0:01

A listener production. Wall

0:04

Street stocks fall as weak US

0:06

GDP growth spreads rate cut gloom.

0:08

And BHP's proposed acquisition of Anglo-American

0:11

dominates in Australia today. I'm Ryan.

0:14

I'm Craig. It's Friday, April 26, 2024. Welcome

0:17

to the Comsec Market Update. Good

0:21

morning Craig. Estageflation fears are

0:23

haunting US share markets this morning. The

0:25

Dow Jones Index has closed down by

0:27

375.1%. The

0:30

S&P 500 Index is down 0.5%. And

0:33

the Tech Evie NASDAQ has closed down by 101.0 or 0.6%. Yeah,

0:37

it's all because of the US GDP

0:39

figures. Now the expectation had been for

0:41

annualised increase in the first quarter of

0:44

2.4%. It came in

0:46

at 1.6%. At

0:48

the same time, the flater, the

0:50

measure of prices was at 3.4% compared with 1.8%

0:53

in the

0:56

fourth quarter of last year. Not a

0:58

good combination. No, certainly it's the

1:00

worst of both worlds. We saw

1:02

economic growth slowing and inflationary pressures

1:05

persisting. So that has thrown

1:07

a cat amongst the pigeons of course as

1:09

far as interest rate cuts are concerned.

1:11

We're seeing swap markets now pricing in

1:14

the likelihood of a rate cut being

1:16

pushed back to December. And

1:18

the Fed's funds, futures, traders are pricing in 35

1:21

basis points worth of rate cuts this

1:23

year, either in September or November. The

1:25

measure of underlying inflation, which is something

1:27

that the US Federal Reserve monitors very

1:29

closely was released last night. Of course,

1:32

we get the final data on Friday

1:34

around this and that'll be a key

1:36

focus. But as you mentioned, Craig, we saw

1:38

core PCE prices lift by 3.7% in the March

1:40

quarter, above expectations

1:42

for 3.4%. With

1:45

the slowing US economy, growth

1:47

of just 1.6%, that's

1:49

raised concerns that we may have

1:51

a stagflationary environment. One

1:53

whereby we have a combination of

1:56

slowing economic growth and rising inflation, and that

1:58

could add headwinds to the market. to policymakers

2:00

decision making going forward. Yeah, we may

2:02

be running a little bit ahead of

2:05

ourselves, but certainly that word stagflation, yes,

2:07

it has been mentioned, will be a

2:09

focus of discussion. In terms

2:11

of the results for US GDP, the consumer

2:13

spending was a little bit on the soft

2:16

side, 2.5% annualized pay is expecting the order

2:18

of 3%. The good

2:20

news, I suppose, is in terms of residential

2:22

construction up by 13.9%. Yes,

2:25

there's a bit of a mixed backdrop as far

2:28

as the economic growth picture was concerned. We

2:30

saw a surge in imports, a small build

2:32

up of unsolved goods at businesses. Science

2:34

has sold demand that together with

2:37

acceleration in inflation reinforced those

2:39

expectations that Reserve Bank Federal Reserve would

2:41

not cut interest rates before September. It

2:44

also reflected a downshift in government spending

2:46

and exaggeration in the moderation of economic

2:48

activity. One would think on the back

2:50

of that. So not all bad, but

2:52

certainly it was a bit of a

2:54

surprise for markets. Now, if we turn

2:56

our attention to company news, Craig, certainly

2:58

the big focus while away was on massive

3:00

platforms. We did see Facebook's

3:03

parent company shares down 10.6% that

3:05

weight on market sentiment. On Wednesday,

3:07

it reported lighter than expected second

3:10

quarter revenue guidance. Mark

3:12

Zuckerberg spoke about spending in areas such

3:14

as artificial intelligence and mixed reality, but

3:16

not currently profitable. That said,

3:18

we did see earnings and revenue both

3:21

above analysts' expectations. Yeah, there's some big

3:23

moves overnight in terms of stocks. So

3:25

IBM was down 8.3% Caterpillar

3:28

down the order of 7%. AstraZeneca

3:31

went the other way. It was up by 5.4%. But

3:34

these are major companies with very significant

3:36

changes in this year. And the other

3:39

thing to note is we've just had

3:41

after close alphabet shares jumped 12% after

3:43

its earnings beat. It's announced its first

3:45

ever dividend as well. Hot

3:48

off the press was seen earnings per share

3:50

at $1.89 versus $1.51 per share

3:52

expected by market analysts. Revenue

3:55

at $80.54 billion versus $78.59 billion.

