Nasdaq outperforms on Wall St rally, Charter Hall, Origin Energy, Resmed, IGO, on watch: ASX to rise

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Global major indexes rally on strong earnings results, shrugging off US GDP data which showed a contraction and other geopolitical headwinds. 

Good morning. Earnings lift offsets woes. I’m Melissa Darmawan for Finance News. This is your market outlook.

The Australian sharemarket is set to go after an optimistic session on Wall St.

Wall St gains on tech surge

US stocks were in rally mode as stocks gained momentum as investors kept a close eye on big tech earnings. Facebook owner Meta and Qualcomm surged as investors bought into the stock after posting its quarterly reports. The moves show signs of optimism for the beaten down tech sector which has been on the downside for most of the year.

At the closing bell, the Dow Jones gained 1.9 per cent to 33,916, the S&P 500 added 2.5 per cent to 4,288 and the Nasdaq jumped 3.1 per cent to 12,872.

Despite the rally, the Nasdaq composite is on track for its worst month since March 2020, down 9.5 per cent.. The S&P 500 is down nearly 5.4 per cent and the Dow is off by 2.2 per cent in April, ahead of the last trading day of the month.

Across the S&P 500 sectors, information tech was the outperformer, up 4 per cent, followed by communication services, which gained 3.9 per cent, strong performances here with energy added 3.1 per cent. The rest closed higher with utilities as the worst performer, down 0.5 per cent.

The yield on the 10-year treasury note rose by 1 point to near 2.83 per cent, gold edged higher by 0.1 per cent to US$1,891 an ounce after hitting a low around US$1,870 as the strength in the greenback gained support which means we will continue to see weakness in this safe haven metal.

Why today’s reaction?

So goes Apple, so goes the market with the tech titan, rallying ahead of their results after the bell boosting these the major indexes. Joining Apple was e-commerce giant Amazon.com set to release results too. Investors focused on Facebook's parent company Meta, sending shares higher by 17.6 per cent. The social network posted a larger-than-expected profit and rebounded from a drop in users, shrugging off the miss in revenue expectations.

Today’s session is an example of where investor sentiment and expectations are at. We have seen consumer sentiment data hit a decade low as investors continue to climb the wall of worries on rising inflation, the central bank’s plan to tighten monetary policy and control economic growth.

Then good news unveils and traders get bullish, putting risk back on the table despite what it means around the future value of these growth stocks. Analysts use a discounted cash flow model to value growth stocks to determine what the future cash flow or earnings is worth today, and it includes an interest rate. The higher the interest rate, the lower the earnings are worth today to say it simply.

Reinforcing this is that the tech earnings overshadowed concerns of a recession, which is two straight quarters of an economic contraction.

US GDP unexpectedly shrunk to 1.4 per cent in the first quarter, so yes, it’s a contraction marking the weakest three month period since March 2020 when the pandemic started. The first quarter GDP slump is an abrupt reversal for an economy that posted a 6.9 per cent annual GDP growth in the fourth quarter of last year. Supply disruptions continue to weigh on multiple sectors, mostly due to a widening trade deficit with the US importing more than they are exporting.

Meanwhile, oil prices continue to recover and appear to be consolidating, closing 3.3 per cent higher. Analysts believe that a breakout is on the cards with several catalysts, ranging from extended lockdowns in China, the war in Ukraine leading to further embargoes or sanctions, and/or a slowdown in output from OPEC+.

Bear in mind, the Kremlin is demanding to be paid in roubles, if more countries push back on doing so like we saw with Poland and Bulgaria, and Russia cuts off more supplies amid this pushback, there’s an upside risk that this could ripple over into the oil market.

Figures around the world

Across the Atlantic, European markets closed higher. Paris added almost 1 per cent, Frankfurt gained 1.4 per cent while London’s FTSE rose 1.1 per cent.

On the London Stock Exchange, Rio lost 0.8 per cent, BP jumped 2.6 per cent and Shell added 2.6 per cent.

Asian markets closed higher. Tokyo’s Nikkei gained 1.8 per cent, Hong Kong’s Hang Seng added 1.7 per cent while China’s Shanghai Composite rose 0.6 per cent.

Yesterday, the Australian sharemarket closed 1.3 per cent higher at 7,357. Join me here for yesterday’s action, “Resources rally puts a glimmer on buoyant ASX, closes 1.3% higher”.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 0.7 per cent gain.

What to look out for today

Technology stocks look ready to roar if we take a strong lead from Wall St and energy stocks could be looking to pop, and iron ore miners are set to extend its gains amid stimulus hopes from China.

Production updates is set to continue with IGO (ASX:IGO), Oceanagold (ASX:OGC), Origin Energy (ASX:ORG), PointsBet (ASX:PBH), Reliance Worldwide (ASX:RWC), and Resmed (ASX:RMD) on the docket.

A couple of broker ratings, CLSA has downgraded ASX (ASX:ASX) to underperform while Morgan Stanley reinstated Domino’s Pizza (ASX:DMP) to overweight with a price target of $100.

Charter Hall (ASX:CHC) is in the box seat for a $2.1 billion deal for Melbourne’s Southern Cross Towers, according to The Australian.

IPO

There is one company set to make its debut on the ASX today. Keep an eye out for Maronan Metals (ASX:MMA) after raising $5.5 million at 20 cents per share.

Ex-dividend

There are 3 companies set to trade without the right to its dividend.

Metrics Income Opportunities Trust (ASX:MOT) is paying 1.53 cents unfranked
Metrics Master Income Trust (ASX:MXT) is paying 0.72 cents unfranked
Partners Group Global (ASX:PGG) is paying 0.6833 cents unfranked

Dividend-pay

There are 15 companies set to pay eligible shareholders today.

Bisalloy Steel Group (ASX:BIS)
Cedar Woods Properties (ASX:CWP)
Duxton Water (ASX:D2O)
Future Generation Investment Company (ASX:FGX)
Kelly Partners Group (ASX:KPG)
Lion Selection Group (ASX:LSX)
Money3 Corporation (ASX:MNY)
Pm Capital Global Opportunities Fund (ASX:PGF)
Perpetual Equity Investment Company (ASX:PIC)
Plato Income Maximiser (ASX:PL8)
Ram Essential Services Property Fund (ASX:REP)
Rural Funds (ASX:RFF)
Ridley Corporation (ASX:RIC)
Wam Leaders (ASX:WLE)
Yancoal Australia (ASX:YAL)

Commodities

Iron Ore has gained 1.1 per cent to $142.00. Its futures point to a 1.3 per cent gain.

Gold has gained $2.60 or 0.1 per cent to US$1891 an ounce. Silver is down $0.32 or 1.4 per cent to US$23.18 an ounce.

Oil has gained $3.34 or 3.3 per cent to US$105.36 a barrel.

Currencies

One Australian Dollar at 7:40 AM has weakened from yesterday, buying 70.98 US cents (Thu: 71.27 US cents), 56.98 Pence Sterling, 92.88 Yen and 67.61 Euro cents.

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics

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