ASX LIVE | XJO to Open Flat after US Fed Raises Rates to 22-Year High, Meta Beats Earnings

That’s all from me today folks. Have a great evening.

I’ll leave you with this calendar to keep up with the latest upcoming economic announcements to help with your trades.

• Overnight: US – pending Home sales (MoM) should be a nice indicator to check the veracity of today’s economic health.
• Tomorrow: AUS – Producer Price Index (PPI) YoY Q2
• Afternoon: GER – German GDP and CPI data for Q2
• Evening: US – Core PCE Price Index MoM

ASX 200 closed up 0.73%, trading at 7,455.9. A five-month high for the index. Real Estate and Information Technology were the top sector gainers for today, but it was a fairly positive day all around, with only the Energy and Materials sectors down, largely as mean retracement after yesterday’s gains in those two sectors.

• $AUD up +0.26% at 67.88 US cents
• ASX futures up +0.71% to 7,409.0
• S&P 500 flat -0.016%
• NASDAQ down -0.12%
• DOW up +0.23%
• FTSE down -0.19%
• STOXX down -0.90%
• SSE down -0.18%
• Bitcoin up +0.64% to $US 29,448.20
• Spot gold up +0.15% to $US 1,975.02
• Iron ore up 0.15% to $US 112.89
• Brent Crude up +0.16% to $US 83.06pb

ASX 200 Sector Top Performance

• Real Estate up 3.33%
• Information Technology up +2.19%
• Discretionary up +2.08%

The best individual performers:

• Sandfire Resources [ASX:SFR], up 9.00%
• Insignia Financial [ASX:IFL], up 6.93%
• Ingenia Communities Group [ASX:INA], up 6.85%
• Charter Hall Group [ASX:CHC], up 5.37%
• Corporate Travel Management [ASX:CTD], up 5.07%

The worst performers:

• Regis Resources [ASX:RRL], down 10.77%
• Whitehaven Coal [ASX:WHC], down 5.85%
• New Hope Corporation [ASX:NHC], down 5.65%
• Iluka Resources [ASX:ILU], down 4.37%
• Macquarie Group [ASX:MQG], down 4.37%

All figures shown are from 4:35pm AEST

Regis Resources [ASX:RRL] shares fell by 11.24% today, closing at $1.855 per share.

The company reported June quarter gold production of 122.5koz at an all-in-sustaining cost (AISC) of $1,851 per ounce.

The company was originally expecting an ASIC of $1,550–1,650 per ounce from their flagship Duketon mine but blamed inflationary pressures.

The company went on to say that it expects costs to remain high through FY24 and is forecasting further increases.

Gold sales for the quarter totalled $337 million at an average realised price of $2,669 per ounce.

With the US equities market leading the charge of investors who are shrugging off ideas of a recession, it may be worth looking at another perspective.

A headwind that could point to a global slowdown comes from the corporate landscape.

PMIs, or purchasing manufacturing indices, measure the prevailing direction of economic trends in manufacturing.

The PMI is based on a monthly survey across 19 industries, covering both upstream and downstream activity to gain a holistic view of the system.

The PMI indices have been trending down across most of the world. This weakness comes from both a wider rotation away from manufacturing goods into producing services in developing nations and the lack of inventory going back into storage currently as companies shed risk.

All of this will serve as a drag on growth as markets that are overreliant on China for trade try and restart some manufacturing or pray for more stimulus from China.

The quarterly Politburo meeting in China that just went by signalled the market’s reliance on China more than anything else.

Chinese officials pledged to step up policy support for the economy without offering any details or large promises.

This was enough to send the materials sector and China-linked companies soaring.

For now, it’s vague promises and a winded economy.

Source: J.P Morgan

Rio Tinto [ASX:RIO] shares are down by 2.49% as struggling economies and regulations bite into profits.

Rio Tinto’s half-year profit has slumped 34% to $US5.7 billion (AU$8.4 billion) following weaker commodity prices.

The weaker results are a sign of the changing economic landscape. Commodity prices have been under pressure in recent months due to a number of factors, including slowing economic growth in China and rising inflation.

Rio Tinto’s flagship Australian iron ore division was the hardest hit, with profits falling 37%. The company shipped 6% more iron ore in the first half of the year, but the average price it received was 11% lower.

Copper prices were also down 12%, and aluminium prices were down 25%. These declines also weighed on Rio Tinto’s results.

Rio wiped more than $1 billion off the value of its carbon-intensive alumina refineries in Australia as it faces increasing emission caps and toughening climate policies that are cutting into profitability. The company acknowledged the purpose of the scheme but said it would be, ‘tough on assets that are not super profitable‘.

‘It doesn’t take away the fact that it is a cost on an asset that doesn’t make money,’ Rio Tinto’s CEO Stausholm said.

‘That’s why we are working so hard to work with the government to future-proof these assets for decades to come because there is no doubt that change is necessary – we cannot continue with a level of carbon dioxide emissions from those assets, we need to find a decarbonisation pathway forward that keeps those assets competitive.’

Despite the weaker results, CEO Jakob Stausholm said that the company is ‘well-positioned for the long term.’ He pointed to the company’s strong balance sheet and its focus on innovation as key strengths.

Some analysts believe that Chinese demand for steelmaking ingredients such as iron ore will slump in the next five months due to weak demand in its construction and property sectors.

For now, Rio will continue to struggle with suppressed commodity prices until we see true big-package stimulus coming out of China.

