Following a mixed session on Wall Street overnight, the local market is set to open slightly higher this morning. The ASX 200 futures are pointing to a 0.1% lift on the open to 8,214 points.
Citi says the ASX 200 will reach 8,600 points by the end of 2025, implying a 5.4% return (before dividends), following a 7.5% rise in 2024.
The broker expects minimal earnings growth in the first half of FY25, with only a modest improvement in the second half. However, it anticipates reasonable earnings growth of 7% in FY26, driven by the resources sector, aligning closely with market consensus.
“Valuations for the ASX200 remain stretched on forward earnings, with the ASX200 currently trading on a 17.9 times forward PE, above its long-run average of 14.6 times,” said Citi equity strategist Liz Dinh.
“The delivery of rate cuts this year should bode well for market sentiment, even if some of these market expectations are already priced in.
“Our domestic equity market will continue to benefit from the ongoing flow of money into superannuation funds and thus continual equity market inflows.
“So despite the muted earnings outlook for the first half of this calendar year then a modest pick-up in the second half, we forecast for the ASX200 index to end 2025 at 8,600,” Dinh concluded.
International markets
US sharemarkets were mixed in choppy trade on Tuesday as investors gauged US inflation data and braced for quarterly earnings reports to justify stock valuations and the strength of the US economy.
- The Dow Jones index rose by 221 points or 0.5%.
- The S&P 500 index gained 0.1%.
- The Nasdaq index shed 44 points or 0.2%.
The yield on the benchmark 10-year US Treasury bond hovered just below its 14-month high, pressuring big technology stocks.
- A gauge of 'Magnificent Seven' megacaps slipped 1.0%.
- Eli Lilly fell 6.6% after it forecast fourth-quarter sales of weight-loss drug Zepbound below estimates.
- Utilities stocks Vistra, GE Vernova and Constellation Energy led gains, up between 3.5% and 5.2%.
- Chemical manufacturer and supplier Celanese jumped 5.4% on the back of a Bank of America double upgrade to buy from underperform.
- Goldman Sachs lifted 1.5% ahead of its earnings results.
- Caterpillar was up 2.5%.
European sharemarkets wrapped up Tuesday with little change as the pressure from rising bond yields continued to weigh on equities, while the looming threat of tariffs from US President-elect Donald Trump kept investors on edge.
- The continent-wide FTSEurofirst 300 index ended flat.
- In London, the UK FTSE 100 index fell 0.3%.
The yield on Germany's 10-year bond climbed to 2.6%, its highest point since July 2024. The healthcare sector was the biggest drag on the benchmark share index, slipping by 1.6%. Eurozone banks rose by 1.1%.
Currencies
Currencies were mixed against the US dollar in European and US trade.
- The Euro rose from US$1.0242 to US$1.0307 and was near US$1.0305 at the US close.
- The Aussie dollar fell from US62.05 cents to US61.66 cents was near US61.90 cents at the US close.
- The Japanese yen dipped from 157.30 yen per US dollar to JPY158.17 and was near JPY158.00 at the US close.
Commodities
Global oil prices slipped on Tuesday from the previous day's four-month highs but the market remained supported by continuing focus on the impact of new US sanctions on Russian oil exports to key buyers India and China.
The Brent crude price fell US$1.09 or 1.3% to US$79.92 a barrel. The US Nymex crude price lost US$1.32 or 1.7% to US$77.50 a barrel.
Base metal prices edged higher on Tuesday.
- Copper futures rose 0.3%, supported by data showing that new Chinese bank loans beat forecasts as government stimulus measures slowly spurred credit demand.
- Aluminium futures inched up 0.1%.
The gold futures price rose US$3.70 or 0.1% to US$2,682.30 an ounce on Tuesday after US inflation data came in slightly weaker than expected, giving investors faint hope that the US Federal Reserve would continue on its rate-easing path this year, sending the US dollar lower. Spot gold was trading near US$2,676 an ounce at the US close.
Iron ore futures lifted US$1.27 or 1.3% to US$99.99 a tonne on Tuesday, helped by lower shipments from key producers and top consumer China's robust steel exports
What’s on?
In Australia, engineering construction activity data is scheduled.
In the US, the Consumer Price Index (CPI) is released with the Empire State manufacturing index and US Federal Reserve's Beige Book. BlackRock, Bank of New York Mellon, Citi, Goldman Sachs, JPMorgan Chase and Wells Fargo are all scheduled to release earnings results.
What’s happening in small caps?
- Elixir Energy Ltd (ASX:EXR, OTC:ELXPF) has booked a maiden contingent resource for deep dry coals at its Grandis Gas Project in Queensland of 245 BCF, which lifts the project’s total 2C recoverable gas resources by 17% to 1,715 BCF.
- St George Mining Ltd (ASX:SGQ) has signed a MoU with the Beijing Fangda, providing a framework for ongoing collaboration in relation to development of the advanced, high-grade Araxá niobium-REE Project in Minas Gerais, Brazil.
- Livium Ltd (ASX:LIT, OTC:LMMFF) has signed an exclusive battery recycling agreement with a leading global energy storage solutions provider.
- Yandal Resources Ltd (ASX:YRL) aircore drilling results, including 11 metres at 1.7 g/t gold from 97 metres to end of hole, demonstrate the discovery potential of the large-scale Caladan target area within the broader Ironstone Well-Barwidgee Gold Project in WA.