A US market correction? Green, gold, EV stocks a focus. Why China banks will cause ripples for ASX
US equities could take a short-term haircut with the Fed’s preferred inflation metric being released this week and low volume ahead of Good Friday could exacerbate end-of-quarter moves. Although there's talk of a potential 5-7% correction in the US and options pricing suggests the S&P500 could fall, bulls may quickly buy any dip in quality names ahead of what’s expected to be a strong year for US equities. Chinese bank earnings put focus on commodities and Aussie commodity stocks this week, with copper prices +14% from their lows, and iron ore prices +11%. Plus, green, gold and EV stocks will be in the limelight after Biden's new EV policy and with the ECB President speaking.
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Climate policies, Fed cutting and ECB front and centre. Why eyes are on green, gold and EV stocks
Last week Biden's administration created a new rule that delivered the strongest-ever vehicle pollution standards in US history. Its move that will accelerate EV sales with the EPA imposing tailpipe emission limits. They're so stringent they'll compel automakers to rapidly boost sales of battery-electric and plug-in hybrid models. And while last week we got confirmation that the Fed will likely cut three times this year, the focus this week will be broader rate cuts in the midst of ECB talk. ECB President Christine Lagarde attends the EIB Group Climate and Environment Advisory Council in Luxembourg.
So this brings focus on not just EV makers, and lithium stocks (such as $Albemarle(ALB.US$, $Sociedad Quimica Y Minera De Chile(SQM.US$, $Pilbara Minerals Ltd(PLS.AU$, $Liontown Resources Ltd(LTR.AU$ that are moving up off their lows), but also uranium given the EU depends on Nuclear power for electricity, while gold and gold producers could muster up with potential further hints of ECB rate cuts toward the back end of 2024.
In the US there are lots of nervous nellies around. Options suggest the S&P500 could pull back. Volatility is expected to pick up. But bulls could buy the dip with end of quarter rebalancing
On Wednesday Fed Governor Christopher Waller speaks at an event held by the Economic Club of New York to discuss the economic outlook. But with the Fed's preferred inflation metric PCE for February, being released at the end of the week, you need to watch high PE stocks, given there is talk of a potential 5-7% correction.
Options on the S&P500 (including the SPY) suggest the market could fall, and many are hedging for this. Moves could be volatile, at the end of the week as well, with volume thinning (people are on holiday for Easter), and this is all while end-of-quarter rebalancing will be taking place. So moves will be exaggerated.
In Australia, data will come thick and fast. But the ASX200 seems in goldilocks spot
The ASX200's technical indicators look very different to the US' S&P500. The ASX's $S&P/ASX 200(.XJO.AU$ RSI and MACD indicate the ASX is not overbought, whereas the S&P500 $S&P 500 Index(.SPX.US$ $SPDR S&P 500 ETF(SPY.US$ looks toppy. So in Australia, focus will likely be on what could support the RBA keeping rates on hold. And signs of the Aussie economy faltering, which could necessitate the RBA in potentially gaining ammunition to cut. On Tuesday at the AFR 10th annual banking summit we'll hear from RBA's head of payments policy, Ellis Connolly. On Wednesday Australia's monthly CPI is released. Thursday Australian retail sales and private credit is released.
Why are all these important? We know business is strong given the cracking employment numbers released last week. But retail numbers this week are expected to show sales slowed, while monthly inflation is expected to pick up to 3.5% YoY.
So just be mindful that rate-cut bets could probably start to be fully rubbed out. And Australia's big four banks which are all predicting rate cuts, could start to become tight-lipped.
We know the RBA sees no further rate hikes and removed it tightening basis. And last week, we then saw Aussie employment carve out its biggest jump since covid lockdown ended in 2021. The 0.8% jump was the biggest gain since before the 2000 Olympics. Again, this strength in the corporate economy shows the RBA has the power to keep rates where they are.
Chinese bank earnings put focus on commodities and Aussie commodity stocks this week
In China, many of their biggest banks report earnings through to Friday and this could reveal more margin pressure. Bank of Communications, Agricultural Bank of China, China Merchants Bank kick off bank earnings.
But, attention will be on commodities, given iron ore prices are up 11% from their lows, Copper is up 14% from its October low and BHP $BHP Group Ltd(BHP.AU$ and Rio $Rio Tinto Ltd(RIO.AU$ are finally responding, up 6% from its low. The market is also saying BHP shares could have likely found their bottom. Options pricing suggests BHP could go back to $46 next month with the market thinking China's bad news is the past.
On Good Friday, many exchanges are closed but US federal government is still at work.
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In case you missed it, here is the lastest on Nvidia $NVIDIA(NVDA.US$ and its price target being upgraded after Nvidia's $NVIDIA(NVDA.US$ its annual conference.
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Skoljil : I don't believe in electric cars.
Kakakala12 : The environment will be a topic of growing concern.
assailed : It goes down tomorrow, thanks!
Peterson111 : Makes a lot of sense and helps a lot.
Cocona33 : That's a range I can live with.
CyberMongrel Skoljil: Electric cars are the future.