Spot gold -0.3% to $US1926.08 an ounce in New York
Brent crude +1.7% to $US87.66 a barrel
Iron ore +1.4% to $US126.65 a tonne
10-year yield: US 3.48% Australia 3.39% Germany 2.17%
Australian shares are poised to move within touching distance of a record high after rising 1.7 per cent last week. Wall Street surged higher on Friday as the tech sector advanced on signs of renewed profit focus from companies.
The S&P/ASX 200 currently sits about 2.4 per cent off its record high after rallying 5.9 per cent this year.
ASX futures up 34 points or 0.46 per cent to 7428 over the weekend.
The local currency was 0.8 per cent higher; the Bloomberg dollar spot index edged lower.
On bitstamp.net, bitcoin fell 1 per cent to $US22,906. It climbed over $US23,000 in weekend trading, reaching its highest level since August.
The yield on the US 10-year note leapt 9 basis points to 3.48 per cent in New York, in sync with similar moves elsewhere.
On Wall Street, a broad rally helped the Nasdaq retake the 11,000 level, helped the S&P 500 put 4000 points within reach and even bolstered the Dow Jones, which was held back by a drop in Goldman Sachs.
The Wall Street Journal reported that Goldman’s consumer business was being reviewed by the Federal Reserve.
The gains in New York were paced by the tech sector, where investors were relieved by news that Alphabet, Google’s parent, was cutting jobs, a move seen as a bid to steady profit margins as the economy slows.
US tech companies have announced more than 50,000 job cuts alone.
Microsoft will report on Tuesday (Wednesday AEDT), Tesla on Wednesday (Thursday AEDT), in what will be the busiest day of this season.
Alphabet is scheduled to report on January 30 with both Apple and Amazon set for February 2.
FactSet senior analyst John Butters said the fourth quarter earnings season for the S&P 500 “is not off to a strong start”.
To date, the number and magnitude of positive earnings surprises reported by S&P 500 companies are below their 5-year and 10-year averages, Butters said. Overall, the index is reporting a year-over-year decline in earnings for the first time since the third quarter of 2020.
“Looking ahead, analysts expect earnings declines for the first half of 2023, but earnings growth for the second half of 2023,” he also said.
“For the first quarter and second, analysts are projecting earnings declines of -1.1 per cent and -1.2 per cent, respectively. For the third and fourth quarters, analysts are projecting earnings growth of 4.6 per cent and 10.5 per cent, respectively. For all of 2023, analysts predict earnings growth of 4.2 per cent.”
Movers & ShakersBroker Upgrades & Downgrades
(BOQ) Bank Of Queensland Price Target Cut 10% to A$6.75/Share by Macquarie
(BEN) Bendigo and Adelaide Bank Price Target Raised 5.3% to A$10.00/Share by Macquarie
(CWP) Cedar Woods Properties Price Target Cut 3.6% to A$4.80/Share by Morgans
(CCX) City Chic Collective Price Target Raised 41% to A$0.65/Share by Wilsons
(CBA) Commonwealth Bank of Australia Price Target Cut 1.1% to A$94.00/Share by Macquarie
(ELD) Elders Price Target Cut 2.3% to A$10.75/Share by Bell Potter
(IMD)Imdex Price Target Raised 7.1% to A$3.00/Share by Bell Potter
(IMD) Imdex Price Target Cut 5% to A$2.70/Share by Macquarie
(LTR) Liontown Resources Price Target Cut 2.1% to A$2.81/Share by Bell Potter
(LTR) Liontown Resources Price Target Cut 24% to A$2.60/Share by Macquarie
(LTR) Liontown Resources Price Target Cut 9% to A$1.50/Share by Goldman Sachs
(MHJ) Michael Hill International Target Price Cut 4.2% to A$1.58/Share by Citi
(NAB) National Australia Bank Price Target Cut 3.9% to A$31.00/Share by Macquarie
(NAN) Nanosonics Price Target Raised 5.7% to A$5.19/Share by Morgans
(PLS) Pilbara Minerals Price Target Raised 7% to A$4.90/Share by Goldman Sachs
(WBC) Westpac Price Target Cut 2.1% to A$23.50/Share by Macquarie
(WHC) Whitehaven Coal Price Target Cut 4.5% to A$10.50/Share by Bell Potter
(WHC) Whitehaven Coal Price Target Raised 8% to A$9.90/Share by Goldman Sachs
Today's Agenda
No local data on Monday. NAB’s December business surveys will be released on Tuesday, fourth quarter CPI on Wednesday with trade and PPI data on Friday. Markets are expecting that annual headline inflation accelerated to 7.5 per cent in the December quarter, from 7.3 per cent in the previous three months. The RBA forecast that inflation peaked at about 8 per cent in December. Trading will be closed on Thursday for Australia Day.
Overseas data: UK January house prices; US December leading index
Note: Chinese markets will be closed this week for Lunar New Year holidays.
United States
Goldman Sachs on the impact of better-than-previously expected outlooks for China and Europe: “Stronger global growth and a weaker [US] dollar would provide modest tailwinds to US earnings at the index level. In our top-down earnings model, a 1 per cent acceleration in world GDP growth boosts S&P 500 earnings by just 1 per cent. For context, the same acceleration in US GDP would boost earnings by 3 per cent.
“The GS global growth forecast has improved by 0.4 per cent during the last three months, translating into roughly 0.3 per cent of EPS uplift.
“US dollar weakness would also represent a modest boost to S&P 500 EPS. If the dollar were to have maintained its level at the start of 2023 for the whole year, it would have represented 1 per cent growth vs. the 2022 average. However, if the dollar remains at today’s levels through year-end, it will register a 1 per cent decline year/year.
“According to company disclosures, 29 per cent of S&P 500 revenues in 2021 were derived from abroad, with 9 per cent attributed to the Asia Pacific region and just 3 per cent to Greater China specifically. In our model, a 10 per cent decline in the trade-weighted dollar translates into a 2-3 per cent boost to EPS.”
Commodities
TD Securities points to China for gold’s fast start to 2023: ”Comex gold speculators notably added to their length as prices continued to rally to new local highs, but the evidence continues to suggest that substantial Chinese buying activity may have overwhelmingly lifted prices over the last weeks.
“Heading into the holidays, our tracking of Shanghai gold purchases has pointed to a slowing pace of accumulation since the start of China’s behemoth buying activity in early November, with notable liquidations observed over the past few sessions.
“The jury is still out on whether Chinese gold purchases will resume after the holidays, particularly from the official sector, but gold could struggle in the absence of Chinese buying activity without alternative buyers.”
