S&P 500 gains for 2nd day, Paladin, Platinum Asset, Premier, Industrials Min on watch: ASX to rise

Wall St gains for a 2nd day despite profit and global economic warnings. Why uranium, iron ore, and coal stocks are in favour. What stocks to look out for today.

Good morning. The RBA hangover, 50 basis points it is. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to rebound after a rally on Wall St.

S&P 500, Nasdaq gains for 2nd day

US stock closed at session highs as investors shrugged off several woes. A weak profit outlook for Target, the World Bank cutting its global growth forecast, and questions if inflation has peaked.

At the closing bell, the Dow Jones added 0.8 per cent to 33,180, the S&P 500 gained almost 1 per cent to 4,161 and the Nasdaq rose 0.9 per cent to 12,175.

It was a broad-based rally led by energy after the US issued a statement to the International Atomic Energy Agency board, suggesting that the revival of the Iran nuclear deal is not getting closer anytime soon. The outlier of the session was consumer discretionary.

Why the reaction?

Investors have found some stability in these oversold conditions. Last month, we saw each sector get punished as the search for the bottom of the market was front of mind for investors. They are forward looking and it looks like they have priced in the number of rate hikes that could be unveiled from the Fed. Additionally, there is some optimism around China re-opening and what that means to the global supply chain.

Either way, recession fears still loom, however, analysts cited that if the economy is to fall into one, it would likely be next year. We did see that yield curve inversion flash earlier this year which has been a sign of a recession in 12 to 24 months. For now, it means that corporate earnings have room to grow but at a slower pace.

Target, the retailer, downgraded its profit forecast for the current quarter as they look to clear out inventory to reflect the change in consumer habits. Why? Pretty much, customers are going into stores and can’t find what they need. The company has bought more stock to meet demand when people were cooped up at home but now as the economy reopens, they’re looking for goods that meet seasonal needs and items that will continue to be needed like back to school goods.

The World Bank cut its global growth forecast by almost a third for this year, attributing the Russian war in Ukraine as a main driver. Officials said that the war is set to worsen the economic impacts from the pandemic with the Covid-19 lockdowns in China remaining to be a wildcard, along with a higher risk of stagflation referring to a time of slow growth and high inflation.

Meanwhile, the Biden administration is pushing lawmakers to support a US$4.3 billion plan to buy enriched uranium directly from domestic producers to wean the US off Russian imports.

Let’s take a look at what this means for the Aussie market today.

Figures around the globe

Across the Atlantic, European markets closed lower ahead of the ECB meeting later in the week. Paris and Frankfurt both fell 0.7 per cent, while London’s FTSE lost 0.1 per cent after UK Prime Minister Boris Johnson survived a confidence vote on Monday.

On the London Stock Exchange, Rio gained 2.3 per cent, BP added 1.4 per cent and Shell rose 0.9 per cent.

Asian markets closed mixed, Tokyo’s Nikkei gained 0.1 per cent, Hong Kong’s Hang Seng fell 0.6 per cent while China’s Shanghai Composite added 0.2 per cent.

Yesterday, the Australian sharemarket closed 1.5 per cent lower at 7,096.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to 0.6 per cent gain.

What to look out for today

The Australian Bureau of Statistics is set to release the March quarter labour account.

Energy stocks could be in the winner’s seat, however, uranium stocks could be in favour today. Keep an eye out for Paladin Energy (ASX:PDN), Energy Resources (ASX:ERA), and Lotus Resources (ASX:LOT).

There could be more buying of coal and iron ore stocks after Jefferies analysts upgraded BHP (ASX:BHP), Rio Tinto (ASX:RIO), South 32 (ASX:S32) due to optimism on China demand. This could mean that other stocks in this sector could ride on the coattails of this momentum.

Officeworks-owner Wesfarmers (ASX:WES), and Smiggles-owner Premier (ASX:PMV) could be in the spotlight today amid the news from Target.

Platinum Asset Management (ASX:PTM) posted net outflows of around $209 million in May to leave FUM at $19.6 million versus estimates of $19.8 million. There is one buy, four holds, and six sells according to Bloomberg. The share price closed 1.1 per cent lower to $1.73 yesterday.

Industrials Minerals (ASX:IND), the silicon sand miner’s share price continues to climb since their 26 May announcement. There have been positive results from their Stockyard project in WA that continues to hit the tape. Shares closed at 41 cents.

IPO

There is one company set to make its debut on the ASX today. Keep an eye out for Southern Palladium (ASX:SPD) after raising $19 million at 50 cents per share.

Dividend-pay

There are three companies set to pay eligible shareholders today.

Gryphon Capital Income Trust (ASX:GCI)
Metrics Income Opportunities Trust (ASX:MOT)
Metrics Master Income Trust (ASX:MXT)

Commodities

Iron ore futures point to a 0.7 per cent gain.

Gold has gained $10.90 or 0.6 per cent to US$1855 an ounce. Silver was up $0.16 or 0.7 per cent to US$22.25 an ounce.

Oil has added $1.30 or 1.1 per cent to US$119.80 a barrel.

Currencies

One Australian Dollar at 7:00 AM has strengthened since yesterday, buying 72.33 US cents (Tue: 71.96 US cents), 57.45 Pence Sterling, 95.85 Yen and 67.61 Euro cents.

Disclaimer

The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.
 
Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics