Morning Wrap: ASX 200 to rally, S&P 500 marks highest close of 2023 + 4 sectors to watch on Monday

ASX 200 futures are trading 65 points higher, up 0.91% as of 8:20 am AEST.

The S&P 500 rallied to a closing high for 2023 last Friday amid growing optimism the Fed could cut interest rates as soon as March 2024, global stocks mark the best month in more than three years, OPEC+ agreed to a surprise new oil supply cutback of 900,000 barrels a day and why copper, building materials, iron ore and gold stocks should be on your radar today.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 rallies intraday to close at best levels (Source: TradingView)

MARKETS

• S&P 500 rallies intraday to finish at best levels, marking the highest close since March 2022 and within 5% of all-time highs 

• S&P 500 and Nasdaq mark a fifth straight week of gains

• US treasury yields sold off last week amid cooler-than-expected inflation data and dovish Fedspeak, with the 10-year down 28 bps to a 3-month low

• Markets now pricing in over 100 bps of Fed cuts in 2024 and possibly of a move as soon as March, a disconnect with the higher-for-longer narrative

• Gold prices rallied to mark its highest close on record

• Positioning and sentiment tailwinds flipped with CTAs marking a record month of buying, according to Goldman Sachs and the AAII bull-bear spread surging ~55 points in the last four weeks  

• Peak rates and disinflation narrative see global stocks mark best month in three years (Bloomberg)

• Markets now price hefty Fed and ECB cuts in 2024, pushing back on central bank messaging further (Reuters)

• China stocks rebounded Friday after report state institution buying ETFs (Bloomberg)

• OPEC+ production cuts fail to convince oil traders (Bloomberg)

STOCKS

• Panera Breads files confidential paperwork for IPO (FT)

• Alibaba shares slip on Morgan Stanley downgrade, citing a slower-than-expected turnaround in its cloud business (CNBC)

• Disney reinstates its dividend amid a renewed proxy battle with Nelson Peltz and Trian Fund Management (CNBC)

• Dell revenue miss expectations amid worse-than-expected drop in PC sales (Bloomberg)

CENTRAL BANKS

• Fed officials shift tone but remain wary of markets' aggressive rate cut bets (Bloomberg)

• ECB's Nagel says inflation trends encouraging but rate cut talk too early (Reuters)

• RBNZ Deputy Governor Hawkesby flags immigration surge, says population growth is adding to demand and inflation risks (Bloomberg)

GEOPOLITICS

• UN warns over humanitarian tsunami (FT)

• China President Xi taking steps to revive foreign investor confidence (Bloomberg)

• EU weighs concession in US steel and aluminum feud, fearing Trump return (Bloomberg)

• Israel-Hamas truce ends after Israeli jets start striking Gaza as soon as deadline passed (Bloomberg)

ECONOMY

• US manufacturing remained subdued in November, hiring slows (Reuters)

• China Caixin PMI unexpectedly returns to expansion, with production growth strongest in four months (Reuters)

• Asian factories failed to gain traction in November on poor global demand (Bloomberg)

• South Korean exports bounce as chip shipments rise for first time in 16 months (Yonhap)

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Sectors to Watch

Things will be pretty crisp as there's lots to cover.

Copper: Copper prices rallied 2.1% last Friday and broke out of a 10-month downtrend. Let's see if this draws a strong response for local copper names like Sandfire Resources (there aren't many quality copper players left, with operationally challenged names like 29Metals and Aeris Resources sold off to oblivion).

Copper futures daily chart (Source: TradingView)

Building and construction: SPDR Homebuilders ETF up 3.03% last Friday, breaking above year-to-date highs to mark the highest close since January 2022. US-listed James Hardie shares also rallied 2.05% to close at its highest level since March 2022.

While names such as Boral, CSR and Acrow derive most of their earnings locally, most of these stocks are also on the verge of breaking above recent highs.

SPDR Homebuilders ETF daily chart (Source: TradingView)

Iron ore: BHP and Rio Tinto ADRs rallied 3.3% and 3.0% respectively last Friday.

Gold: Gold is having a crack at the US$2,070 level for the fourth time since August 2020.

Gold spot price weekly chart (Source: TradingView)

The VanEck Gold Miners ETF rallied 8.9% last week, including a 1.6% gain on Friday to close at four month high. Let' see if this strength follows through for local names, many of which have rallied 10-15% in recent week(s).

VanEck Gold Miners ETF daily chart (Source: TradingView)

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Unusually Bullish

I've been a keenly tracking sentiment and positioning indicators for most of this year. Here's the latest from the US AAII Investor Sentiment Survey:

• Bulls are at a 16-week high

• Neutral is ever so slightly above historical averages

• Bears are at the lowest since January 2018

• Bull-bear spread is the highest in more than two years

AAII sentiment survey as at 1 December (Source: AAII)

AAII sentiment survey as at 1 December (Source: AAII)

ASX corporate actions occurring today:

• Trading ex-div: Incitec Pivot (IPL) – $0.05, Collins Foods (CKF) – $0.125, Stanmore Resources (SMR) – $0.088  

• Dividends paid: PharmX Technologies (PHX) – $0.007

• Listing: None

Economic calendar (AEDT):

• 11:30 am: Australia Company Gross Profits (Q3)

• 11:30 am: Australia Home Loans (Oct)

• 6:00 pm: Germany Balance of Trade (Oct)