4:00

US dollars expected by markets. Also

4:02

at the same time, we have

4:04

seen Microsoft come out with its

4:06

results as well. It's

4:08

going to accelerate its push

4:10

into cloud growth. Its

4:12

third quarter fiscal results exceeded estimates on

4:15

the top and bottom line. We've

4:17

obviously got to wait for the management conference

4:19

call. The company has

4:21

started selling its co-pilot artificial intelligence

4:23

add-on for small businesses with subscriptions

4:26

to Microsoft 365 productivity software during

4:28

the quarter. So certainly

4:30

those results could be positive

4:32

for our markets today. But as

4:34

you mentioned, Craig, we did see

4:36

drags on the market last night,

4:39

Caterpillar lost 7% after it cut

4:41

second quarter sales forecast, the demand

4:43

for its construction equipment eased, and

4:45

Victoria's Secret, its shares were down 3.5%

4:47

after broker Goldman Sachs initiated coverage

4:51

of the stock with a sell rating saying

4:53

it sees a tough macro and ongoing competitive

4:55

pressure for the lingerie company in the near

4:57

term. So not such good news for people

4:59

buying lingerie at the moment. Rising gold prices

5:02

helped Newmont, the world's largest bullion miner. Of

5:04

course, it's dual listed. We've got those shares

5:06

here in Australia. It reported first kind of

5:08

profit and beat estimates. Its shares are up

5:10

12.5%. It was the strongest

5:12

performer on the S&P 500 index. Big

5:15

focus on Europe overnight. Craig, it

5:18

was all about the BHB takeover

5:20

of Anglo. That in part propelled

5:22

the UK FTSE 100 index to

5:24

a record high for a third

5:26

consecutive session. The FTSE 100

5:28

index was up 0.5%, really the

5:30

only share market in the developed world that was

5:32

up last night because we saw the broader stock

5:35

600 index that was down by 0.6%.

5:39

So Craig, what's behind the

5:41

news with the BHP takeover? It's

5:43

all about copper. That's really where

5:46

the interest lies in terms of

5:48

BHP's bid for Anglo-American. Now we

5:50

must remember it's an unsolicited, non-binding

5:53

and highly conditional proposal from BHP.

5:56

It's got to finalise the bid by May 22. talking

6:00

about a 60 billion Australian dollars

6:02

takeover of Anglo-Americans. So as I

6:04

say, you know, so copper is

6:07

the major focus. BHP may

6:09

have to sell or demerge the South

6:11

African iron ore operations and also the

6:13

platinum metals group out of South Africa

6:16

as well. You may even have to

6:18

sell some of the diamonds and manganese

6:20

business. But yeah, the real focus is

6:22

on boosting copper production, which may in

6:25

terms of Anglo's exports boost BHP's production

6:27

by as much as 40%. Amazing.

6:30

So we did see Anglo-American shares surge 16.1% with

6:32

more than 10 month high on the

6:35

back of that bid. The deal would

6:37

create the world's biggest copper miner with around 10% of

6:40

global output. However, BHP's London listed stock

6:42

fell 2.2%. So be

6:45

mindful of that here in Australia

6:47

today. Anglo-Americans management does not consider

6:49

the proposed 39 billion takeover offer

6:51

that US dollars from BHP as

6:53

attractive according to sources at

6:56

Reuters. So this has got a way to

6:58

play out by the looks of things. But

7:00

certainly that will lead to an interesting day

7:02

here in Australia. We have seen if we

7:04

look at commodities, cray, copper prices up 2.3%

7:08

as funds chase the market higher after

7:10

the takeover bid by BHP for Anglo-American,

7:13

which of course is focused on copper.

7:15

We have broadly got the commodity prices up. The oil price,

7:18

US oil nimex is up 0.9% to 83.57 US dollars. So,

7:22

Barrow, what do you look at in the oil market last night?

7:25

The oil market, yes, it's a

7:27

case of on the one hand,

7:29

you've got the geopolitical uncertainties in

7:31

the Middle East in particular, and

7:33

on the other side, the softening

7:35

of the US economy. So they've

7:37

focused on the geopolitical realities, I

7:39

suppose, and Brent up 1.4%, nimex up 1.2%, gold

7:43

price up $8.60 or 4.10% to 1%. We

7:47

also saw the iron ore futures up 0.4% to 109.68 US dollars a barrel

7:49

overnight as well. Of

7:54

course, a lot of talk again about shiny

7:56

stimulus and hopes for an

7:58

increase in demand. although some profit

8:00

taking may be limiting gains. So we

8:02

did hear that rising steel output

8:05

and demand have heightened expectations of higher

8:07

hot metal output in the steel market.

8:09

So commodity prices are higher, but

8:12

that doesn't mean that we'll see the Australian share

8:14

market up. So spy features are currently down by

8:16

29.0.4% after

8:19

that negative lead in from Wall Street. In

8:21

terms of today's session, Craig, we've got

8:24

another bunch of inflation data to look

8:26

forward to here in Australia. They're business

8:28

inflation figures, the producer price index, and

8:30

then you've got international trade prices, the

8:33

export and import prices, which

8:35

will be coming out. The United States

8:37

later tonight, you've got the personal consumption

8:39

expenditure deflator. That's the major focus in

8:41

the spending and income data that will

8:44

be coming out, and more

8:46

earnings results coming out in the United

8:48

States, ExxonMobil, Chevron, and Colgate amongst those

8:50

reporting. And of course, we've got the

8:53

Bank of Japan today set the whole

8:55

rates steady at Friday's meeting as

8:58

well, the Aussie dollar, what we have seen there is the

9:00

Aussie dollar is from 65.32 US cents. We

9:03

did see the Aussie dollar lift of course, after those

9:05

stronger than expected consumer prices numbers for

9:07

Australia on Wednesday, but it's eased back

9:09

to 64.85 cents during

9:12

last night's session, currently trading at 65.18 US

9:14

cents. That's

9:17

it from us. Have a fantastic weekend. Thanks

9:19

for joining us. This podcast is

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