Australian Shares React Positively to US Tech Surge and Bank of Canada Rate Cut
Australian shares are projected to rise today, buoyed by significant gains in US tech stocks and a rate cut from the Bank of Canada, which has spurred anticipations for global rate cuts. Nvidia experienced a 5.2% surge, reaching a market valuation of $US3.01 trillion, surpassing Apple as the second-largest publicly traded company. Apple, meanwhile, rose nearly 1%, maintaining its $US3 trillion cap.
This represents the first time since 2002 that Nvidia has overtaken Apple in value. Meanwhile, the yield on the US 10-year note fell below 4.30%, dropping over 20 basis points in the last month amid mounting speculation regarding the Federal Reserve’s upcoming interest rate actions.
Mixed signals emerged from US economic data. The ADP Research Institute's jobs data lagged expectations, though the US service sector showed significant expansion in May according to the Institute for Supply Management.
"With a deluge of mixed economic data, recession fears are growing amid lower Treasury yields and concerns about the Fed’s ‘higher for longer’ stance,” stated LPL Financial Chief Economist Quincy Krosby.
Goldman Sachs expects upward momentum for US equities, noting a robust influx of funds at the start of the new quarter and half-year, driven by seasonal trends and retail investor activity.
European and US Market Drivers
European stocks saw an uptick, driven by gains in tech giant ASML Holding. The Stoxx Europe 600 increased by 0.9%, propelled primarily by technology. ASML shares surged 8.2% thereby surpassing LVMH in market cap.
In the US, the ISM’s non-manufacturing PMI hit its highest level since August, at 53.8 in May. The Bank of Canada’s rate cut confirmed its continued control over inflation, with Governor Tiff Macklem suggesting further cuts if progress continues.
Stock Focus: Nvidia
Bank of America reaffirmed its buy rating on Nvidia, citing its leadership in AI services and projecting a $US1500 stock price. Nvidia is viewed as having a multi-year advantage in performance and developer support.
ERM to Acquire Melbourne's Energetics: Boosting Sustainability Consultancy in Australia
ERM, the top global sustainability consultancy, will acquire Melbourne-based Energetics, a climate risk and energy transition advisor since 1984. The acquisition, which is pending approval from the Foreign Investment Review Board, will integrate Energetics' 100 specialists with ERM's 500 Australian staff. Accretion Investment Management, Energetics’ majority shareholder, will receive significant financial returns from the deal.
This acquisition aligns with new regulations under the Corporations Act that will require Australian businesses to include climate-related reporting in their financial disclosures starting January 1, 2025. ERM operates in over 150 countries and was acquired by private equity giant KKR in 2021 at an estimated $US3 billion valuation.
Ownership Matters Scrutinises MinRes Deals and Governance
Shareholder advisory firm Ownership Matters has scrutinised Mineral Resources' (MinRes) recent share trading activities and governance practices. The report, authored by James Samson, focuses on MinRes’ dealings with three lithium hopefuls: Wildcat Resources, Global Advanced Metals, and Kali Metals. Concerns about the adequacy of Australia's related party disclosure requirements have been raised.
This week’s report highlights MinRes' plan to address governance issues before the 2024 annual report release. Given Ownership Matters' history of accurate warnings, the market is closely watching MinRes' next steps.
RBA Governor on $300 Energy Rebate: No Major Impact on Inflation
Reserve Bank of Australia (RBA) Governor Michele Bullock stated that the $300 energy bill rebate from the federal government’s recent budget will not significantly impact inflation forecasts. Speaking at a Senate estimates hearing, Bullock affirmed that the RBA would not base potential interest rate cuts on this rebate alone.
If inflation spikes unexpectedly, Bullock indicated that the RBA is ready to raise rates again. The RBA aims to bring inflation back into the target band by 2026, with updated economic forecasts to be released in August.
Unions Push for 5 Weeks’ Paid Holiday and More Reforms
Australian unions are advocating for five weeks of paid holidays annually, a push to be confirmed at the ACTU Congress. The Shop Distributive and Allied Employees Association (SDA) is leading the proposal to increase mandatory annual leave from 20 to 25 days. Additional reforms include raising the casual loading rate and challenging junior rates at the Fair Work Commission.
Prime Minister Anthony Albanese praised the unions’ contributions and urged them to strengthen membership, which currently stands at 12.5% overall and 8% in the private sector.
Astron Corporation Secures $183M for Major Rare Earth Mine in Victoria
Astron Corporation has secured $183 million in funding for a new rare earth and mineral sands mine in western Victoria. Construction is set to begin in 2025, with production starting in 2026. Concerns about radioactive elements in the concentrate have been mitigated by safety measures and a radiation management licence from the Victorian government.
Further local community consultations are planned to address concerns regarding transport routes and road safety.
Electrician Fights Insurer Over Costly Home Repairs
Scott Malcolm, a Brisbane electrician, is in a dispute with Auto & General over water damage repairs to his home caused by heavy rains in 2022. Despite covering accommodation costs, Auto & General has failed to make timely payments, leading to escalating repair costs now reaching potentially over $150,000. The case is before a federal ombudsman, highlighting broader frustrations with insurers' responses to claims and repair costs.
GPN Vaccines Scores $300M Valuation in Latest Funding Round
GPN Vaccines, an Aussie start-up focused on combating Streptococcus pneumoniae, has achieved a $300 million valuation following an $18 million funding round. The funds will be used for further clinical trials and regulatory engagement, with plans to secure an additional $100 million for phase-two trials. The company targets mid-2026 for the completion of phase-two trials.
Underutilised Scheme Could Boost First Home Deposits by $12,000
First home buyers in Australia can potentially see an additional $12,000 to their deposits through a lesser-known government scheme. The scheme allows first home buyers to make up to $15,000 in concessional super contributions annually, up to a total of $50,000, which can later be withdrawn for a home purchase. Advisors stress the importance of acting quickly to maximise benefits before the financial year ends.
Apple's AI Revolution at WWDC 2024
Apple is expected to introduce its own AI innovation at the upcoming Worldwide Developers Conference (WWDC) in California. This comes as competitors like Samsung and Google have already launched advanced AI assistants for their devices. The introduction of AI on devices is accelerating, with significant implications for jobs, energy consumption, and investment returns.
