ASX LIVE | ASX to Rise with Wall St, RBA Head to change, Oil Passes $80pb Mark

That’s all from me today traders.

Over the weekend, look out for news from China.

Hints from the PBOC and Chinese leaders may see stimulus in the pipeline, which could continue the ASX rally.

In the US, keep an eye on tech stocks as they continue to defy gravity, and keep moving into near all-time high territory.

Where the wave breaks is anyone’s guess.

Here’s today’s AI-generated image of tech stock’s meteoric rise.

Have a great weekend!

As concerns of a slowdown continue in the market commentary, the economy soldiers on with activity showing things are starting to fall but not significantly at this stage.

For Australia, while job postings are starting to drop off, we still have robust employment, and consumers are still spending.

Recent consumer surveys show we are at levels regarded as ‘deeply pessimistic, but how much of that is from reporting rather than the experience borne out by households?

To be sure, the rise in mortgage repayments is affecting household’s disposable income, but so far, it seems like we aren’t closer to recessionary waters.

Our Economic Activity Trackers fell in Europe and Australia in the last week but rose in the US. All are yet to show any significant fall in economic activity. pic.twitter.com/MtwyRJVuxw

— Shane Oliver (@ShaneOliverAMP) July 14, 2023

 

ASX 200 closed up 0.78% at 7,303.1 today, extending its positive streak to four days. Investors are betting on the new RBA head Michelle Bullock holding the cash rate in August. Traders were also bolstered by an exceptional run by the US and AUS Tech sectors.

Iron ore was also up today, pushing with it many big producers such as Fortescue Metals, up 1.4% and BHP Group, up 1.8%.

All figures shown are from 4:20pm AEST

• $AUD up +0.02% at 68.84 US cents
• ASX futures up +0.83% to 7,264.5
• S&P 500 up +0.85%
• NASDAQ up +1.58%
• DOW up +0.14%
• FTSE up +0.32%
• STOXX up +0.64%
• SSE up +0.13%
• Bitcoin up +3.50% to $US 31,390
• Spot gold down -0.03% to $US 1,959.46
• Iron ore up +0.31% to $US 110.95
• Brent Crude up +0.03% to $US 81.40pb

ASX 200 Sector Top Performance

• Information Technology up 1.68%
• Telecomunications +1.66%
• Materials up +1.35%

The best individual performers:

• Neuren Pharmaceuticals [ASX:NEU], up 17.35%
• Block Inc [ASX:SQ2], up 5.48%
• TELIX Pharmaceuticals [ASX:TLX], up 4.98%
• Virgin Money UK [ASX:VUK], up 4.21%
• Lendlease Group [ASX:LLC], up 3.87%

The worst performers:

• Netwealth Group [ASX:NWL], down 5.88%
• HUB24 Ltd [ASX:HUB], down 2.00%
• Stanmore Resources [ASX:SMR], down 1.95%
• Allkem Ltd [ASX:AKE], down 1.85%
• Domain Holdings Australia [ASX:DHG], down 1.84%

POS systems Fintech Block Inc (formerly Square Inc) rallied 5.52% today, trading at $111.64 per share. after it saw shares tumble last week.

Block has previously been the target of short sellers who claimed that the company boosted its user numbers.

In March, Hindenburg Research, a short-selling firm, published a report claiming fraudulent accounts and inflated user numbers, among other charges.

Block threatened legal action, but the damage was already done, and the stock has yet to recover to its prior valuation of 115 per share before the report.

Today’s rally has seen the company near that value as tech stocks are gaining ground across the ASX and Wall St.

Ripple Labs Inc. won a landmark legal victory on Thursday when a U.S. judge ruled that the company did not violate federal securities law by selling its XRP token on public exchanges.

The ruling, which is the first win for a cryptocurrency company in a case brought by the U.S. Securities and Exchange Commission, sent the value of XRP soaring by 75%.

The SEC had argued that XRP was a security and that Ripple had violated securities laws by selling it without registering with the agency. However, Judge Analisa Torres ruled that XRP is not a security and that Ripple’s token sales did not violate the law.

The ruling is a major victory for Ripple, and it could have implications for other cryptocurrency companies facing similar legal challenges from the SEC.

