ASX News LIVE | ASX 200 Set to Recover from Fourth Day Down, Iron Ore Drops

That’s all from me today. I thought I’d leave you with a list of things investors should put in their calendars for the coming week.

I’ll be back tomorrow covering these, plus all the other big news in the markets.

Investor watchlist:

• 12 July NZ news: RBNZ to announce OCR for July. Many think this will be paused, considering NZ’s economic outlook.
• 12 July US news: CPI data will come through around 10:30pm AEST and could spook markets
• 12 July India news: Industrial production YoY for May due
• 13 July EU news: EU Economic forecasts and production
• 13 July NZ news: NZ’s new holiday Matariki
• 13 July US news: GDP numbers and Fed’s balance sheet

In a tough year of global trade, China has lost the front of the pack to India, estimated to grow by 7% GDP this year.

Meanwhile, at the bottom sit Saudia Arabia and Argentina.

Argentina is currently in the midst of another hyperinflation cycle after the country still struggles to pull itself out of an economic crisis that began in 2018.

Saudia Arabia’s decision to extend oil production cuts may lead to an economic contraction in the country.

Despite being the fastest-growing economy in the G20 last year, reduced crude demand and a global economic slowdown have prompted Riyadh to lower output along with OPEC members to try to bolster the oil price.

The move has only slightly increased prices, and if the cuts continue, the Saudi economy could contract by 0.1% to 1%.

There is some optimism about growth in the non-oil sector, but stats show that the country has yet to diversify properly and is still overreliant on oil.

– Saudi economy in the slow lane
– Israel braces for turmoil
– The next Dubai?

Read the Middle East newsletter: https://t.co/jXTvRq56pj pic.twitter.com/mXl2tMPXEu

— Bloomberg Markets (@markets) July 11, 2023

ASX 200 closed up 1.50% today, finishing strong after four days in the red.

All figures shown are from 4:00pm AEST

• $AUD up +0.03% at 66.77 US cents
• ASX futures up +1.25% to 7,049.5
• S&P 500 up +0.24%
• NASDAQ up +0.18%
• DOW up +0.62%
• FTSE up +0.23%
• STOXX up +0.25%
• SSE up +0.37%
• Bitcoin up +1.21% to $US 30,453.07
• Spot gold up +0.74% to $US 1,925.89
• Iron ore down -1.20% to $US 109.21
• Brent Crude up +0.55% to $US 78.12pb

ASX 200 Sector Top Performance

• Information Technology up 2.60%
• Real Estate +1.94%
• Discretionary up +1.88%

The best individual performers:

• Capricorn Metals [ASX:CMM], up 8.13%
• De Grey Mining [ASX:DEG], up 5.80%
• Sandfire Resources [ASX:SFR], up 5.61%
• Sayona Mining [ASX:SYA], up 5.56%
• Perseus Mining [ASX:PRU], up 4.92%

The worst performers:

• Infratil [ASX:IFT], down 2.00%
• Johns Lyng Group [ASX:JLG], down 1.87%
• Mercury NZ [ASX:MCY], down 1.48%
• Amcor Plc [ASX:AMC], down 1.08%
• Magellan Global Fund [ASX:MGF], down 0.93%

Westpac- Melbourne Insitute consumer confidence saw modest gains of +2.7% in July after the RBA rate pause.

The consumer index still sits in ‘deeply pessimistic’ levels, hinting at continued weak consumer spending as households tighten budgets and defer spending for sunnier times.

Souce: Westpac

While the Western nations battle with high inflation, China is facing a very different problem with a deflationary spiral at the top of the concerns of the Chinese central bank.

Newly appointed PBOC head Pan Gongsheng, a Harvard-trained technocrat, has promised to stabilise the Yuan after recent manufacturing data painted a similar picture of a spluttering economy.

Any real recovery may have to come with a further stimulus package which markets are currently betting the Politburo will hold off from announcing this month at the upcoming meeting. This recent data may push Chinese leaders into action, as it’s the clearest signal yet that the market has stalled.

A future stimulus package may come in the form of further interest rate cuts or consumer vouchers, which the Chinese are fond of employing to stimulate Chinese spenders.

China June CPI inflation fell to 0%yoy, from 0.2% in May. Mkt exp was +0.2%. Core (ex food and energy) inflation fell further to 0.4%yoy
PPI inflation fell to 5.4%yoy, v mkt exp of 5%
(Goldman Sachs chart) pic.twitter.com/qY53Byqjtl

— Shane Oliver (@ShaneOliverAMP) July 10, 2023

ASX 200 continues its strong bounce, up 0.97%
ASX Tech XTX is up 1.72%

The best individual performers:

• Capricorn Metals [ASX:CMM], up 6.16%
• De Grey Mining [ASX:DEG], up 5.25%
• TELIX Pharmaceuticals [ASX:TLX], up 5.18%
• Paladin Energy [ASX:PDN], up 4.17%
• Sayona Mining [ASX:SYA], up 4.17%

The worst performers:

• Stanmore Resources [ASX:SMR], down 2.43%
• Mercury NZ [ASX:MCY], down 1.80%
• Infratil Ltd [ASX:IFT], down 1.68%
• Amcor Plc [ASX:AMC], down 1.62%
• Johns Lyng Group [ASX:JLG], down 1.49%

All figures shown are from 12:20 pm AEST

The huge growth seen in US tech on the back of AI mania has led to ‘overconcentration’ according to Nasdaq Inc.

