Following two days of heavy loses to end last week, US equity markets closed higher on Monday
The S&P500 gaining 24.34 points (+0.57%) to close at 4,296.12, while the Nasdaq100 lifted 1.32% to close at 13,533.23. Prices reversed strongly from earning losses, with the S&P500 briefly touching a low of 4200.82 shortly after lunch, before buyers pushed prices higher for the remainder of the trading session. Communications and Information Technology were the strongest sectors, while the energy sector retreated over 3%. From a technical perspective, prices have largely retraced the rally from March, returning to retest major support between 4200 to 4115. Monday’s bar, with its high close on high volumes, suggests buyers remain strong at current levels, and major support continues to hold.
Major news from overnight is that Elon Musk has been successful in his takeover of Twitter (TWTR), with the board accepting an offer of US$44 billion, one of the biggest leveraged buyouts deals in history. Shareholders will receive US$54.20 per share, a little over double from the company’s IPO price of US$26 per shares from November 2013. Musk has publicly criticized Twitter over recent months and stated that he plans to transform the platform into one that allows for greater free speech.
There will be plenty of US company earnings out later in the week, in particular from several of the larger cap stocks, such as Alphabet (GOOG), Amazon (AMZN), and Meta Platforms (FB). Given their large weighting in the Index, their results relative to analyst expectations will likely have a meaningful impact on the short-term direction of the overall market. Investors are becoming more and more cautious on the global economic outlook, in particular, as it relates to China, and the impact that the current economic restrictions will have. China remains one of the last countries continuing to pursue a zero covid policy, which has seen strict lockdowns reintroduced in many major cities. Added to this, with inflation remaining high, there is an increased risk that the Federal Reserve will be required to tighten monetary conditions more stringently and quicker than previously thought.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
To Australia and given the ASX was closed for Anzac Day on Monday, the ASX200 will be adjusting for both Friday and Monday’s trading session in the US. ASX SPI200 futures closed overnight at 7,298, down 25 points for the session. However, we should expect the cash index to open approximately 2% lower, with futures off 150 points from Friday’s close. Quite a few ASX listed companies are scheduled to release their results today, including South32 (S32), Woodside (WPL), and Beach Energy (BPT).
To commodity markets, and iron prices have plunged overnight, declining over 10% to US$135.75 a tonne, in response a weakening Chinese demand outlook. Crude oil prices were also lower on Monday, with WTI Crude declining US$3.53 (-3.46%) to finish at US$98.54 a barrel, while both base and precious metals were also softer. Spot Gold prices sold off over US$30 an oz, to settle at US$1,897.09, the lowest closing price since late February. Weakness in commodities was partly a result of a strong US Dollar, which remains in a strong uptrend, with the US Dollar Index closing at two-year high of 101.74. The Euro closed at 1.0712, while the Aussie dollar is back below 72 US cents.
On the economic front, CPI in Australia is due out on Wednesday, with analyst’s currently forecasting the annualized trimmed mean to be 3.4% for the March quarter, well above the upper bound of the RBA’s 2% – 3% target range. While in the US, new home sales data is out on Wednesday, following by GDP and initial jobless claims on Thursday.
This article was written by Oliver Gordon, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
