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Morning Research Notes - 07.08.24
Yesterday, global markets found some relief as US shares closed higher, although they pared gains late in the session. The notion echoed through to major commodities. Spot gold decreased by 0.8% to $US2391.59 per ounce. Brent crude rose by 0.6% to $US76.77 per barrel, while iron ore prices fell by 0.9% to $US102.85 per tonne. The VIX index, measuring market volatility, increased by 65% to $US38.57.
On Tuesday, markets experienced relief from the global sell-off that occurred on Monday. US shares closed higher but notched gains late, reflecting ongoing nervousness. The S&P 500, Nasdaq Composite, and Dow Jones all rose around 1%, though they dipped in the final half hour. The volatility index (VIX) remained at its highest since May 2020, indicating persistent market anxiety. Tech giants like Meta and Nvidia saw gains, while Apple and Alphabet slipped slightly. Market strategists advised caution, noting that the recent sell-off may not have fully corrected elevated valuations, particularly in the US. Despite the volatility, some strategists see the market as oversold and due for a bounce.
On Tuesday, markets experienced a respite from the global sell-off that had previously tanked commodity prices and caused a significant drop in the Australian market. Investors began buying into lower prices, leading the ASX 200 to close 0.4% higher. Financials, Health Care, and Utilities saw price gains of 0.86%, 0.15%, and 0.14% respectively, while Materials and Info Tech experienced slight declines of 0.06% and 0.46%. The commodity markets showed a positive bullish trend, with Aluminum, Copper, Zinc, and Nickel rising by 1.75%, 1.10%, 0.75%, and 2.78% respectively.
In other news, Gold eases as US dollar, yields firm, NZ jobless rate rises to 4.6pc, and Oil prices settle higher; signs of tighter supply end 3-day swoon. (Source: AFR)
Chart of the day
The ASX 200’s heavy concentration in banks and miners presents both opportunities and risks. While financials have surged, with the S&P/ASX 200 Financials index rising nearly 24% in the last 12 months and the Banks index up almost 28%, materials and miners have generally underperformed, except for gold companies which have seen a 19% increase. This concentration can drive valuations higher, but it also means that any market correction could be severe. Henry Jennings and James Gerrish highlight that while the US market’s tech dominance poses its own risks, the cyclical nature of Australia’s financial and resources sectors adds another layer of complexity.
Source: Livewiremarkets
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