ASX Outlook: Market Set for Gains Amid US Stock Rally

Highlights: 

• ASX Futures Rise: ASX 200 futures indicate a positive start, up 53 points (+0.63%), following overnight strength in US equities. 
• Commodity Strength: Base metals and gold gain as the US dollar weakens, while oil prices remain mixed amid US-China trade tensions. 
• Tech Stocks Surge: Appen (ASX:APX), Wisetech Global (ASX:WTC), and DroneShield (ASX:DRO) rally after Palantir’s strong earnings report. 

The Australian share market is positioned for a stronger opening, with ASX 200 futures advancing 53 points (+0.63%) by 8:30 am AEDT. This follows a positive session on Wall Street, where US stocks surged, erasing earlier losses driven by trade tensions and mixed corporate earnings. 

The ASX 200 ended the previous session slightly lower, closing 5 points (-0.06%) down at 8,374. The downturn was largely influenced by weakness in the Real Estate (-1.11%), Consumer Discretionary (-0.76%), and Energy (-0.73%) sectors. Meanwhile, IT (+1.52%), Materials (+0.93%), and Health Care (+0.01%) provided resilience to the broader index. 

The Consumer Discretionary sector, which had recorded a robust 7.13% gain in January, continued its pullback. Kogan (ASX:KGN) fell 2.81% to A$4.49, while Aristocrat Leisure (ASX:ALL) declined 1.3% to A$73.10, and Myer (ASX:MYR) slipped 1.12% to A$0.89. 

Interest Rate Expectations and Market Sentiment 

Traders have priced in 85 basis points of interest rate reductions from the Reserve Bank of Australia (RBA) for 2024, with a February rate cut of 25 basis points now nearly fully expected. 

Tech stocks saw strong gains, fueled by an after-hours surge in US-listed Palantir, which jumped 22.75% to US$102.79 following a standout earnings report. This strength extended to Australian tech firms, with Appen (ASX:APX) up 9.77% to A$2.81, Wisetech Global (ASX:WTC) climbing 3.60% to A$124.50, and DroneShield (ASX:DRO) advancing 3.25% to A$0.63. ZIP Co (ASX:ZIP) recovered from the previous session’s losses, gaining 2.19% to A$2.33. 

US Market Momentum 

Wall Street ended its session at daily highs, reversing earlier losses. Investors responded to a mix of corporate earnings and economic data, while risk appetite improved after details of China’s response to US tariffs were assessed as moderate. 

China’s retaliatory measures included tariffs on US oil, coal, and strategic materials such as tellurium and tungsten, affecting approximately US$20 billion worth of goods—significantly smaller than the US$450 billion of tariffs imposed by the United States. 

Palantir’s stock soared 24% to US$103.83 after the company outperformed earnings forecasts and issued an optimistic outlook. In contrast, Alphabet (NASDAQ:GOOGL) fell 7.47% to US$192.47 in extended trading after posting weaker-than-expected earnings and announcing a projected 42% rise in capital expenditure to US$75 billion for 2025. 

Investors will closely watch upcoming US corporate earnings, with key reports from Uber (NYSE:UBER), Walt Disney (NYSE:DIS), MicroStrategy (NASDAQ:MSTR), Ford (NYSE:F), and Arm Holdings (NASDAQ:ARM) due in the next 24 hours. 

European Market Developments 

European equities delivered mixed performances. The FTSEurofirst 300 index rose 0.2%, while London’s FTSE 100 edged 0.2% lower. 

Luxury carmaker Ferrari (BIT:RACE) led European gains, surging 8% after forecasting at least a 5% increase in revenue and core earnings for the year. Meanwhile, financial stocks struggled, with UBS Group (SWX:UBSG) dropping 7% after CEO Sergio Ermotti warned that Switzerland’s higher capital requirements would impact shareholder returns. 

Currencies and Commodities 

The US dollar weakened in response to new US tariffs and China's measured response, leading to strength in major currencies: 

• Euro: Rose from US$1.0273 to US$1.0386, settling at US$1.0380. 

• Australian Dollar: Climbed from US$0.6168 to US$0.6260, closing near US$0.6255. 

• Japanese Yen: Strengthened from JPY155.48 per US dollar to JPY154.16, trading near JPY154.30. 

Commodity prices responded favorably to the softer US dollar: 

• Brent Crude: Up US$0.24 (+0.3%) to US$76.20 per barrel. 

• US Nymex Crude: Down US$0.46 (-0.6%) to US$72.70 per barrel. 

• Copper Futures: Gained 1.1%. 

• Aluminium: Added 0.5%. 

• Gold Futures: Jumped US$18.70 (+0.7%) to US$2,875.80 per ounce, with spot gold hitting a record US$2,845.14. 

• Iron Ore: Increased US$0.38 (+0.4%) to US$105.40 per tonne, ahead of China’s reopening post-Lunar New Year. 

Small-Cap Sector and Exploration Updates 

The S&P/ASX Small Ordinaries Index (XSO) finished 0.32% higher at 3,170.60. Despite a slow start to the week, several small-cap miners and explorers delivered key updates: 

• Cyprium Metals (ASX:CYM): Upgraded its mineral resource estimate at the Maroochydore Copper-Cobalt Project in Western Australia, now totaling 370.8 million tonnes at 0.43% copper and 227 ppm cobalt. 

• Dynamic Metals (ASX:DYM): Provided an exploration update for its Cognac West prospect in Western Australia, progressing drill targets. 

• Brightstar Resources (ASX:BTR): Released results from diamond drilling at the Lord Byron deposit, part of the 293,000-ounce Jasper Hills Gold Project. The program aims to refine geological models ahead of an updated resource estimate. 
• Apollo Minerals (ASX:AON): Initiated Phase 2 drilling at the Salanie Gold Project in Gabon following strong results from 2024 drilling, confirming high-grade gold mineralization with assays reaching up to 124 g/t.