1 August Markets at a glance
Around the grounds
The local market is on the rise, taking leads from Wall Street and on track for a second straight session of gains with energy and mining stocks leading the charge as commodity prices recover.
Under the hood, energy shares are up over 1% after the price of oil surged overnight on continued worries over rising tensions in the Middle East and a sharp fall in U.S. crude stockpiles. The miners are following suit, climbing 1.2% largely due to a rebound in copper prices to a one-week high on a weaker USD amid fresh stimulus hopes from top consumer China.
Tech stocks of course are in rally mode, with the index up nearly 2% tracking gains on the Nasdaq and Nvidia’s rosy sales forecast. Similar story for gold, with the index up 1.5% as bullion extends gains after FOMC Chair Jerome Powell hinted a rate cut could be on the cards as early as September.
In the news
Getting to the news of the day and the competition watchdog says it will not oppose Dutch commodity merchant Louis Dreyfus’ (LDC) proposal to take over Australian listed Namoi Cotton (NAM), with conditions, a month after it raised concerns over a similar buyout bid by a Singaporean entity.
In a statement the ACCC said LDC Group would need to divest its stake in Australian cotton lint classing services firm ProClass and terminate its joint venture with sector peer WANT cotton. Once this divestment occurs the ACCC concluded it wouldn’t have “sufficient market power to restrict or negatively impact rival merchants’ access to cotton lint.
Sticking with M&A, Pacific Smiles (PSQ) has asked investors to favour NDC’s sweetened AU$327.1 million buyout bid for the company, over the competing offer from Gensis Capital. Earlier in the week, Genesis had offered AU$1.90 per share of the company, valuing it at AU$303.2 million, which matched NDC’s previous bid.
The scheme meeting to vote on the proposals is scheduled for today.
Finally, Regional Express Holdings (REX) has swung the axe on hundreds of jobs as the struggling airline enters voluntary administration, the second small Australian airline this year, in a move that will further concentrate the country’s aviation market.
According to Morningstar analysts, while slot availability at Sydney airport was an issue, Rex's failure ultimately came down to a general slowdown in aviation as leisure travellers cut back.
Rex’s original focus was to service vast regional areas with small plans, but in 2021 the company began larger flights between Sydney, Brisbane and Melbourne, which is dominated by Qantas (QAN) and Virgin Australia. However, the airline failed to dent their control over the market, which sat at 90% as of March.
Going global
On the global stage, it’s rally on for the Asian region tracking a surge in global tech stocks over night helped by Meta and Nvidia, along with prospects of an imminent rate cut from the FOMC as soon as September.
As expected, the Fed held rates steady overnight, and opened the door wide for its easing cycle to begin next month. Looking ahead focus shifts to the Bank of England tonight, with traders pricing in a 60% chance the BoE will follow in the Fed’s footsteps and cut its own benchmark.
Elsewhere, the yen has extended its blockbuster rally, up another 0.8% to touch a 4 and a half month high. This after the Bank of Japan (BoJ) increased interest rates for the just the second time in 17 years yesterday and signalled more tightening to come.
Tokyo’s Nikkei 225 however has tumbled 3% as the strengthening yen clouded the outlook for the country’s exporters. More broadly on equities, MSCI’s index of Asia-Pacific shares outside Japan climbed nearly 1% after ending the month of July mostly flat.
Back in the U.S. tech stocks continue to make an extraordinary comeback, with Nasdaq futures coming back online up around 1% boosted by Facebook-parent company Meta (META) which surged 7% in afterhours trade on a strong earnings beat. Looking ahead, Apple (AAPL) and Amazon (AMZN) will hand down Q2 numbers tonight.
Finally, in currency markets, the big dollar is under pressure on the back of that surging yen, both the AUD and NZD have steadied above recent lows with the kiwi rallying against the Aussie unit as bets for an RBA rate hike were all but swept off the table after yesterday’s inflation print.
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