ASX to rise, Wall Street powers higher

Aristocrat Leisure, Macquarie Group and Westpac Banking are each scheduled to pay dividends to investors on Tuesday.

Market highlights

ASX futures up 6 points or 0.1% to 7446 near 8am AEDT

• AUD +0.1% to 67.04 US cents
• Bitcoin +1.1% to $US42,363 at 828am AEDT
• On Wall St at 4pm: Dow +0.00% S&P +0.5% Nasdaq +0.6%
• In New York: BHP +0.5% Rio +0.5% Atlassian -0.4%
• Tesla -0.6% Apple -0.9% Amazon +2.7% Meta +2.9%
• VIX +2.3% QQQ +0.6% TLT -0.8%
• Stoxx 50 -0.6% FTSE +0.5% DAX -0.6% CAC -0.4%
• Spot gold +0.4% to $US2026.74/oz at 2.05pm in New York
• Brent crude +2% to $US78.10 a barrel
• Iron ore -1.1% to $US132.45 a tonne
• 10-year yield: US 3.93% Australia 4.05% Germany 2.08%
• US prices as of 4.59pm in New York

What’s driving markets

US stocks continue to press higher towards the end of the year and paving the way for further gains in 2024.

In a note, Goldman Sachs’ David Kostin said: “We raise our year-end 2024 S&P 500 index target to 5100 representing 8 per cent upside from the current level. Decelerating inflation and Fed easing will keep real yields low and support a P/E multiple greater than 19x.

“Since late October, S&P 500 has surged by 15 per cent and Russell 2000 has soared by 23 per cent as real rates plummeted from 2.5 per cent to 1.7 per cent. Our prior year-end 2024 forecast assumed yields of 2.3 per cent and a P/E of 18x. Upside risk exists to our above-consensus EPS estimate of 5 per cent growth.”

Kostin also said the improved macro outlook implies a more conducive environment for bringing IPOs to market. “Resilient growth and falling rates should benefit stocks with weaker balance sheets, particularly those that are sensitive to economic growth.”

Morgan Stanley strategists led by Mike Wilson said the dovish message from the Federal Reserve last week has opened the door for equities to extend their rally.

“Over the past month, we’ve experienced arguably the best stretch of breadth improvement in 2023. The equal weighted S&P 500 has outperformed the cap weighted S&P 500 by 4 per cent since the middle of November. Further, the percentage of S&P 500 members above their 200-day moving average reached 78 per cent last week, matching the highest level this year. This is an encouraging sign. It will be important to see this dynamic continue as we progress beyond year-end and into 2024.”

Bank of America’s view on the final days of 2023: “The S&P 500 rallied 3.3 per cent over the first 10 sessions of December, which ended on 12/14. The last 10 sessions of December started on 12/15. For all years going back to 1928, the last 10 trading days of December are up 72 per cent of the time on an average return of 1.17 per cent (0.95 per cent median).

“In Year 3 of the Presidential Cycle, this period is up 82 per cent of the time on an average return of 1.59 per cent (1.21 per cent median). However, when the first 10 sessions of December are up, the last 10 days of the month remain positive but not as robust with average and median returns of 0.88 per cent and 0.81 per cent, respectively.”

Today’s agenda

Local: RBA will release its latest board meeting minutes at 11.30am

Overseas data: NZ trade balance November at 8.45am, ANZ business confidence December at 11am; Bank of Japan policy decision; US November housing starts and building permits at 12.30am Wednesday AEDT

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