Monday report – July 1, 2024

This story is about ANZ GROUP HOLDINGS LIMITED and other companies. More information STOCK ANALYSIS: ANZ

World Night
Sleeps for the night	7737.00	– 35.00	– 0.45%
S&P ASX200	7767.50	+7.90	0.10%
S&P500	5460.48	– 22.39	– 0.41%
Nasdaq Comp	17732.60	– 126/08	– 0.71%
DJIA	39118.86	– 45.20	– 0.12%
S&P500 VIX	12.44	+ 0.20	1.63%
Yield of 10-year US bonds	4.34	+0.06	1.28%
USD Index	105.87	– 0.05	– 0.05%
FTSE100	8164.12	– 15.56	– 0.19%
DAX30	18235.45	+24.90	0.14%

Good morning,

The local market will open weaker after Friday’s declines on the stock exchanges in the US and Europe.

Investors analyzed US inflation data, but also took into account political uncertainty following the US presidential debate and ahead of the elections in France and the UK.

Nike shares fell -20% after a surprising drop in fiscal 2025 revenue forecasts from management. Amazon shares surged further towards record territory after surpassing $2 trillion in market capitalization. Vanguard Mega Cap Growth ETF gained 0.3%.

Semiconductor names held back the broader market after Micron’s disappointing earnings report.

On Friday, the Dow Jones fell -45 points or -0.1%, the S&P 500 lost -0.4% and the Nasdaq fell -126 points or -0.7%.

Treasury yields fell in response to the data releases and the sale of $44 billion in 7-year bonds.

The economic data released on Friday included an upward revision to Q1 GDP, the highest level of jobless claims since November 2021 and a better-than-expected increase in durable orders in May.

The yield on 10-year bonds settled at 4.29%, three basis points lower than a day earlier. The yield on 2-year bonds settled at 4.72%.

In June, the Dow Jones gained 1.1%, the S&P 500 rose 3.5% and the Nasdaq rose 6%.

In the second quarter, the Dow Jones fell 1.7%, the S&P 500 rose 3.9% and the Nasdaq rose 8.3%. It’s a perfect example of the polarization of financial markets (including in Australia).

In the first half of 2024, the Dow gained 3.8%, the S&P 500 rose 14.5% and the Nasdaq rose 18.1%.

Michael Brown Senior Research Strategist at Pepperstone

After a turbulent end to June, dominated by month-end, quarter-end and half-year flows, market participants are preparing for a busy week ahead, dominated by the elections in France and the UK, the latest US employment report and the ECB’s annual meeting in Sintra.

The week that was Topics

Last week was perhaps rather typical of the volatile and indecisive trading that is usually seen at the end of the month, with offsetting flows intensifying in June, which also means the end of the second quarter and the first half of the year dominated for most of the past five trading days and rather muddies the waters when it comes to defining a precise narrative that can be assigned to match price action.

Overall, despite this volatility, volatility has generally remained relatively low, with markets appearing to have entered the typical summer doldrums just as the sun is starting to shine here in the UK (finally!).

The return of the central bank’s “put,” in a more flexible and assertive form than before, continues to largely insulate markets from external shocks while still giving investors confidence that they will move further along the risk curve and stay there. This should continue into the second half of the year, especially given that the BoE is planning its first cut in August and the Fed’s first cut could come as early as September.

To this end, the S&P500 posted an impressive 15% gain in the first six months of 2024, with ten out of eleven sectors ending the first half of the year in the green as the rally was led by Information Technology and Communication Services. The market continued these gains on Friday, with the S&P and Nasdaq 100 posting new intraday highs, although these gains tapered towards the end.

However, This year, the S&P500 index reached 31 all-time highsand the index hit a new record high on one of four trading days.

The path of least resistance clearly still leads up.

The aforementioned September FOMC cut, which remains my own primary argument, was confirmed by last week’s PCE data, a clear standout in an otherwise light economic report.

The report showed the core PCE deflator rose just 0.1% m/m in May, in line with consensus and down from an upwardly revised 0.3% m/m rise a month earlier. The core PCE m/m rate was 0.08% to two decimal places, the slowest monthly increase in the Fed’s preferred inflation gauge since November 2020.

