ASX 200 to fall, uranium stocks rally + Australian CPI set to ease

ASX 200 futures are trading 12 points lower, down 0.16% as of 8:30 am AEDT.

S&P 500 SESSION CHART

MARKETS

• S&P 500 lower but finished off worst levels of -0.70%
• Small caps have come under renewed pressure, with the Russell 2000 underperforming major benchmarks
• WTI crude settled ~2% higher after the 4% selloff on Tuesday
• Economic worries and new supplies temper outlook for crude oil price (FT)

STOCKS

• United Airlines shares rally after a double upgrade to Buy from Underperform from Bank of America, citing a “valuation disconnect” (CNBC)
• Samsung expects profit to fall 35% on weak chip demand (Reuters)
• Hewlett Packard Enterprise in talks to acquire Juniper Networks for $13bn (Reuters)
• X to launch peer-to-peer payment platform this year (CNBC)
• GM sold fewer cars in China than in the US for first time since 2009 as locals opt for domestic vehicles (Bloomberg)
• US banks expected to report lower profits in Q4 amid defaulting loans (Reuters)
• More than US$6.4bn in deals announced at JPMorgan Healthcare Conference (Bloomberg)

CENTRAL BANKS

• Atlanta Fed Bostic says it is too soon to declare victory over inflation (Bloomberg)
• Fed Governor Bowman says “we are not yet at that point” to begin rate cuts and remains willing to hike based on incoming data (Reuters)
• BOJ was a likely net seller of stocks in 2023 (Nikkei)

GEOPOLITICS

• Blinken to discuss way forward in Gaza as he meets Israeli leaders (Reuters)
• Senior Hezbollah and Hamas figures killed, stoking fears of wider war (FT)
• Taiwan presidential candidate accuses China of election interference (FT)
• Germany's Scholz pushes EU countries to boost military aid for Ukraine (Politico)

CHINA

• China's central bank indicates it may lower reserve ratio (Bloomberg)
• China's share in key emerging-market index drops to record low, highlighting bearish sentiment on country (Bloomberg)

ECONOMY

• World Bank expects global growth to slow in 2024 (CNBC)
• US trade deficit narrowed in November, both imports and exports declined (Reuters)
• German industrial output posts sixth consecutive monthly decline (Reuters)
• Tokyo core inflation slows to lowest in more than a year but consumer spending falls for ninth consecutive month (Bloomberg)
  
  

Another Kicker for Uranium Equities

The Global X Uranium ETF rallied 3.8% overnight after the US Department of Energy announced the next steps to build domestic uranium supply for advanced nuclear reactors.

• The DoE issued request for proposals for uranium enrichment services to help establish a reliable domestic supply of fuels called high-assay low-enriched uranium (HALEU)
• HALEU is uranium fuel that is enriched up to 20% compared to traditional uranium fuel used in today's reactors of about 5%
• Biden's Inflation Reduction Act will provide up to US$500 million for HALEU enrichment contractors
• DoE's Nuclear Energy plans to award one or more contracts to produce HALEU from domestic uranium enrichment capabilities
• The HALEU enrichment contract has a maximum duration of 10 years and the government assures each contractor will have a minimum order value of US$2 million to be fulfilled over the term of the contract

Cameco – one of the world's largest uranium companies – rallied 4.7% overnight.

Mines at Risk of Closure

The AFR has short-listed eight mines that are most at risk of closure amid the recent slump in battery metal prices. The candidates include:

• First Quantum Minerals and POSCO's Ravensthorpe nickel and cobalt mine
• Arcadium Lithium's Mt Cattlin lithium mine
• Consolidated Minerals' Woodie Woodie manganese mine
• Mineral Resources' Bald Hill lithium mine
• Andrew Forrests' Wyloo Metals
• Glencore's Mt Isa zinc, lead, silver and copper project

I only listed six because the article mentions Albemarle, Tianqi and IGO's Greenbushes and MinRes' Mt Marion – They definitely don't belong in that list – Even if the article acknowledges them being low cost. 

Where Are We Now?

Markets experienced a sizeable bounce on Tuesday and continue to linger around recent highs. While most positioning and sentiment indicators remain stretched – We're going to look at some bigger picture stuff today.

A recent thread from Jurrien Timmer, the Director of Global Macro at Fidelity talks about a potential early-cycle bull market. Here are the key takeaways:

• The early cycle bull market narrative is on track, as per the below chart, which examines historic returns from the start of the cycle

• Most of the gains since October 2022 have been driven by multiple expansion
• Multiple expansion is when the 'Price' in Price-to-Earnings increases while 'Earnings' remains relatively muted
• On average, the first year of a bull market produces a 40-50% P/E expansion. This is because the market tends to bottom a few quarters before earnings do
• Timmer suggests that the market is nearing a point of maximum P/E expansion. This means earnings will need to start to do the heavy lifting
• Consensus currently expects S&P 500 earnings to rise ~12% in 2024. The expectations are there but can the companies deliver?