ASX 200 LIVE: ASX to fall, monthly inflation data awaited; Nvidia ...

Timothy Moore, Joshua Peach

18 mins ago – 8.53AM

Two former Magellan stock pickers have resurfaced at boutique funds house Bennelong to head up their own global equities strategy.

The pair will run the new Canopy Global Small & Mid Cap Fund as part of the Bennelong Funds Management roster, alongside other boutiques like 4D Infrastructure, Quay Global Investors, Touchstone Asset Management and emerging markets specialist Skerryvore.

43 mins ago – 8.28AM

Former Crown Resorts CEO Steve McCann has been appointed as group CEO of embattled casino operator Star Entertainment.

McCann will join Star on July 8, after stepping down from the board of property giant Scentre Group.

McCann was appointed as Crown CEO in June 2021 to navigate a royal commission into its operations. He went on to negotiate the casino group’s privatisation to Blackstone, which was completed in September 2022.

Before Crown, McCann spent more than a decade as the head of ASX-listed Lendlease.

Star’s former CEO Robbie Cooke announced his departure in March amid an ongoing inquiry into the company’s Sydney casino.

McCann will receive a $2.5 million sign-on bonus for starting the top job, alongside a $2.5 million annual salary.

1 hr ago – 8.03AM

Seven West Media chief executive Jeff Howard has lost some of his most senior lieutenants including the head of sport and chief revenue officer as he attempts to reduce the company’s cost base.

Kurt Burnette, chief revenue officer, and Lewis Martin, head of sport and managing director of Seven Melbourne, are the highest-profile exits at the media company controlled by billionaire Kerry Stokes.

Four sources with knowledge of the redundancies, who spoke on condition of anonymity as they were not permitted to comment publicly, said chief marketing officer Melissa Hopkins will also depart the business.

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1 hr ago – 7.16AM

Inflation unexpectedly surged in Canada, a setback for policymakers as they weigh further interest rate cuts next month.

The consumer price index rose 2.9 per cent in May from a year ago, up from 2.7 per cent a month earlier, primarily due to higher prices for services, Statistics Canada reported in Ottawa. That was faster than the median estimate of 2.6 per cent in a Bloomberg survey of economists.

Canada’s CPI rose 3.9 per cent on an annual average basis in 2023, following a 40-year-high increase of 6.8 per cent in 2022 and a 3.4 per cent increase in 2021.

On a monthly basis, the index climbed 0.6 per cent, versus expectations for a 0.3 per cent gain and up from 0.5 per cent in April. On a seasonally adjusted basis, inflation rose 0.3 per cent.

The Bank of Canada’s two core inflation measures also accelerated, averaging a 2.85 per cent yearly pace - faster than economists expected.

Tuesday’s data broke a four-month string of easing price pressures. The re-acceleration of both headline and core inflation will likely caution the central bank against a second consecutive interest rate cut next month, as officials seek to understand whether the latest setback is temporary.

“The inflation path remains uneven, which means the rate cut path likely won’t be smooth either,” Benjamin Reitzes, rates and macro strategist at Bank of Montreal, said by email. “While we won’t rule out a July cut, the odds just fell notably.”

Governor Tiff Macklem and his officials lowered the benchmark overnight rate by 25 basis points to 4.75 per cent earlier this month, the first Group of Seven central bank to kick off an easing cycle. After seeing several months of cooling price pressures, they said they were more confident inflation was headed to the 2 per cent target and that monetary policy no longer needed to be as restrictive.

Tuesday’s inflation release is the first of two such reports before the next Bank of Canada rate decision on July 24. The majority of economists in a Bloomberg survey expect policymakers to hold borrowing costs steady at that meeting before easing again at the next meeting in September.

1 hr ago – 7.13AM

In its latest US equity update, Société Générale said it expects the S&P 500 “to stay in buy-the-dip mode, with the next up leg coming closer to a Fed rate-cutting cycle, which we see starting in early 2025e.

“Our S&P 500 target level is unchanged at 5500 for year-end 2024, with return dispersion in mega-cap tech as the revenue growth rate consolidates at elevated levels. Some slight downside risk is likely in 3Q to price in election-year volatility from September, with bond-market volatility set to be higher this time, as deficits are unlikely to be dialled back irrespective of the election outcome.”

SG also said it sees the S&P 500 as being at a critical juncture. “The outperformance of mega caps vs the average S&P 500 stock is now at a critical juncture. Narrow breadth typically occurs in a bear market or when a few concentrated stocks have the potential to take us into a ‘bubble’ – neither of which is our base case.

“We see cyclical opportunities outside tech too, e.g. in industrials and financials, increasing performance breadth within large caps.”

SG also said it likes tech and is staying overweight on it. “However, as the profit cycle outside the Nasdaq-100 companies should move from -10 per cent in 2023 to +8 per cent in 2024 estimated, “we have identified cyclical opportunities outside tech too.

“So, instead of taking cyclical risk within tech, where high-risk stocks have already performed well, we suggest opting for financials and industrials.

“To take on the risk associated with low-quality, leveraged Russell 2000 stocks, we believe the Fed would have to cut several times and the yield curve would have to be positive.

“We keep our S&P 500 EPS forecast unchanged at $US243 for 2024 and $US270 for 2025. Volatility typically picks up ahead of the US elections, and we keep our S&P 500 target at 5500 for end-2024. We see some slight downside in 3Q. The decline is pricing in election-year volatility from September, with bond-market volatility set to be higher this time, as deficits are unlikely to be dialled back under any scenario.”

In terms of upside risk: “If the S&P 500 accelerates further, with only a few stocks delivering a more significant re-rating than the others, and if the index trades at valuation levels similar to the peak reached in 1999-2000, we believe that the S&P 500 could move to an upside scenario of 6666.”

3 hrs ago – 7.10AM

ASX futures down 29 points or 0.4% to 7801 near 7am AEST

3 hrs ago – 7.08AM

Traders in the US rates options market are embracing a nascent wager on the Federal Reserve’s interest-rate path: a whopping 3 percentage points worth of cuts in the next nine months.

Over the past three sessions, positioning in the options market linked to the Secured Overnight Financing Rate shows an increase in bets that stand to benefit if the central bank reduces its key rate to as low as 2.25 per cent by the first quarter of 2025.

Such an outcome – which appears unlikely unless the US economy tumbles into a sudden recession – would mean at least 300 basis points of easing from current levels. This type of wager could be used to hedge another investment.

It’s an aggressive position given that market participants are pricing in some 75 basis points of easing in that period. Fed officials recently forecast just 25 basis points of reductions by the end of this year and a total of 125 basis points by end-2025.

Investors have been scouring economic data and remarks by Fed officials for clues on the exact timing of eventual Fed easing. Now, some are starting to build up bets that hedge tail-risk outcomes, too – such as rapid and extreme rate cuts. Trading in many of these contracts is anonymous, which makes it difficult to identify the firms behind those bets.

In the Fed funds market, traders have been ramping up buying of August contracts that would pay out if policymakers cut at the July 31 policy meeting. Swaps linked to that meeting date, meanwhile, only price in one basis point of a reduction then.

A dovish stance has emerged in the cash market, too, according to JPMorgan Chase data. The bank’s latest survey of clients showed the biggest net long positions in three months in the week ending June 24.

3 hrs ago – 7.04AM

The $US430 billion sell-off earlier this week in artificial-intelligence darling Nvidia was no more than a blip to Neuberger Berman Group’s Steve Eisman.

The senior portfolio manager, best known for his “Big Short” bet against subprime mortgages ahead of the global financial crisis, owns “a lot” of the chipmaker’s shares and considers it a long-term play that’s going to be relevant for years to come, he said on Tuesday (Wednesday AEST) in an interview on Bloomberg Television.

Traders appeared to share his view on Tuesday as the stock rallied 6.8 per cent, climbing back from a three-day slide that pushed shares down more than 10 per cent for the first time since April, past the threshold that represents a correction.

“If you look at the chart on Nvidia, you can barely see the correction,” Eisman said. “I don’t think it means anything.”

The AI poster-child has soared this year amid a furious appetite for its chips that dominate the market for artificial-intelligence computing. Its latest climb saw shares surge 43 per cent from its May 22 earnings report and stock-split announcement to the June 18 peak, when it toppled Microsoft to become the world’s most valuable company – a title it has since lost.

Nvidia is still up 155 per cent this year through Tuesday’s close. As some sceptics worry that the company has grown too quickly, Eisman says price is the last thing to fret over.

“One of the things I learned running a hedge fund is that shorting a stock solely because of valuation is a death wish,” he said, adding that people purchase a stock even when it’s perceived to be expensive because they’re buying into a story. “As long as the story is intact – like Nvidia is obviously intact – the story is going to continue. I don’t think all that much about the valuation of Nvidia.”

The message that Nvidia will continue to benefit from booming AI demand was echoed by Nuveen Asset Management LLC’s chief investment officer.

“Nvidia is the company that wins in this space, basically no matter what,” Saira Malik said in an interview. “Everyone who wants to shift into AI basically has to use Nvidia’s products. Their growth rate has been so strong that their price-to-earnings really isn’t expensive.”

Malik is a portfolio manager for several key investment strategies for Nuveen, a $US1.3 trillion global asset manager. The $US125 billion College Retirement Equities Fund – Stock Account, which she oversees, has outperformed 86 per cent of peers over the past year, according to data compiled by Bloomberg. Microsoft, Nvidia, Apple and Amazon were the fund’s biggest holdings as of the end of May.

“People will say the stock price itself has just done so well, how can you own it?” Malik said. When compared to peers, “it’s not an expensive stock”.

While Nvidia trades at a premium of about 50 per cent to the Nasdaq 100 Index, its 12-month forward price-to-earnings ratio has pulled back from a 2023 high of 63 times down to about 40. It’s now valued close to peers such as Advanced Micro Devices. Malik said the AI-fuelled rally in Nvidia and Microsoft – which has propelled US stock benchmarks to a series of record highs – is unlike the dotcom bubble.

“These companies are much more dominant because they are not brand new,” she said. “They’ve been around for years investing in this trend. So I do think it’s different this time.”

3 hrs ago – 7.00AM

FedEx provided a full-year profit outlook above Wall Street’s expectations as the company takes on a slew of cost-cutting measures to increase margins and cope with a sluggish demand environment.

Adjusted earnings in the 2025 fiscal year will be $US20 to $US22 a share, the company said in a statement that also detailed results for the fourth quarter. The midpoint topped the $US20.85 average of analysts’ estimates compiled by Bloomberg.

The Memphis-based courier has been working to reduce costs across the organisation, including shrinking the workforce by tens of thousands of workers. The latest announcement came earlier this month when the company said it plans to reduce its headcount in Europe by as many as 2000 jobs.

Chief executive officer Raj Subramaniam is in the process of consolidating the Express, Ground and Services units, a fundamental shift from the two-network system it has operated for decades. The Express segment has been particularly hard hit by slumping demand as inflation-stung customers opt to ship via ground instead of air.

Its shares leapt more than 15 per cent after regular trading ended in New York.

FedEx reported earnings per share of $US5.41 for the quarter that ended May 31, which beat analyst expectations of $US5.34.