ASX Live Coverage Update – April 13
Good morning! Welcome to our live coverage of the ASX on Monday, April 13. We anticipate a busy pre-market period, with updates rolling out throughout the day before concluding around 2:00 PM AEST.
S&P 500 Sector Valuations
As of 9:01 AM, the S&P 500’s forward price-to-earnings multiple is at 20 times, still within the 77th percentile of the past three decades. Notably, the Technology and Consumer Staples sectors are both trading at 22 times earnings, whereas Financials appear undervalued.
Source: Goldman Sachs
Software Stocks Decline
The iShares Expanded Tech-Software ETF slipped by 2.5%, marking its lowest level in several years and bringing its total decline to 28.8% year-to-date. Notably, recent trading volumes reached record highs.
Source: TradingView
Positives Amidst Worries
Despite gloomy headlines surrounding US-Iran tensions, inflation surges, and software stock declines, here are a few silver linings:
- CTA Positioning: Goldman estimates a significant $30 billion short position in the S&P 500, suggesting potential buying of $34 billion in the upcoming week.
- AI Demand: Amazon disclosed a $15 billion annual run rate in AI for AWS. Meta continues to innovate, expanding its AI infrastructure deals.
- Resilient Consumer Insights: Walmart noted tax refunds positively impacting consumer spending levels.
- Delta Airlines: Reported robust demand in the main cabin, hinting at strong expectations for Q2 revenue.
Oil Prices Surging
As of 8:45 AM, Brent crude oil prices opened 7.1% higher, now trading at approximately US$102.10 per barrel. LNG prices are also escalating, with the Dutch TTF benchmark rising up to 18% early in the session.
Source: TradingView
US-Iran Talks Break Down
In a significant geopolitical development, US-Iran negotiations concluded unsuccessfully in Islamabad following 21 hours of discussion. The US is set to blockade the Strait of Hormuz, heightening tensions in the region. This blockade may exacerbate global energy supply issues, as analysts express concerns over risks to energy markets.
- The US Navy will enforce a blockade on all maritime traffic in the Strait.
- Iran, meanwhile, has maintained consistent export levels, unlike neighbouring countries, whose outputs dropped due to the situation.
Consumer Sentiment Dips
In an alarming trend, the University of Michigan’s preliminary readings show US consumer sentiment has reached a record low in April, primarily fuelled by economic pessimism across various demographics.
- The headline sentiment index fell to 47.6 from an estimated 52.
- Inflation expectations have surged dramatically, reflecting increased economic apprehensions among consumers.
Federal Reserve Outlook
Current analyses indicate a 44.1% chance that the Federal Reserve may hold interest rates steady throughout the year, down from 75.6% previously. Additionally, predictions for rate cuts and hikes are being discussed, highlighting economic uncertainties ahead.
Source: CME Fedwatch Tool
March US CPI Shows Unexpected Resilience
Despite inflation spikes driven by rising energy prices, core inflation metrics were softer than forecast. Key insights include:
- Core CPI rose by just 0.2% versus expectations of 0.3%.
- Headline CPI matched expectations with a 0.9% increase.
- Energy prices soared by a record 10.9% month-on-month.
Looking Forward to Q1 Earnings
As Wall Street prepares for what is expected to be the weakest earnings growth since mid-2025, various challenges such as rising oil prices and disruptions caused by AI are converging:
- The S&P 500 is projected to see earnings growth of about 12%, while stripping out tech predictions lowers it to merely 3%.
- The energy sector remains the only one postulating growth in earnings expectations amid ongoing oil market upheavals.
Market Open Brief
As of 8:30 AM AEST, ASX 200 futures rose by 70 points (+0.77%). Key highlights from the overnight session include:
- Major US indices closed mostly lower, breaking a seven-day winning streak for the S&P 500.
- Inflation figures and deteriorating consumer confidence have painted a worrying picture for economic sentiment and overarching market dynamics.
Stay tuned for further updates throughout the day.