The index provider says it will, ‘address overconcentration in the index by adjusting the wights’ on the 24th of July.

The details are not yet known as to the extent of the change, but regardless, this signals an extraordinary move by the index.

It should be regarded as ‘a good thing as it reduces the concentration risk from those players,’ said Todd Sohn, managing director of ETF and technical strategy at Strategas Securities. ‘On the other hand, it increases the burden for the rest of the index — what I like to call ‘the bench’ — to continue to improve and strengthen.’

Microsoft, Apple, Alphabet, Nvidia, Amazon, and Tesla account for approximately 50% of the current NASDAQ — something the index would like to see drop to around 40%.

While in the S&P 500, concentration is now at levels seen in the last tech bubble. There have been no indications by the S&P500 for a reweighting, but watch this space as markets react to the Nasdaq changes later this month.

Bell Financial Group [ASX: BFG] is set to deliver impressive financial results for the first half of 2023.

The company announced today that it expects its profit before tax to reach approximately $16.2 million, marking a substantial 21% increase compared to the same period last year.

The solid performance can be attributed to the strong contributions from Bell Financial Group’s Technology & Platforms and Products & Services businesses.

The announcement also attributed Equity Capital Markets transactions as playing a significant role in bolstering the company’s profitability.

Lisa Shalett, Chief Investment Officer at Morgan Stanley Wealth Management, believes that market ‘untethered’ disconnects indicate increasing risks beyond Federal Reserve policy, inflation, and growth.

According to Shalett, experienced investors understand that valuations are unreliable predictors of short-term returns. However, over longer periods of one year or more, valuations become crucial.

Shalett highlighted a significant disparity between current price/earnings (P/E) ratios and their fundamental driver—the 10-year US Treasury real yield.

This rate serves as the foundation for discounting future cash flows, particularly for growth stocks with long durations.

Surprisingly, the current 10-year real rate aligns with last October’s cycle high, which coincided with a stock market trough and P/E ratios below 17.3. Therefore, the current forward P/E ratio of 20 appears entirely unjustified.

In addition, Shalett emphasizes that market internals should not exhibit such contradictions, even if the bullish narrative suggests that ‘this time may be different.’ Regardless of the narrative’s accuracy, it should remain consistent and cohesive.

Shalett advised, ‘Caution is warranted. Consider adding duration as ultrashort rates top out and bills and bonds roll over; US stock investors should diversify with active managers or equal-weighted indexes. We continue to view commodities and Japanese and emerging market equities as good hedges for a peaking US dollar.’

ASX opens up 0.40% to 7,031.8

• $AUD up +0.01% at 66.76 US cents
• ASX futures up +0.09% to 7,014.5
• S&P 500 up +0.24%
• NASDAQ up +0.18%
• DOW up +0.62%
• FTSE up +0.23%
• STOXX up +0.25%
• SSE up +0.22%
• Bitcoin up +0.65% to $US 30,365.99
• Spot gold up +0.74% to $US 1,925.89
• Iron ore down-1.54% to $US 110.54
• Brent Crude down -0.87% to $US 77.79pb

All figures shown are from 10:00am AEST

Canadian mineral explorer Patriot Battery Metals [ASX:PMT] responded to a short seller report by Night Market Research that sturred controversy and drove the share price down.

The rumour mill included a claim the company used ‘curiously timed buyout rumours‘ to inflate its share price.

Night Market Research alleged that the lithium reserves were 40% lower than the company’s claims, and suggested Patriot had deliberately delayed its resource update, ‘seven times and counting’.

Recent news has seen successful tests carried out for its spodumene extraction, but with rumours flying, the company has pushed back on claims.

Patriot hit back, saying that the assertions made were ‘factually inaccurate and misleading.‘

They have also confirmed the interest by mining majors in a potential buyout was real, stating, Pilbara Minerals, Orocobre, and Galaxy Resources were all looking at the company.

Morning All, Kiryll here with another day on the markets.

Here’s today’s Bing AI-generated image with a difficult day miners and resources sector as Iron fell sharply due to weak Chinese inflation data signalling a slow recovery for China.

Central banks and China remain at the top of investors’ watchlists, with the RBNZ set to make a call on rate hikes tomorrow. Many are betting that there will be a pause this month as the NZ economy struggles to find its mojo with its recession looming large in everyone’s mind.

Earnings season begins with reports flowing in. I’ll be here to cover all the biggest news and updates from around the globe.