ASX to rise, Dow paces gains in New York

Timothy MooreBefore the Bell editor

Updated Mar 28, 2024 – 7.33am, first published at 4.45am

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Australian shares are poised to rise as US stocks extended their first-quarter advance. The Dow paced Wall Street higher, rising 478 points; the S&P 500 closed at a record high and is within 13 points of its intraday record. Apple rallied 2.1 per cent, while Nvidia shed 2.5 per cent.

“The S&P 500 continues to defy all of the naysayers,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “As we have been saying for over a year now, if the economy continues to expand and corporate profits keep growing with it, the stock market will keep moving higher, even in the absence of rate cuts.”

Trading was expected to be somewhat volatile as fund managers shifted assets in the final hours of the March trading quarter. Goldman Sachs said pension funds could sell an estimated $US32 billion in equities as they rebalance their portfolios.

Policymakers at Sweden’s central bank held the key rate at 4 per cent at their latest meeting and said they could pivot to rate cuts as early as May.

After peaking at over 10 per cent in late 2022, headline inflation in Sweden is close to target and the Riksbank is almost ready to start reversing two years of policy tightening, according to Reuters.

“What we are saying is that if our forecasts in a broad sense turn out to be right, there is a high chance there will be a cut in May,” Governor Erik Thedeen told reporters.

The last time the central bank reduced rates was in 2016.

Stocks in focus

Australian Clinical Labs, Sigma Healthcare and Westgold Resources all trade ex-dividend on Thursday.

MinRes to auction lithium in quest for ‘real price transparency’ Chris Ellison’s Mineral Resources and New York-listed Albemarle sell lithium at well above spot price amid renewed efforts to make opaque market dominated by China more transparent.

Market highlights

ASX futures up 60 points or 0.8% to 7930 near 7am AEDT

AUD +0.02% to 65.34 US cents
Bitcoin -1.2% to $US68,886 at 7.12am AEDT
On Wall St at 4pm: Dow +1.2% S&P +0.9% Nasdaq +0.5%
In New York: BHP +1.7% Rio +2.1% Atlassian +0.6%
Tesla +1.2% Microsoft -0.1% Apple +2.1% Nvidia -2.5%
Alphabet +0.2% Amazon +0.9% Meta -0.4%
Stoxx 50 +0.4% FTSE +0.1% DAX +0.5% CAC +0.3%
Spot gold +0.6% to $US2191.93/oz at 1.30pm in New York
Brent crude -0.6% to $US85.73 a barrel
Iron ore -2.9% to $US101.15 a tonne
10-year yield: US 4.19% Australia 4% Germany 2.29%
US prices as of 4.26pm in New York

What’s driving markets

Merck & Co won US approval for a new treatment for a rare, dangerous form of high blood pressure that’s expected to be among the company’s hits as sales from successful older drugs begin fading later this decade, Bloomberg reported.

Fundstrat Global technical strategist Mark Newton said he sees the potential for the S&P 500 to rally another 100 points into mid-April which would likely find resistance between 5350-5400.

His warning: the current weakness needs to bottom in the near-term between 5184-5205 before turning back higher to test and exceed March 21 intraday peak at 5261.10.

“Groups like Technology have shown just minor consolidation, while not having done any technical damage. Additionally, other groups like Energy and Materials have shown strength, which could make further near-term outperformance possible.”

In a note, Vanda Research said it expects individual investors to continue to buy dips and fade rallies the next several weeks leading to the April 15 tax filing deadline in the US.

“From a single-stock perspective, individuals continue diversifying out of the Magnificent 7+,” Vanda also said. While the concentration of US indices’ returns has been in focus, retail investors appear to be “broadening their purchases beyond the usual culprits in the hope to front-run an eventual improvement in market breadth”, it added.

Today’s agenda

Local: Retail sales February, private sector credit February and consumer inflation expectations March, at 11.30am

Overseas data: NZ March consumer confidence at 8am; UK final fourth-quarter GDP at 6pm; US fourth-quarter GDP at 11.30pm, February pending home sales, March Chicago PMI, Kansas City Fed index and University of Michigan consumer sentiment

Friday’s Agenda

Most developed markets will be closed for Good Friday. The ASX also is closed on Monday.

On Friday, the US is scheduled to release February personal income, spending and Core PCE at 11.30pm. On Sunday, China is set to release March manufacturing and services PMIs.

China’s mixed economic view: Capital Economics

Citing its own China Activity Proxy, CE economists Leah Fahy and Mark Williams said the nation’s economy “has performed reasonably well over the last few months – better than much recent commentary would suggest”.

Fahy and Williams said: “Our estimates suggest the economy has been growing at around a 6 per cent annualised pace in recent months. Relative to a year ago, activity in the first two months of 2024 was 7.5 per cent higher.”

The economists said they prefer to look at the data for January and February together to smooth Lunar New Year volatility.

Among the bright spots have been rising container freight traffic both at China’s ports and on roads and railways; the increase in seaport traffic was particularly sharp. “The customs data suggest this was driven by a sharp rise in export volumes, rather than a strengthening of domestic demand.”

In addition: “Construction activity continues to hold up surprisingly well despite the weakness of the property sector. While new property starts have fallen to a multi-decade low, output of construction materials and sales of machinery both expanded in January & February. The resilience of the sector is the result of policymakers pressuring developers to complete ongoing projects, while ramping up investment in social housing.”

In contrast, Fahy and Williams said the recovery in services activity appears to have stalled.

“Taken together this suggests that China’s economy continued its recovery in the opening weeks of this year but there are still signs of weakness. Fiscal policy will remain a support for the next few months, but we expect a renewed slowdown later this year as that support is withdrawn.”

United States

Tesla shares poised for ‘sharp bounce’: Fundstrat Mark Newton said he sees the potential for a rebound in the EV maker’s shares after a rough start to the year.

Reddit tumbles after Hedgeye names it a short-selling idea Hedgeye Risk Management said the stock is “grossly overvalued” and should trade closer to its IPO price of $US34.

AI rally expands beyond Nvidia as investors bid up hardware “The trick is recognising who’s really monetising” artificial intelligence, said Michael Sansoterra, CIO at Silvant Capital Management.

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