaims.
We won’t have to even get dressed when the next hit, a post-meet address from RBA Governor Dr P. Lowe, drops on Tuesday.
The assistant guv’nah Luci Ellis will also drop a speech at a CEDA event on Wednesday, before the latest set of RBA economic forecasts gets published, Friday.
Do take a moment to vigorously follow some growth numbers out of Honk Kong and Indonesia, there’s inflation data from mainland China and some PMIs about the ‘hood.
Elsewhere, fans of The Fed and those jokers at the ECB won’t be let down either.
The start of May sees a truncated week for some amid outdated socialist public holidays across Europe, but it’s nevertheless a sexy diary, with worldwide PMI data, US non-farm payrolls and rate-setting meets in the US, EY and Brazil.
In the States, the Fed’s Open Market Committee (FOMC) meets Wednesday, but with a salacious pre-match manufacturing PMI drop to help get a read on global manufacturing.
While one wouldn’t bank on the health of the American banking sector, it will play a key role in the FOMC’s decision, so watch out for any new fall overs, Stateside.
On this front, according to S&P Global’s research arm, the narrative has taken a wee hawkish turn in the lead up to the FOMC gathering, where they expect and most others expect a 25bp hike, to take the Fed Funds rate to 5.00–5.25%.
“However, the presser will be eagerly anticipated to assess whether this represents a peak, as a further hike in June is by no means off the table according to futures markets,” S&P adds.
There’s a timely read on the US jobless rate to tick higher and payroll growth.
“Anything other than an upside surprise will fuel speculation that May’s hike will be the last in the current cycle,”
The European Central Bank (ECB) will likely hike by a good 50 basis point taking the deposit rate to 3.5% and the ironclad promises of boss Christine Lagarde straight into the hearts of EU bankers everywhere.
Needless to say, we may head to Brussels for the decision, but we stay for the post-match press conference and Ms Lagarde’s fulsome rhetoric.
Sources: S&P Global, Commsec, Trading Economics
Australia Commodity Prices (YoY)
RBA Interest Rate Decision (May)
New Zealand Jobless data (QoQ)
Australia Retail Sales
Australia Trade Balance (Mar)
Markets shut for May Day Holiday in the Uk and Ireland; Germany, Italy, France, Portugal, Spain; Singapore, China, South Korea, South Africa
S&P Manufacturing PMI (Apr)
South Korea Exports & Imports (Apr)
Brazil Trade Balance (Apr)
China Labour Day
South Korea CPI (Apr)
UK Nationwide HPI (Apr)
Germany Retail Sales (Mar)
Hong Kong GSP (YoY)
Italy CPI (Apr)
Eurozone CPI (Apr)
Brazil Trade Balance
China Labour Day
S&P Services PMI
France Government Budget Balance (Apr)
US Mortgage Market Index
US Fed Interest Rate Decision
Brazil Interest Rate Decision
Japan & South Korea Market Holiday
S&P Global Composite PMI
Germany Trade Balance (Mar)
Spain Unemployment Change
UK Mortgage Approvals & Lending (Mar)
Hong Kong Retail Sales (Mar)
Europe ECB Interest Rate Decision (May)
United States Trade Balance (Mar)
Canada Trade Balance (Mar)
Japan & South Korea Market Holiday
S&P Global Construction PMI
Singapore Retail Sales (Mar)
France Industrial Production (Mar)
Europe Retail Sales (Mar)
United States Unemployment Rate (Apr)
Canada Unemployment Rate (Apr)
According to the ASX and Emma, there are no new company listings this week, but here’s a couple of possibles for May:
Expected listing date: 10 May, 2023
IPO: $5m at $0.20
This explorer has a suite of green metal projects (either owned or optioned) including lithium, PGEs, nickel, vanadium and uranium in the attractive mining jurisdiction of Western Australia.
The Coats PGE, nickel, copper and vanadium project is 20km SSE of Chalice Mining’s (ASX:CHN) Julimar project.
The Lake Johnston lithium and nickel project is close to Wesfarmers’ (ASX:WES) and SQM’s Mount Holland Lithium Mine, as well as the historic Maggie Hays/Emily Ann Nickel deposits held by Poseidon Nickel (ASX:POS).
Then there’s the Nowthanna uranium-vandium project, which is adjacent to Toro Energy’s (ASX:TOE) Nowthanna project.
Expected listing date: 17 May, 2023
IPO: Around $9.56m at $0.20 per share
NGX is Sovereign Metals’ spin-out of its Malawi graphite assets, which Sovereign said would allow it to focus on its Kasiya rutile project – “the largest natural rutile deposit in the world”.
Under the spinoff deal, Sovereign shareholders are entitled to one NGX share for every 11 Sovereign shares they hold, with the IPO allowing them to participate in purchasing one new NGX share for each NGX share held.
Graphite itself is having its day in the sun due to increasing demand driven by electric vehicle battery makers.
While graphite prices have not moved to the same extent as other battery metals so far in the electric vehicle boom, a major gap is emerging between supply of battery graphite and demand.
That is only set to rise with EV penetration, given graphite anode material makes up significantly more of the metal content of the battery than lithium.
Upon listing, NGX holders will take full ownership of the advanced Malingunde project, which already boasts a measured, indicated and inferred resource of 65Mt at 7.2% total graphitic carbon for 4.68Mt of contained graphite, more than half of that in the higher measured and indicated categories.
They’ll also pick up the Duwi project, just 15km east of the Malawian capital of Lilongwe.