Markets start new week to prospect of US rate cuts; Nvidia result eyed

Australian shares are poised for a strong start to the week after Federal Reserve chair Jerome Powell’s tilt towards a rate cut sent a rocket under stocks on Wall Street on Friday.

The Friday rally unwound some of the declines on the tech-heavy Nasdaq Composite, and Nvidia’s quarterly earnings on Wednesday in the US are the next bellwether for artificial intelligence, while the US federal government took a 10% stake of Intel in exchange for its Joe Biden-era grants.

New Zealand’s corporate earnings season continues at pace today with Tourism Holdings providing a gauge on demand for international visitors, while Steel & Tube Holdings will provide some clues on the construction market.

And the Reserve Bank is expected to launch its review of capital settings today, following on from last week's parliamentary select committee report making a series of recommendations to foster greater competition in the sector – admittedly without a silver bullet.

Powell speaks

Australian futures are pointing to a 0.9% gain for the S&P/ASX 200 index – which is already at a record – when trading opens after Wall Street rallied on US Federal Reserve chair Jerome Powell’s keynote speech at the central banking symposium in Jackson Hole, Wyoming on Friday.

Powell moved away from his wait-and-see approach in the speech, saying the shifting balance of risks where inflation and employment are creating competing tensions “may warrant adjusting our policy stance”, which is still restrictive.

“Powell signalled the Fed may cut rates in September triggering large gains in equity markets, a rally in treasuries and a sharply weaker US dollar,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “The speech comes amid unprecedented pressure from the US administration, which if maintained, threatens the Fed’s independence in determining monetary policy.”

The kiwi dollar rose to 58.68 US cents at 7am in Auckland from 58.06 cents last week.

Stocks on Wall Street gained on Friday with the Dow Jones Industrial Average up 1.9%, led by Caterpillar, Home Depot and Goldman Sachs.

The tech-heavy Nasdaq reversed earlier declines in the week as it gained 1.9%, with Nvidia’s quarterly earnings on Wednesday seen as a bellwether for the AI sector as investors start to question its pace of growth.

Meanwhile, Intel gained 5.5% on Friday after the US federal government took a 10% stake in the chipmaker in return for the US$8.9 billion in grants awarded to the firm under Joe Biden’s Chips Act. That stake might increase depending on the future of Intel’s manufacturing business.

And accounting software firm Intuit sank 5% after missing earnings expectations last week.

Earnings season

New Zealand’s corporate earnings season resumes its hectic pace this week.

Tourism Holdings is among those reporting today, having recently outlined a pathway to growth in rejecting a takeover offer from the Trouchet family and BGH Capital. The rental campervan operator is often seen as a gauge for the health of the tourism sector and comes after Auckland International Airport projected a small increase in international visitors in the coming year.

Meanwhile, Steel & Tube’s result will provide an update on the construction sector and comes after Vulcan Steel said the steel market might have hit its bottom.

Other companies reporting today include lines company Vector, Property for Industry, broadband network operator Chorus, and apple exporter Scales.

Statistics New Zealand is due to release retail spending figures for the June quarter, while the Reserve Bank is expected to launch its review of capital settings today, following a report from Parliament’s finance and expenditure select committee making a series of recommendations to improve competition in the banking sector.

Reporting by Paul McBeth. Image from Cora Leach on Unsplash.