‘This is a huge win for Ripple, but more importantly for the industry overall in the U.S,’ said Ripple CEO Brad Garlinghouse. ‘It’s a clear validation of our position that XRP is not a security.’

The SEC has not yet said whether it will appeal the ruling. However, the agency said that it is ‘reviewing the decision’.

The ruling is a positive development for the cryptocurrency industry, as it could help to legitimise the industry and attract more institutional investors. It is also a sign that the SEC is willing to take a nuanced approach to regulating cryptocurrencies, rather than simply classifying them all as securities.

The future of cryptocurrency regulation in the United States is still uncertain, but the Ripple ruling is a step in the right direction. It could help pave the way for a more clear and consistent regulatory framework for cryptocurrencies, which would benefit both the industry and investors.

Source: CoinGecko

 

ASX 200 up 0.64% at 7,293.4

The best individual performers:

• Neuren Pharmaceuticals [ASX:NEU], up 16.37%
• Block Inc [ASX:SQ2], up 5.28%
• Lendlease Group [ASX:LLC], up 4.47%
• Paladin Energy [ASX:PDN], up 4.31%
• Viva Energy [ASX:VEA], up 3.77%

The worst performers:

• Netwealth Group [ASX:NWL], down 5.95%
• Domain Holdings Australia [ASX:DHG], down 1.84%
• Eagers Automotive [ASX:APE], down 1.77%
• Reliance Worldwide Corporation [ASX:RWC], down 1.64%
• Stanmore Resources [ASX:SMR], down 1.56%

All figures shown are from 12:58pm AEST

The recession that many have been expecting is looking increasingly likely, but that hasn’t stopped markets from rallying in recent months.

The positive news is coming in about core inflation numbers coming down and Wall Street (particularly Tech stocks) rallying to near-all-time highs.

Source: LongConvexity

 

But don’t get sucked in by the FOMO.

Remember that this is the usual playbook of the markets, and as tightening cycles and CPI peak, the next step is usually recession as the previous rate hikes work their way through the system.

Source: InnovatorEtfs

There are a few reasons for this continued rally while things look dicey.

There is still abundant liquidity in the system, and the Fed remains a strong backstop for the financial system.

However, as the Fed continues to raise interest rates and liquidity evaporates, these factors will likely no longer be enough to support markets.

Investors Should Be Cautious, Focus on Defensive Assets

Investors should be cautious about the current market rally and focus on defensive assets.

While there may be some short-term upside, the longer-term outlook is for a recession.

This means that risk assets, such as equities, are likely to underperform. Investors should instead focus on assets that will provide protection during a downturn, such as gold, bonds or safer dividend-paying stocks.

For more detail, click below to see how we’ve seen this story before.

https://www.moneymorning.com.au/20230714/the-endgame-begins-for-inflation.html

If you haven’t dusted off your old Monopoly set in a while, I encourage you to give it a go with your friends or kids.

Give this a read to understand why it was originally made, and what we can learn from playing.

Learn to Play the Game of Monopoly — the Great Australian Dream! https://t.co/hXfA85Dul2 @CC_CASHMORE

— Catherine Cashmore's Land Cycle Investor (@LandCycle) July 14, 2023

New RBA head Michelle Bullock’s previous comments may come back to bite her in the coming months.

As Australians struggle with high-interest rates and consumer spending slows, unemployment may rise.

In her previous position as Deputy Governor of the RBA, she welcomed the idea of the unemployment rate rising, causing backlash.

Future rate decisions could put the RBA on a similar path of antagonising the public.

The Reserve Bank should not be determined to make another 140,000 workers lose their jobs. pic.twitter.com/wUFLWcHsiv

— Craig Emerson (@DrCraigEmerson) July 6, 2023

Oil is set for a third weekly gain as supply disruptions in Africa and a reduction in shipments from Russia tightened the market.

Protests in Libya and production stoppage in Nigeria cause oil field shutdown. Meanwhile, Russian oil flows show signs of easing.

West Texas Intermediate futures surpassed US$ 77 per barrel, a 4.6% increase for the week.

Meanwhile, Russia’s Urals crude oil breached a price cap set by the G7 today, a blow to Western sanctions efforts to slow Russia’s economy after the invasion of Ukraine.

