Yesterday saw Gina Rinehart emerge as a significant player in Lynas (LYC) after taking her stake to almost 6% over the last few days, although compared to her net wealth, the purchases were a poultry drop in the ocean. LYC is the world's largest non-China producer of rare earths, although China still produces almost 70% of the world's rare earths, with Australia's ~5% output more of a supporting role. Gina's move could be largely motivated by her intention to merge US-listed MP Materials (MP US), which has a market cap. of ~$4.3bn, and the local and larger $6bn rare earth player Lynas (LYC), i.e. it would form a relative $10bn rare earth giant.
Earlier in the year, we felt markets were far too optimistic towards rate cuts, i.e. US futures were pricing in three cuts before Christmas, the best possible outcome and even with the Feds rhetoric continually targeting three cuts, the risks of two remained high. Now, we believe things are swinging in the other direction. The market is now pricing in 1.69 cuts by Christmas; at MM, we’re rarely keen to fight the Fed, and we think two cuts remain a strong possibility, as they remain keen to cut at some stage, i.e. markets are now too pessimistic, ultimately good news for rate-sensitive stocks/sectors.
The London Metal Exchange (LME) has banned the delivery of Russian metal following tough sanctions imposed by the US and UK. The LME is a central market for metals such as aluminium, copper, and zinc. If the supply taps are turned off, prices will likely rise as they did overnight, e.g. over 90% of the aluminium on the LME is of Russian origin. However, prices have a tendency, just like water, to move in the path of least resistance and with plenty of buyers still happy to take delivery of Russian metal, by whatever means, advances are likely to be controlled in nature, assuming they do occur.
Iran and a number of its allies launched a large-scale drone and missile attack upon Israel on Saturday night in retaliation for a suspected Israeli strike on an Iranian diplomatic complex in Syria. The prospects of a full-blown conflict in the region have increased dramatically over the last week, with at least nine countries involved in Saturday's conflict, projectiles fired from Iran, Iraq, Syria and Yemen were downed by Israel, the US and France, as well as Jordan. Following Iran's attack, the U.S. pledged "ironclad" backing for Israel, but President Joe Biden made it clear the US would not participate in any offensive operations against Iran.
As subscribers may have read, NEXTDC (NXT) is tapping the market for $1.3bn; some investors might be tempted to fund the raise by the data centre operator with other ASX tech names, hence today's report. Last night's +1.65% surge by the NASDAQ-100 illustrated there's still plenty of life left in the sector, especially if we do see the Fed and ECB start cutting rates this year. For all of the talk around excessive valuations and sticky inflation, the US tech sector is still less than 1% below its all-time high.
The weakness across the Lithium Sector has lost its place in the financial press due to the strong rallies in copper and gold. Usually, more “clicks” are achieved from bad news and crash-style stories, but the lithium bear market has grown old in the tooth. However, as we’ve seen with other commodities and related stocks, this year is starting to look exciting for the commodity space, and we believe lithium can join the party, at least for a while. We aren’t as bullish towards lithium as copper, for example, with the supply & demand dynamics far from clear, but we can see them enjoying a strong finish to this FY.
Overnight, the influential former Federal Bank of St. Louis President James Bullard said he's expecting three rate cuts in 2024 as inflation moves towards the Feds target even while the economy remains resilient, i.e. the “Goldilocks” scenario for stocks. Bullard’s outlook echoed the Fed’s messaging as opposed to the increasing market expectations that two cuts have become more likely than three, e.g. Treasury yields made new highs for the year on Monday night. Mr Bullard is indirectly quoting the old adage of “don’t fight the Fed”. However, it wasn’t the ongoing commentary from the central banker that caught our attention but rather the market’s reaction following the relatively Dovish interview—gold surged over $US30 to another all-time high while bond yields hardly moved. This has been the story of 2024, which has seen gold surge around $US300/oz while bonds have drifted lower (yields higher).
BHP and RIO are two stocks most closely followed by MM subscribers; just look at Saturday's Q&A. Hence, it caught our attention when one of the leading stories in yesterday's AFR was “Brokers go all in on RIO tipping 20% annual share price jump”, i.e., at MM, we’ve preferred BHP over RIO over recent years. They believe that RIO is better positioned for a boom in industrial metals, and they also think it has a stronger balance sheet. A glance at the two stocks shows they’ve pretty much danced in tandem since COVID, while so far in 2024, BHP is down -12.2% and RIO -10.3%, with iron ore weighing on both miners.
Gold surged to new all-time highs last week, shrugging off a pullback in bonds (higher yields). The trend of precious metals is usually determined or significantly influenced by interest rates, but not at the moment—higher interest rates make zero-yielding assets such as gold less attractive from a relative perspective. There are arguably three main drivers of gold at the moment, with two very bullish and one mildly bearish short-term.
