US, China, Australia Eco focus points & investment implications for Fed rate cut bets, Goodman Group, copper & BHP
Corporate earnings have been growing much stronger than expected in Australia and the US, while the markets fear gauge as measured by the VIX has calmed, and it seems Middle East tension has eased. So equities are once again being supported higher, despite inflation blowing hotter than expected. As such, Australia's ASX200 and the US benchmarks' the S&P500 and the Nasdaq 100 have recouped some lost ground.
This week however, we are focused on several key areas. From why the saying 'sell in May and go away’ is wrong and outdated. Goodman Group defies high interest rates. Amazon almost always ups the ante and delivers stronger than expected results. And theSemiconductor sector hot sauce - what to watch.
But first, let's reflect on this week's economic updates from the US, China and Australia and potential implications.
The Fed Chair Jerome Powell will probably become more hawkish at the Fed's meeting April 30-May 1 and hint rates need to stay higher for longer following hotter than expected CPI and PCE inflation data. Currently the Fed Fund Futures are only fully pricing in one interest rate cut in December. Then a cut in January 2025. If those cuts are pushed back again, expect bond yields to likely spike, and that would pressure down US equities. Watch the QQQ $Invesco QQQ Trust (QQQ.US)$, and SPY $SPDR S&P 500 ETF (SPY.US)$ and IVV $iShares Core S&P 500 ETF (IVV.US)$.
Australian economic data will probably show another rise in house prices. Yet just one property stock in the Australian-REITs sector Goodman Group $Goodman Group (GMG.AU)$ is trading up by double digits (up 24%), which reflects that most property groups are hurting amid higher for longer rates.
Most property stocks are underwater YTD yet Goodman, the biggest warehouse and logistics property giant's shares trade at record all time highs and this is supported by Goodman growing its rental and operating income. GMG also upgraded its earnings for 2024, saying it's on track for 11% EPS growth. This is underpinned by its mega-cap tenants, and 98.4% occupancy. Its Tenants span across logistics, automotive, food, healthcare and consumer discretionary names including DHL, BMW, Bridgestone, Hello Fresh, Showpo, Chep, Woolworths. That said, the average analyst sees Goodman $Goodman Group (GMG.AU)$ shares as now being overvalued.
Chinese economic data will probably show its economy continued to expand in the second quarter, but at a slower pace, accounting for holiday distortions. I am watching the global growth proxy, Copper as its price trades at 2-year highs and broke above $10,000 per tonne for the first time in two years in London.
China, the biggest copper consumer accounts for almost 60% of demand. If Chinese data is stronger than expected and if China announces much needed stimulus, so it can achieved its 5% GDP goal, watch the copper price likely gain further legs. Regardless the copper price seems supported to move higher, given global demand for electrification is rising, with solar and EV adoption boosting copper demand, at a time when copper supply is limited. Keep in mind the copper price is sensitive to the rise of the USD. This week we could see the USD spike if the Fed becomes hawkish and that could pressure copper to lose ground, especially as copper price seems ‘overbought’.
That said, watch Copper stocks like copper giant, Freeport-McMoRan $Freeport-McMoRan (FCX.US)$ which trades up 18% this year at 2-year highs, while BHP $BHP Group Ltd (BHP.AU)$ trades 14% down YTD. BHP's shares naturally fell to fresh April lows, after it made a $60 billion takeover offer for Anglo American $ANGLO AMERICAN (AAUKF.US)$ which was later rejected. BHP shares are still deemed as undervalued compared
If BHP makes another sweeter deal and if it goes ahead, BHP-Anglo will control 11% of the world's mined-copper supply and it would make BHP the biggest copper company in the world, while it maintains its crown as the biggest iron ore company.
Bloomberg argues that if BHP's $BHP Group Ltd (BHP.AU)$ takeover of Anglo $ANGLO AMERICAN (AAUKF.US)$ goes ahead, 60% of its earnings would be tied to the steel cycle, which could prompt BHP to sell iron ore and coal.
If you are a US or Aussie investor, here's two reasons NOT 'sell in May and go away'
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Jessica Amir OP : China's economy is gaining strength and its supporting commodities and the notion EV demand will pick up.
China's headline April manufacturing PMI fell less than expected and remained in growth phase.
- China's April manufacturing PMI fell to 50.4 from 50.8 in March (vs 50.3 est').
- China's Caixin manufacturing purchasing managers' index rose to 51.4 from 51.1 in March
- This is the the highest reading since Feb. 2023 and the 6th consecutive month of growth.
- Output rose to 53.1 vs 52.8 in March, marking the highest reading since May 2023.
- New orders rose vs prior month and were the highest reading since Feb. 2023
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