Urals crude has exceeded $60 per barrel, surpassing the cap set by the Group of Seven last year to restrict Moscow’s revenue from oil. The cap aimed to prevent Western ships, with Western insurance, from transporting Russian oil unless it was priced below the threshold.

The sale of Russian crude to India and other neutral nations has become a headache for the G7.

Instead of western ships, a large shadow fleet has emerged to fill the gap.

G7 has tried to slow Russia’s oil trade in an effort to hinder its Warmachine and reduce Russian profits.

Market analysts have been saying the trade sanctions will slow the long-term capability of Russia to maintain its oil fields and replace lost equipment in the war against Ukraine.

The short-term reality has seen Russia shrug off the apparent moves by relying on an aging fleet of oil tankers and recommissioning old equipment.

Ben Lucklock, co-head of oil trading at Trafigura Group, highlighted the risk of environmental disasters, saying:

‘You’ve got a lot of 17-, 18- and 19-year-old boats transiting the Danish straits with the oil,” he said.

“We have changed the logistics skillset [for the worse] around Russian oil in a very short period.‘

Neuren Pharmaceuticals [ASX:NEU] Shares jump 15%, trading at $13.41 this morning after announcing the expansion of the licence for its drug Trofinetide and the phase 2 clinical drug trials commencing for two more hopeful treatments to assist people with neurodevelopmental disabilities.

The market’s expectations for the Reserve Bank’s cash rate have shifted significantly downward, as bond prices rose today.

The probability of an August rate increase has fallen from over 60% to 43%, and the probability of a rate increase by September has fallen from greater than 100% to 70%.

The market now expects the peak RBA cash rate to be around 4.36%, which means that only one more rate increase is expected before the RBA pauses.

On Monday, markets were pricing in a minimum of two more rate increases.

If the RBA does deliver one more rate increase, markets expect the central bank to start cutting rates by this time next year.

Longer-term bonds have seen a swift and dramatic decline in yields. The 3-year bond rate began the week at 4.3%, but it is now down to 3.9% after a further 10 basis point fall. The 10-year bond rate has fallen back below 4%.

This decline in yields reflects a growing belief that the RBA will not need to raise rates as much as previously thought. The recent rally in bonds suggests that investors are becoming more confident that inflation will peak soon and that the economy will not overheat.

If this trend continues, it could mean that the RBA will be able to end its tightening cycle sooner than expected. This would be welcome news for borrowers, who have seen their interest payments rise sharply in recent months.

Australian 10, 5, 2-year bond yields

Source: TradingView

ASX 200 opens up 0.25% at 7,264.9, following suit with US equities that were up overnight after tech stocks rallied.

• $AUD down-0.03% at 68.80 US cents
• ASX futures down -0.11% to 7,232.5
• S&P 500 up +0.85%
• NASDAQ up +1.58%
• DOW up +0.14%
• FTSE up +0.32%
• STOXX up +0.64%
• SSE up +1.26%
• Bitcoin up +3.49% to $US 31,467
• Spot gold up +0.09% to $US 1,959.63
• Iron ore up +1.16% to $US 110.61
• Brent Crude up +0.22% to $US 81.54pb

All figures shown are from 10:05am AEST

Michele Bullock, previous RBA deputy, has just been named the next governor of the RBA.

Mrs Bullock has been working at the RBA since 1985 and holds extensive global finance training. Her appointment comes at a crucial time as the central bank tackles the task of managing the economy amidst significantly high inflation rates that have not been witnessed in decades.

In a morning announcement, Prime Minister Anthony Albanese revealed Bullock’s appointment, emphasizing the historic milestone of her becoming Australia’s first female central bank governor.

‘Ms Bullock is an accomplished economist with wide experience in the RBA, including as deputy governor and deputy chair of the payment systems board,’ he said.

Morning investors, kiryll here covering the markets today.

The biggest news coming in this morning, Phillip Lowe is out as RBA governor.

The cabinet is meeting this morning to decide on his replacement. Stay tuned as we watch the announcement and market reaction.

Here’s your morning AI-generated image, showing the changing of the guard at the RBA.