ASX set to rise after mega-caps boost Wall Street

By Johann M Cherian and Ankika Biswas

The Australian sharemarket is set to open stronger after Wall Street’s main indexes climbed overnight, underpinned by strength in some mega-caps, while caution ahead of a report on US inflation and big bank earnings later in the week kept investor sentiment in check.

ASX futures edged up 13 points, or 0.2 per cent, to 7458 as of 7:59am AEDT. On Wall Street, the Dow Jones Industrial Average closed 0.45 per cent higher at 37,695.73, the S&P 500 rose 0.3 per cent and the Nasdaq Composite climbed 0.75 per cent. The Aussie dollar traded largely unchanged at 66.97 US cents.

Wall Street closed higher as some mega-cap stocks advanced.
Wall Street closed higher as some mega-cap stocks advanced.Credit: Reuters

Microsoft, Alphabet and Amazon.com rose between 0.9 per cent and 1.9 per cent as the yield on the benchmark 10-year note inched lower ahead of a highly anticipated government bond auction.

Megacap stock Nvidia gained 2.3 per cent to hit a record high after TSMC, the world’s largest contract chipmaker, beat fourth-quarter revenue expectations, while Facebook’s owner Meta Platforms climbed 3.7 per cent to a more than two-year high.

Gains in equities have remained limited on Wall Street since the turn of the year as expectations of early rate cuts, which had driven much of the rally towards the end of 2023, scaled down following contrasting economic data and mixed signals from Federal Reserve officials.

In the Australian market, the ASX ended the previous session firmly in the red despite a brief uptick following a report that showed inflation had slowed to the lowest rate since January 2022. The S&P/ASX200 dropped 52 points, or 0.7 per cent, to 7468.5 at the close as miners, utilities and consumer staples dragged the index lower.

All eyes are now on America’s December consumer and producer inflation reports, due tonight and on Friday, respectively, which could help determine the monetary policy trajectory for the US central bank. Investors will also closely monitor comments by New York Fed President John Williams, who is scheduled to speak later in the day.

Skyler Weinand, chief investment officer at Regan Capital, believes any strong surprise on the inflation front may cause bond and equities to sell off.

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Market participants on Wall Street have scaled back expectations for at least a 25-basis-point rate cut in the world’s largest economy in March, and see a near 67 per cent chance, down from around 86 per cent in the final week of 2023, as per the CME FedWatch Tool.

On Friday, banking giants JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are expected to report lower fourth-quarter profits.

“Banks are going to be in a very large hole for at least the next two years, unless yields drop tremendously,” Weinand added.

The lenders slipped between 0.8 per cent and 1 per cent overnight, pushing the S&P 500 bank index to a one-week low.

Boeing rose 0.9 per cent, recovering from a 9.3 per cent tumble in the last two sessions. CEO Dave Calhoun acknowledged errors by the US planemaker as more than 170 jets remained grounded for a fourth day.

Crypto stocks, including Coinbase and Riot Platforms, softened as Bitcoin prices dipped after the US securities regulator said a fake social media message was posted on its account regarding the eagerly awaited approval of exchange-traded funds.

Bitcoin traded 1.5 per cent lower at $US45,579 as of 8:22am AEDT amid expectations that the Securities and Exchange Commission is poised to green-light ETFs to hold the cryptocurrency, while Ether gained on optimism that the token may be the next to win approval.

The SEC is widely expected by analysts to announce a decision about the ETF applications imminently.

Reuters, with staff reporters

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