The ASX is expected to lift today. ASX 200 futures are up 0.3% to 8481 points in the closing minutes of US trading, signalling a potential new record close for the local index.
Yesterday, the ASX200 finished 46 points (0.55%) higher at 8493. All eleven sectors closed higher, led by the Energy (+1.20%), Consumer Discretionary (1.11%), Consumer Staples (+0.95%) and Financial (+0.66%) sectors.
Yesterday’s high of 8515.70 was marginally above its previous peak of 8514.5 from early December, boosted by cooler Q4 inflation reading and expectations the RBA will start a shallow rate-cutting cycle in February.
So far this year, the ASX200 has gained 4.1% and on track for its best January since the 6.22% gain that followed China's reopening from lockdown in 2023.
However there is a caveat.
“A good start to the year doesn’t guarantee all one-way traffic. As a reminder, back in 2023, after a strong January, the ASX200 then fell almost 9% over the next two months as the COVID reopening euphoria in China fizzled out,” IG Markets analyst Tony Sycamore notes.
US stocks higher
US stocks closed higher overnight as key earnings reports were released, including a bullish note from Tesla, but a disappointing forecast from Microsoft.
“On the data front, US Q4 GDP grew by an annualised 2.3% in Q4, falling short of the 2.6% forecast,” Sycamore notes.
“Elsewhere initial jobless claims decreased by 16,000 to 207,000 for the week ending January 25th, well below the expected 220,000, marking a significant drop from the near two-month high of the previous week, aligning with the Federal Reserve’s statement yesterday that the US labour market has steadied at solid levels.
"Tonight, Core PCE inflation is expected to see headline PCE rise to 2.6% year-on-year, and core PCE is expected to remain stable at 2.8%.
“In the stock space, Meta rose 1.55% to $686.99 after exceeding earnings expectations and announcing an ambitious investment in open-source AI. Tesla surged 2.9% to $400.28 as investors chose to focus on bullish remarks from Elon Musk despite the company missing earnings expectations.
"Conversely, Microsoft fell 6.2% to $414.99 due to a disappointing revenue forecast, reflecting concerns about its significant investment in Azure. Apple reported an earnings beat after the market closed, consisting of EPS of $240 vs $2.34 exp and Revenue of $124.3B vs $124b exp.”
Europe reaches record highs
European markets surged to record highs on Thursday following the European Central Bank’s (ECB) fifth consecutive interest rate cut.
The ECB reduced the deposit rate by 25 basis points to 2.75%, in line with expectations, signalling openness to further policy easing as concerns over sluggish economic growth took precedence over inflation risks.
Denmark’s central bank followed suit, cutting its key interest rate by 25 basis points to 2.35%. Rate-sensitive real estate stocks rose 1.8% as German bond yields declined. The FTSEurofirst 300 index advanced 0.8%, while London’s FTSE 100 gained 1% to close at a record high.
Currencies and commodities
Currencies showed a mixed performance against the US dollar in European and US trade on Thursday. The euro declined from US$1.0462 to US$1.0387 before settling near US$1.0395 at the US close.
The Australian dollar weakened from US62.39 cents to US62.02 cents, recovering slightly to trade near US62.10 cents at the US close. Meanwhile, the Japanese yen strengthened from 154.73 yen per US dollar to JPY153.81 before easing to JPY154.40 at the US close.
Global oil prices remained steady as markets assessed the potential impact of looming US tariffs on Canadian and Mexican crude, which could take effect over the weekend. Brent crude edged up US29 cents, or 0.4%, to US$76.87 per barrel, while US Nymex crude gained US11 cents, or 0.2%, to US$72.73 per barrel.
Base metal prices rose as investors awaited further clarity on potential US tariff measures. Copper futures increased 0.6%, while aluminium futures posted modest gains.
Gold surged on safe-haven demand, with futures jumping US$51.70, or 1.9%, to a record high of US$2,845.20 per ounce. Spot gold was trading near US$2,793 at the US close.
Iron ore futures remained flat at US$101.33 per tonne as market activity slowed due to China’s Lunar New Year holiday.
On the small cap front
Looking at small caps. The S&P/ASX Small Ordinaries (XSO) closed 0.53% down yesterday to 3,197.80. Over the past five days, the index is 0.25% lower.
There are plenty of quarterlies to digest today including from Apollo Minerals Ltd, Brookside Energy Ltd, ArchTIS Ltd, Eclipse Minerals Ltd, European Lithium Ltd, Elixir Energy Ltd and more.
Meanwhile Maximus Resources Ltd has started drilling at its Lefroy Lithium JV, starting a ~3,000m Reverse Circulation (RC) drill program with the Korea Mine Rehabilitation and Mineral Resources Corporation.