These three unrelated commodities have surged higher recently, taking many ASX names along for the ride. For example, in 2024, Sandfire Resources (SFR) is up +24%, Northern Star (NST) +8%, and Paladin (PDN) +50%. Fortunately, at MM, we enjoyed the moves of all three themes, and today, we quickly reviewed the group to evaluate if our exposure needs tweaking as market volatility starts to increase.
Earlier in the year, we felt markets were far too optimistic towards rate cuts, i.e. US futures were pricing in three cuts before Christmas, the best possible outcome and even with the Feds rhetoric continually targeting three cuts, the risks of two remained high. Now, we believe things are swinging in the other direction. The market is now pricing in 1.69 cuts by Christmas; at MM, we’re rarely keen to fight the Fed, and we think two cuts remain a strong possibility, as they remain keen to cut at some stage, i.e. markets are now too pessimistic, ultimately good news for rate-sensitive stocks/sectors.
The London Metal Exchange (LME) has banned the delivery of Russian metal following tough sanctions imposed by the US and UK. The LME is a central market for metals such as aluminium, copper, and zinc. If the supply taps are turned off, prices will likely rise as they did overnight, e.g. over 90% of the aluminium on the LME is of Russian origin. However, prices have a tendency, just like water, to move in the path of least resistance and with plenty of buyers still happy to take delivery of Russian metal, by whatever means, advances are likely to be controlled in nature, assuming they do occur.
Iran and a number of its allies launched a large-scale drone and missile attack upon Israel on Saturday night in retaliation for a suspected Israeli strike on an Iranian diplomatic complex in Syria. The prospects of a full-blown conflict in the region have increased dramatically over the last week, with at least nine countries involved in Saturday's conflict, projectiles fired from Iran, Iraq, Syria and Yemen were downed by Israel, the US and France, as well as Jordan. Following Iran's attack, the U.S. pledged "ironclad" backing for Israel, but President Joe Biden made it clear the US would not participate in any offensive operations against Iran.
As subscribers may have read, NEXTDC (NXT) is tapping the market for $1.3bn; some investors might be tempted to fund the raise by the data centre operator with other ASX tech names, hence today's report. Last night's +1.65% surge by the NASDAQ-100 illustrated there's still plenty of life left in the sector, especially if we do see the Fed and ECB start cutting rates this year. For all of the talk around excessive valuations and sticky inflation, the US tech sector is still less than 1% below its all-time high.
The weakness across the Lithium Sector has lost its place in the financial press due to the strong rallies in copper and gold. Usually, more “clicks” are achieved from bad news and crash-style stories, but the lithium bear market has grown old in the tooth. However, as we’ve seen with other commodities and related stocks, this year is starting to look exciting for the commodity space, and we believe lithium can join the party, at least for a while. We aren’t as bullish towards lithium as copper, for example, with the supply & demand dynamics far from clear, but we can see them enjoying a strong finish to this FY.
Overnight, the influential former Federal Bank of St. Louis President James Bullard said he's expecting three rate cuts in 2024 as inflation moves towards the Feds target even while the economy remains resilient, i.e. the “Goldilocks” scenario for stocks. Bullard’s outlook echoed the Fed’s messaging as opposed to the increasing market expectations that two cuts have become more likely than three, e.g. Treasury yields made new highs for the year on Monday night. Mr Bullard is indirectly quoting the old adage of “don’t fight the Fed”. However, it wasn’t the ongoing commentary from the central banker that caught our attention but rather the market’s reaction following the relatively Dovish interview—gold surged over $US30 to another all-time high while bond yields hardly moved. This has been the story of 2024, which has seen gold surge around $US300/oz while bonds have drifted lower (yields higher).
BHP and RIO are two stocks most closely followed by MM subscribers; just look at Saturday's Q&A. Hence, it caught our attention when one of the leading stories in yesterday's AFR was “Brokers go all in on RIO tipping 20% annual share price jump”, i.e., at MM, we’ve preferred BHP over RIO over recent years. They believe that RIO is better positioned for a boom in industrial metals, and they also think it has a stronger balance sheet. A glance at the two stocks shows they’ve pretty much danced in tandem since COVID, while so far in 2024, BHP is down -12.2% and RIO -10.3%, with iron ore weighing on both miners.
Gold surged to new all-time highs last week, shrugging off a pullback in bonds (higher yields). The trend of precious metals is usually determined or significantly influenced by interest rates, but not at the moment—higher interest rates make zero-yielding assets such as gold less attractive from a relative perspective. There are arguably three main drivers of gold at the moment, with two very bullish and one mildly bearish short-term.
These three unrelated commodities have surged higher recently, taking many ASX names along for the ride. For example, in 2024, Sandfire Resources (SFR) is up +24%, Northern Star (NST) +8%, and Paladin (PDN) +50%. Fortunately, at MM, we enjoyed the moves of all three themes, and today, we quickly reviewed the group to evaluate if our exposure needs tweaking as market volatility starts to increase.