The company also announced an interim dividend of $US1.77 per share, which was lower than analyst expectations.

The ASX 200 Information Technology (XIJ) has had a good 2023 so far. Sadly it’s been overshadowed by its bigger brothers over the Pacific in the tech lead rally of the S&P 500 and NASDAQ.

But success here should still not be shrugged off. The XJO has had a tough year so far, with unsteady macro outlooks and a struggling China we have seen the base index up 6.07% since the start of the year.

Compare this to the XIJ which is up 36.88% in 2023 to date, posting its best half-year performance since H2 2020.

Source: Market Index

It seems, for now, Australian tech is inextricably linked to the US tech market, but as the market moves into maturity, we may see some positions that are able to withstand the movements of US capital and eyeballs.

Here are some of today’s big movers.

Macquarie Group’s share price fell by 4.90% today after announcing the company’s asset management arm was hit by less income from its investments in green energy projects, while its commodities and global markets (CGM) business saw less trading activity across power and gas.

The Fed raised US interest rates to a 22-year high of 5.25-5.50%.

The market let out a collective shrug.

Media is still churning its usual news about how to digest and interpret the latest raise…

But the reality is, that the market has long priced this in and is already looking at the next thing around the corner.

Earnings season is in full swing, and so far, the optimism has become visibly palpable.

Words like ‘Nirvana scenario’ and new theories to explain the bond yield inversion are being thrown around in the fixed-income markets.

‘Soft landing’ or no recession ideas have moved from a minority position to near parity with bearish sentiment within the equity markets.

The Fed announced yesterday that it doesn’t expect the US markets to face recession.

These changes are so recent that we have yet to see substantial flowthrough into media and general business confidence.

US Business Confidence

Source: Moody’s

But soon they will; Before that, it may be a good time to go shopping on the ASX and pick up some stocks that are balanced for your risk profile.

If you’re looking for some ideas, try the link below — happy hunting.

https://www.moneymorning.com.au/20230726/three-positive-tailwinds-for-the-asx.html

ASX 200 up 0.74% to 7,456.4 as Real Estate and Information Technology Sectors lead the charge in positive sentiment. ASX currently sits at a five-month high as more investors believe we may be at the end of the rate hike cycle, or at the very least, the RBA meeting next week will likely keep rates on pause.

These bets come after the consumer price index (CPI) data out yesterday showed a 6% rise in prices — lower than the expected 6.2%, indicating inflation is coming down fast enough to warrant caution from the RBA not to add further pain into the economy.

Megaport shares are up 10.45% this morning after reaching the top end of its earnings guidance for financial year 2023.

Ingenia Communities Group rebounded from yesterday’s drop, now trading at $4.145 per share, up 5.20% at midday.

Meta stock rallied 7% in overnight trading as the company surpassed expectations and posted an 11% rise in revenue.

Revenue grew to $32 billion in the quarter, beatings analyst expectations by US$880 million, making it Meta’s most profitable quarter since 2021.

‘I’m really proud of our teams for everything we’ve accomplished so far this year,’ Mark Zuckerberg, Meta’s CEO, said on the earnings call. ‘It’s been a tough year in a lot of ways. But it’s also been an impactful one. I’m quite optimistic about the road ahead.’

In the earnings call, he highlighted investments into AI across the company but also doubled down on Metaverse investments and direction for the company, saying, ‘We remain fully committed to the metaverse vision as well‘.

Facebook’s daily active users rose 5% to 2.06 billion, adding to its advertising revenue which was up 12% YoY to $31.08 billion.

Meta said it expects third-quarter revenue to be in the range of 32-34.5 billion, beating estimates of $31.2 billion.

CPI data out this week has shown inflation is past its peak, but it seems services inflation remains sticky.

The next set of questions will inevitably be, if we are getting inflation on top of inflation, do we need another rate hike?

And then, if we are at peak rates, how long before the RBA brings them down?

Aust June qtr CPI up < expected at 0.8%qoq/6%yoy (mkt & our forecast was 6.2%)
Trimmed mean +0.9%qoq/5.9%yoy (mkt was 6%, we were 5.9%)
The mthly inflation indicator for Jun also slowed further to 5.4%yoy

Annualising the trimmed mean gives 3.6%, down from peak of 7.6% in Sep qtr pic.twitter.com/8sE8dKWpZP

— Shane Oliver (@ShaneOliverAMP) July 26, 2023

Here’s an update on global markets overnight. Gold continues to climb as Wall St remained subdued by the hike. European markets continue to climb cautiously as Euro gas prices and food begin to drop as supply issues from Ukraine and Norway begin to resolve.

The US Fed is no longer forecasting a recession for the US market. This call was also echoed at the Congressional Budget Office, which released estimates overnight that forecasted a 0.4% GDP annual rate for the second half of the year.

Good morning investors. Here are the morning market updates

• $AUD up -0.43% at 67.60 US cents
• ASX futures up +0.62% to 7,357.0
• S&P 500 flat -0.016%
• NASDAQ down -0.12%
• DOW up +0.23%
• FTSE down -0.19%
• STOXX up +0.90%
• SSE down -0.26%
• Bitcoin up +0.89% to $US 29,465.87
• Spot gold up +1.17% to $US 1,974.65
• Iron ore up +0.19% to $US 112.72
• Brent Crude down -0.82% to $US 82.95pb

All figures shown are from 09:00am AEST