Wall St jumps, Humm, Janus Henderson, Lumos Diagnostics, AMP, Coronado Coal on watch: ASX to rise

US stocks rebounded as dip buyers emerged after the long weekend. Energy and miners led the rally on Wall St, Europe and ASX. What to look out for on the ASX today. 

Good morning. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set rally for a second day after Wall St resumed trade.

Is this a bear market rally?

US stocks rebounded, closing near session highs after the S&P 500 posted its worst week since 2020 which is now in bear market territory. The bounce comes ahead of the Fed Chair Jerome Powell’s semi-annual testimony on Wednesday and the University of Michigan consumer sentiment figures on Friday which could be a fresh catalyst for volatility on the markets.

At the closing bell, the Dow Jones gained 2.2 per cent to 30,530, the S&P 500 jumped 2.5 per cent to 3,765 and the Nasdaq also gained 2.5 per cent to 11,069.

Energy was the best performer, up 5.1 per cent, followed by consumer discretionary, consumer staples, healthcare, information technology, all rose above 2 per cent while materials added the least by 1.5 per cent. These are big gains after last week’s rout which wiped US$2 trillion from the S&P 500.

Why the reaction?

Investors are hoping that the Fed will hold back on its aggressive tightening policy despite the commentary coming out as of late.

Goldman Sachs doubled its forecast on the likelihood of a recession and sees a 30 per cent chance that the US economy will go into a recession by 2023. Morgan Stanley noted that a recession would take the S&P down another 15 to 20 per cent from its current levels. While not long ago, JPMorgan CEO Jamie Dimon warned of an “economic hurricane”. It’s not just Wall St banks that expect a recession, we also have Tesla CEO talking about it too.

Meanwhile, oil prices jumped 1 per cent after last week’s sell off after investors focused on tight crude supply and talks on further sanctions on Russian crude.

M&A in biotech sector

The M&A story continues and in particular, the biotech sector. Last month, Pfizer inked a US$11.6 billion deal with Biohaven Pharmaceutical. On Wall St, Pfizer was back at it again and has agreed to purchase a 8.1 per cent stake in a French vaccine company, Valneva for US$95 million. The equity investment by Pfizer will further support a partnership between the two firms to back the phase three development of the Lyme disease programme. Valneva’s share price continues to climb after hours and is up over 93 per cent.

University of Michigan consumer sentiment

The University of Michigan consumer sentiment is now a survey that is in front of the mind of the Fed. At the post-decision press conference, Mr Powell said it was critical that inflation expectations remain anchored.

He said “if we even see a couple of indicators [of inflation expectations] that bring that into question, we take that very seriously. We do not take this for granted. We take it very seriously. So the preliminary Michigan reading, it’s a preliminary reading, it might be revised. Nevertheless, it was quite eye-catching and we noticed that”.

The last Michigan survey numbers came out just five days before the last Fed decision and showed that respondents expected prices to increase 3.3 per cent over the next five to 10 years, the most since 2008. There are talks among analysts as to why the US Federal Reserve have included the survey results now as part of of their meeting. It will be interesting to see how the market will respond when the results come out this Friday.

Figures around the globe

European markets closed higher. Paris gained 0.8 per cent, Frankfurt added 0.2 per cent, while London’s FTSE closed 0.4 per cent higher. Rio gained 2.4 per cent, BP added around 1 per cent and Shell jumped 1.9 per cent.

Asian markets closed mixed, Tokyo’s Nikkei jumped 1.8 per cent, Hong Kong’s Hang Seng climbed 1.9 per cent while China’s Shanghai Composite closed 0.3 per cent lower.

Yesterday, the Australian sharemarket gained 1.4 per cent to 6,524, snapping a seven-day losing streak led by resource and financial stocks.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to 0.8 per cent gain.

What to look out for today

Energy was the best performer on the ASX 200 yesterday and it could retain this position if we take a strong lead from Wall St. Keep an eye out for Woodside Energy (ASX:WDS) and Santos (ASX:STO) and Beach Energy (ASX:BPT).

The biotech sector has been hit, however amid the current M&A moves, there could more of this action to come as larger biopharmaceutical companies look to buy out undervalued ones.

In economic data, the National Skills Commission has scheduled its latest detailed skilled vacancy data for May, which is at 14-year highs.

We have had a few CEO appointments – let’s see how the market reacts. Janus Henderson (ASX:JHG) has appointed Ali Dibadj as chief executive officer (CEO). Lumos Diagnostics (ASX:LDX) has also appointed Doug Ward as the new CEO. Congratulations to both Roger and Doug.

Meanwhile, Humm (ASX:HUM) issued a statement, providing further colour on the reason why they scrapped the sale of its consumer finance arm to Latitude Financial and Andrew Abercrombie’s involvement.

Queensland-based coal miners got hit after the QLD state government added an extra three tiers of coal royalties which include a royalty rate of 20 per cent for prices above $175 a tonne; 30 per cent for prices above $225 a tonne and 40 per cent for prices above $300 a tonne. Keep an eye out for Bowen Coking Coal (ASX:BCB) and Coronado Coal (ASX:CRN).

AMP (ASX:AMP) is one, according to the AFR, investors in the AMP Capital wholesale office fund have four weeks to weigh up the rival bids from Dexus and Mirvac to run the flagship vehicle before voting on its future.

IPO

There is one company set to make its debut on the ASX. Keep an eye out for Odette Six Metals (ASX:OD6) after raising $8 million at 20 cents per share.

Ex-dividend

There is one company set to trade without the right to its dividend.

Fisher & Paykel Healthcare Corp (ASX:FPH) is paying 20.4638 cents unfranked

Commodities

Iron ore has added 3.2 per cent to US$115.90. Its futures point to a 0.7 per cent fall.

Gold has lost $5.30 or 0.3 per cent to US$1,835 an ounce. Silver was up $0.07 or 0.3 per cent to US$21.76 an ounce.

Oil has added $1.09 or almost 1 per cent to US$110.65 a barrel.

Currencies

One Australian Dollar at 7:10 AM has strengthened since yesterday, buying 69.71 US cents (Tue: 69.55 US cents), 56.79 Pence Sterling, 95.26 Yen and 66.16 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, Sequoia excludes all liability for any loss or damage arising in any way including by way of negligence. Commentators may hold positions in stocks mentioned.
  
Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics