ASX to drop, Dow tops 40,000, Wilsons warns on bank shares

Star Entertainment says its licence suspension for its Gold Coast and Brisbane casinos will be extended from May 2024 to December 2024 by order of the Queensland government.

It said this means regulators have more time to assess the results of the second Bell inquiry into the operations of its Sydney casino.

Broker Wilsons is telling its clients not to have too much exposure to Australian banks after taking in a slew of earnings reports from the lenders. It said bad debts were better than expected, but that status is susceptible to change.

“There is a broad consensus among the banks that bad debts will follow arrears higher over the medium-term amidst weakening credit quality from the still percolating impact of higher interest rates on households,” Wilsons said.

It said in summary that it and the market still expect negative earnings per share growth for the banks in financial 2024 and financial 2025.

On that basis, it labelled valuations “uncompelling” and suggested investors stay “underweight”.

Its preferred pick among the big four is ANZ Bank.

The broker described CBA’s valuation on a forward price to earnings multiple of 21 times as “excessive”.

“While a premium is deserved for quality, the extent of CBA’s valuation premium is unjustifiable when considering CBA’s weak medium-term EPS outlook, which is below the bank sector average on a comparable basis over the 2024 and 2025 calendar years,” Wilsons said.

The soaring bitcoin price has propelled homegrown bitcoin miner and energy trader Iris Energy to a net profit of $US8.6 million ($12.9 million) in the March quarter.

The Nasdaq-listed business founded by Sydneysider brothers Daniel and Will Roberts mined 1003 bitcoins over the quarter for total revenue of $US53.4 million.

As of the period end, the group had cash on hand of $US259.7 million.

The stock has been on a wild ride, comparable to the bitcoin price, since it listed on the Nasdaq at $US28 per share at the peak of the last bitcoin bubble in November 2021.

It last fetched $US5.83 and fell below $2 in 2023.

Iris Energy did not respond to a prior request for comment on how the bitcoin halving will impact its revenues.

Iron ore climbed overnight amid speculation Chinese officials will announce more measures to support the country’s ailing property sector.

Iron ore futures were up 2.6 per cent to $US116.15 a tonne in Singapore after Bloomberg reported that the China’s government was planning to hold a meeting with key officials on Friday morning to discuss the property market – a significant buyer of the steel-making ingredient.

The meeting includes a proposal to clear excess housing inventory, according to people with knowledge of the matter. Senior officials from the housing ministry, financial regulators, local governments and state banks will attend the State Council meeting by video conference, the people said, asking not to be identified.

“Iron ore rose amid renewed optimism over Beijing’s efforts to tackle property crisis,” wrote ANZ in a note to clients. “This follows reports that China will start selling 1 trillion yuan [$210 billion] of special bonds this week centred on boosting infrastructure spending.”

Three US Federal Reserve officials said the central bank should keep borrowing costs high for longer as policymakers await more evidence inflation is easing, suggesting they’re not in a rush to cut interest rates.

Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin, speaking separately on Thursday (Friday AEST), argued it may take longer for inflation to reach their 2 per cent target.

“Incoming economic information indicates that it will take longer to gain that confidence,” Mester said on Thursday during an event in Wooster, Ohio. “Holding our restrictive stance for longer is prudent at this point as we gain clarity about the path of inflation.”

The Cleveland Fed chief said she expected price growth to cool at a slower pace than last year, now that there is less downward pressure from improving supply chains.

Mester, who votes on policy decisions this year, is stepping down at the end of June when her term expires. She said policy was well positioned, and it was too soon to say progress on inflation had stalled, reiterating comments she made earlier this week.

Williams made similar comments in a Reuters interview published on Thursday, saying he doesn’t see a reason for adjusting monetary policy now. And Barkin, speaking on Thursday with CNBC, said demand needed to cool further to get price growth to the Fed’s goal, noting goods inflation has come down significantly as supply chains have healed.

Oil erased earlier losses to close higher, but remained within a tight range as traders weighed shrinking US stockpiles and the outlook for inflation in the world’s largest economy.

West Texas Intermediate edged higher to settle above $US79, though the US benchmark has been wedged between about $US77 and $US82 a barrel this month. US oil inventories fell by 2.5 million barrels last week for the first back-to-back drop since March, taking nationwide holdings to the lowest in almost a month.

More broadly, risk-on sentiment is bolstering markets as a measure of US inflation cooled for the first time in six months, offering scope for looser monetary policy from the Federal Reserve.

“Recent macro data from the US has raised expectations that the Fed could start cutting rates soon, which will be providing some support to oil,” said Warren Patterson, head of commodities strategy for ING.

The market remains range-bound, and needs either clarity on OPEC+ policy or a fresh catalyst to break out, he said.

Reddit has partnered with OpenAI to bring the social media platform’s content to popular chatbot ChatGPT, the companies said, sending Reddit’s shares up 12 per cent in extended trade in New York.

The deal underscores Reddit’s attempt to diversify its revenue stream by making its user-generated content available for training of artificial intelligence models.

OpenAI will also become a Reddit advertising partner as part of the deal.

Earlier this year, Reddit struck a deal with Alphabet’s Google that was worth about $US60 million ($90 million) per year.

Walmart raised its full-year forecast and reported better-than-expected quarterly results, betting that easing inflation will drive stronger sales of groceries and non-essential merchandise like clothing and electronics.

Some US retailers in recent weeks have fanned concerns that consumer spending is waning, but behemoth Walmart is not one of them.

The largest US retailer sounded uniformly positive in its outlook, sending shares up 7 per cent to an all-time high of $US64.22. The rally was the sharpest single-day gain for Walmart’s stock since March 2020, and it helped lift the Dow industrials briefly past 40,000 for the first time.

US consumer prices rose less than expected in April, but domestic demand has shown signs of cooling as Americans struggle with higher rents, petrol prices and car insurance premiums.

“These are not inflation-driven results,” Walmart CEO Doug McMillon said on a post-earnings call.

Results were driven by more visits to stores and the website by wealthier shoppers and the price gaps it is maintaining against rivals, McMillon said.

In Thursday’s report, Walmart said total US comparable sales rose 3.9 per cent, excluding fuel, in its first quarter ended April 30. The average bill at the cash register was flat but the number of transactions rose. Analysts expected those sales to rise 3.15 per cent, according to LSEG.

ASX futures down 44 points or 0.6% to 7875 near 7am AEST

• AUD -0.3% to 66.77 US cents
• Bitcoin -0.9% to $US65,378 at 7.12am AEST
• On Wall St at 4pm: Dow -0.1% S&P -0.2% Nasdaq -0.3%
• In New York: BHP +1.3% Rio +2.3% Atlassian -1.1%
• Tesla +0.5% Microsoft -0.5% Apple +0.1% Nvidia -0.3%
• Alphabet +0.9% Amazon -1.3% Meta -1.7% Walmart +7%
• VIX -0.2% QQQ -0.2% TLT -0.1%
• Stoxx 50 -0.6% FTSE -0.1% DAX -0.7% CAC -0.6%
• Spot gold -0.2% to $US2381.77/oz at 2.07pm in New York
• Brent crude +0.6% to $US83.23 a barrel
• Iron ore +2.6% to $US116.55 a tonne
• 10-year yield: US 4.37% Australia 4.18% Germany 2.46%
• US prices as of 4.59pm in New York