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As of 8:30 am AEST, the ASX 200 futures are trading 68 points lower, down 0.83%, indicating a potential downturn in today's session.
Market Update
Last Friday, the stock market appeared to pause after an extended rally, driven by expectations of rate cuts. However, optimism surrounding rate cuts began to fade as the broader market digested new earnings data and economic signals. FedEx (NYSE:FDX) reported earnings that were significantly below market expectations, raising concerns about overall economic growth. In contrast, uranium stocks surged following news of a major nuclear facility restart in Pennsylvania, and gold prices reached a new all-time high of US$2,600 per ounce.
US Market Overview
Major US indices closed the week on a mixed note but managed to recover somewhat from earlier lows. After a strong rally on Thursday, which propelled the Dow Jones Industrial Average and S&P 500 to new record highs, the market was less volatile in Friday’s session. Key US benchmarks finished the week with the following performances:
- Russell 2000: +2.0%
- Dow Jones: +1.6%
- S&P 500: +1.3%
- Nasdaq Composite: +1.4%
One of the most significant developments was the sharp decline in FedEx shares, which fell 15.2% after the company’s first-quarter earnings came in nearly 25% below expectations. Reduced demand for priority services, coupled with increased demand for deferred services, constrained yield growth, leading the company to revise its full-year earnings outlook downward by about 2.5%.
Sentiment in the US market saw a noticeable shift, with the American Association of Individual Investors (AAII) reporting a bull-bear spread jump of 15.6 percentage points to 24.4%, marking the largest weekly increase since November 2023. Additionally, Bank of America's "Flow Show" report highlighted that US equities attracted approximately US$34 billion in inflows during the week ending September 19, the third-largest inflow of the year.
ASX Market Snapshot
On the domestic front, several key developments are shaping the outlook for the ASX market:
- Fletcher Building (ASX:FBU): The company is seeking to raise NZ$700 million in emergency funding to reduce debt. Weighed down by a sluggish New Zealand economy, earnings have been under pressure, prompting the capital raise.
- Healius (ASX:HLS): Discussions are underway to sell the Lumus Imaging business to Affinity Equity Partners. The proposed sale, excluding costs, is valued at approximately $700 million.
- Incitec Pivot (ASX:IPL): The company is exploring prospective buyers for its fertiliser operations after a previous sale attempt with Indonesian firm Pupuk Kaltim failed to reach an agreement.
- REA Group (ASX:REA): The company has raised its bid for UK property website Rightmove to 5.9 billion euros, a 7% increase from its previous offer.
Commodities and Sector Watch
Uranium: Global X Uranium ETF (NYSEARCA: URA) rose 4.1% after Microsoft (NASDAQ:MSFT) announced a power purchase agreement with Constellation Energy (NASDAQ:CEG), a major US utility provider. This agreement will facilitate the restart of a significant 835MW nuclear facility in Pennsylvania, bringing substantial new electricity supply to the market. While this news is a positive catalyst for uranium stocks, it may not have the same long-lasting impact as other recent supply-related events.
Gold: Gold prices surged above US$2,600 per ounce for the first time, propelling the VanEck Gold Miners ETF (NYSEARCA: GDX) up by 2% overnight. The continued strength in bullion prices is likely to support a positive session for local gold miners, particularly those on the ASX.
Defensive Sectors: Utilities, telecommunications, and consumer staples were the only sectors that finished in positive territory last Friday, while industrials, materials, and technology stocks underperformed. This pattern could suggest a continued defensive positioning in today’s ASX trading session.
Conclusion
The ASX 200 appears poised for a pullback amid a mixed global economic environment, as investor sentiment digests a range of new developments, from disappointing corporate earnings to surging commodities. Gold and uranium stocks may see further gains in response to supply-side news, while defensive sectors like utilities and consumer staples could hold steady as the broader market faces headwinds.