On a year-over-year basis, the PCE report was equally good news for policymakers. Core PCE rose 2.6% year-over-year in May, the slowest pace since early 2021. Taken together, the data should help the FOMC gain additional confidence that the U.S. economy remains on track to return to 2% inflation, consistent with the message conveyed in the latest CPI report released earlier this month.

Of course, “one swallow doesn’t make a summer,” so policymakers will be looking for further confirmation of this disinflationary trend before pulling the trigger on the first 25-basis-point rate cut; the USD OIS curve still fully discounts this move to November, although it estimates a 2 in 3 chance that such a cut will occur in September, with a total valuation of -40 bp of cuts this year.

Last week, several other important data from the US were published, but they did not have a major impact on the market.

As expected, first quarter GDP was revised upwards by 0.1 percentage points to 1.4% on an annualized quarter-on-quarter basis, confirming that the first three months of 2024 broke a six-quarter streak of GDP growth of over 2%, and provide further evidence that the economy continues to normalize and both growth rates and price pressures continue to ease.

As economic momentum eases somewhat, there are still signs of cracks forming in the labor market. For example, the number of people still unemployed rose to 1.839 million in the week ending Jan. 15^vol June, a significant increase from the 1.821 million recorded in the previous seven days and the highest level since November 2021. Given that this data refers to the June nonfarm payroll survey week, the soft claims print could introduce some downside risk to the nonfarm payroll figure, due next Friday 5^t July.

Meanwhile, in the equities space, as noted above, the path of least resistance continues to be up, with both the S&P 500 and Nasdaq 100 posting their fourth straight weekly gains. It seems likely that this path will continue for at least the next few weeks, with participants now looking at CPI at 11^vol July and the start of the Q2 12 earnings season^t July the Next Major Risk for Stocks Friday’s jobs report is likely to be ignored unless it turns out to be a significant surprise, given that it will be released on a day when most participants will be enjoying an extra-long Independence Day weekend.

Next week

In the coming week, which will of course be interrupted by the holidays, the main topic on the markets will probably be political events. The United States celebrates Independence Day on Thursdayseeing many markets closed. This will also result in markets closing early on Wednesday, while Friday is likely to be a day of light volumes and significantly reduced liquidity as many spend the long weekend with 4^t July celebrations.

The coming week will also bring an election on this side of the Channel, although a general election result seems almost certain at this stage, with Labour still maintaining a lead of around 20 points in the polls with less than a week to go until election day.

Today on the calendar:

-In Australia, data on house prices, inflation, production and job advertisements

-ANZ Bank ((ANZ)) pays a dividend

-Charter Hall Retail REIT ((CQR)) ex-dividend

Elsewhere:

-Caixin China Manufacturing Purchasing Managers’ Index (PMI)

– France: First round of elections goes to the far right (but not cause for concern)

Spot metals, minerals and energy futures
Gold (ounce)	2336.90	– May 1	– 0.04%
Silver (ounce)	29.43	+0.18	0.62%
Copper (pound)	4.37	+0.04	0.91%
Aluminum (pounds)	1.14	+0.01	1.08%
Nickel (pounds)	7.76	– 0.02	– 0.25%
Zinc (pound)	1.32	– 0.00	– 0.20%
West Texas Oil	81.46	– 0.40	– 0.49%
Brent Crude	84.84	– 0.60	– 0.70%
Iron ore	106.51	0.00	0.00%

Australian share market over the last thirty days

Index	June 28, 2024	One week to date	Month to present (June)	Quarter to date (April-June)	Year to date (2024)
S&P ASX 200 (ex-dividend)	7767.50	-0.37%	0.85%	-1.64%	2.33%

CHANGES IN BROKER RECOMMENDATIONS OVER THE LAST THREE TRADING DAYS
CCX	City Chic Collective	Change option to Neutral from Buy	City
CKF	Collins Food	Change to Buy from Neutral	UBS
LTR	Liontown Resources	Downgrading from Buy to Neutral	UBS
PDN	Paladin Energy	Upgrade from ‘Hold’ to ‘Buy’	Potter’s Bell
SUL	Super retail	Change to Buy from Neutral	UBS
UNI	Universal store	Change to Buy from Neutral	UBS

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