Latest / ausbiz a.m / 22.10.26 Angus Geddes, Fat Prophets
Transcript
- Andrew: Good morning. Welcome to your morning wrap from OSBIS. It's Thursday, October the 22nd, and we are expecting a modestly positive start on the local market, ASX Futures up around five points at a moment. We'll preview the day ahead with Angus Geddes. First, though, global markets broadly higher, driven by a resurgent AI and tech rally following a stellar third quarter earnings report from SpaceX and Elon Musk's announcement of a possible merger between SpaceX and Tesla. That tech momentum overshadowed by ongoing political unrest in Europe. Downward pressure on those global bond markets, French bond yields hitting 5% a new 24-year high. So the Nasdaq was up around 1.2%, the SP up three-quarters of a percent, the Dow up more than half a percent. And Meta, it beat Wall Street estimates in its third quarter earnings with revenue of $64.5 billion. Tesla also beating estimates for third quarter revenue. notably Netflix dropped around 5% following a week's subscriber and advertising outlook. Brent crude is a little changed, a hundred and nine a barrel, gold slightly higher, Bitcoin moving above eighty four thousand US, and the Aussie dollar strengthening to seventy point two five US cents. Well, let's get across those market moves. Angus Geddes joining us from Fat Profits. Angus, good morning. Angus: Good morning, Andrew. Andrew: All right, so let's begin with those earnings results out of the States. Pretty impressive you would think. What what what were you looking at? Angus: Look, I I thought they were very impressive. particularly the SpaceX set of numbers where Elon Musk has basically upgraded revenue guidance for two thousand and twenty-seven to five hundred billion to a trillion dollars of revenue. So, you know, that that was right at the very top end of Wall Street expectations. It led to a number of broker upgrades, including JP Morgan, which upgraded the stock. With a price target from $240 a share to $500, which obviously compares with the traded price yesterday of $160. but so, you know, I think the earnings season is proving to be another very strong one for the US. And pertinently what we're sort of seeing now. is some of the hyperscalers are really sort of coming through. And as we saw with meta platforms, they're really beginning to demonstrate to the market that they can monetize all this huge capex that they've sp been spending on AI infrastructure. Andrew: Yangus also obviously a lot made of that what is expected to be eventually a merger between SpaceX and and Tesla, how are you seeing that play out? Angus: Well, think that's a logical progression. sequen sequentially I think that was always sort of on the cards. And the fact that, you know, Elon Musk kind of mentioned it on the earnings call probably means that the deal's probably gonna be sealed at some point in the not too distant future. I think you know, both of those companies have have different business streams, but obviously there's a central sort of connection around AI. So a merger probably would make sense. And, you know, we're gonna end up with probably one of the most interesting dynamic companies the world has seen for a very long time. Andrew: geopolitics still front and centre at the moment, obviously Angus, given what's playing out in the Middle East, but also we've had negotiations between Russia and the US. Wha how is that informing your overall outlook of what's going on at the moment? Angus: Yeah, look, that's a great point. And look, I think markets are underestimating the ability for peace deals to be struck between Russia and the Ukraine and and also in the Middle East, between the US and Iran. you know, there seems to be this sort of consensus sort of bearish view that that these wars are not going to end anytime soon. In fact, polymarkets pricing an end to the Middle East war out to the middle of next year. But I think there's actually upside risk. and the fact that z presidents Putin and Zelensky are going to come together with the US to discuss a a peace deal and a ceasefire, I think that's significant because that could impact the energy markets, you know, given that Ukraine's been targeting a lot of Russian energy and refining infrastructure. and I also think this kind of raises the stakes sort of heading into the midterm elections. you know, I think it's it would be a good outcome for the for the White House if they could have some sort of reconciliation with Iran on that front. and meanwhile, you know, we we're seeing oil prices elevated this week, you know, up around that sort of $110 level. But I think you know, given the amount of volume that's transiting at through the Middle East and the fact that Middle East exports have actually picked up to pre pre-war near pre-war levels, there could be, you know, potentially quite a lot of downside in the oil price. you know, should should peace sort of arrive on both of those fronts. I don't think that's in the price with respect to the markets. Andrew: Mm. Angus: And if we were to see, you know, oil prices come off, it would have significant implications for global bond yields. Andrew: Yeah, it's most immediately obviously those elevated oil prices not doing central banks any favours whatsoever as far as they're trying to negotiate both inflation but also weakening growth. That's certainly a case with the RBA Angus. What did you make of those comments from Andrew Houser yesterday from the RBA? Angus: I I under I can understand where the RBA's coming from. I mean, they're clearly worried about inflation. But, you know, my view is that if if they were to hike in November, that could be the store that breaks the camel's back. I mean, we know that consumer confidence has plunged following the last rate hike. We also know that the unemployment rate printed at 4.7%. so I'm worried about the unemployment rate continuing to rise. And we know that the RBA has got a pain threshold of five, so it's not far off that. risk the the the the the risk of a rate hike has been dialed up to rough roughly a 50-50 chance at heading into that November Melbourne Cup Day meeting. And but I think you know it would be a mistake. I think the RBA should remain on hold and just to determine the impact of that last rate hike, which which probably will be quite material. And and let's not forget also that the narrative around high energy costs could could change quickly if if a a settlement was to be reached in the Middle East. Andrew: So how do you view the local market, Angus, given obviously those interest rate pressures that we're feeling at the moment? and also I guess taking into account, you know, for what we saw yesterday, and next DC having plummeted, obviously data centers we got significant community backlash and that's had knock on implications, particularly for those contractors. Angus: Look, I think the the local market's actually weathering all the concerns around the RBA hiking very, very well. I mean the market was down close to one percent on the open and recovered in definition positive territory. So I think the market actually is proving to be pretty resilient and and and handling this quite well. In in terms of next DC, I think this this does sort of put the the the spotlight on AI infrastructure stocks. And you know, as we saw, there was a lot of disappointment around Fermos and the IPO being cancelled, and then this this latest development with the power outage at Next DC, you know, the 42% fall yesterday seemed what somewhat overcooked, but but but then of course, you know, there's a lot of investors. on on next DC and you know the AI infrastructure trade is somewhat crowded. So it didn't sort of surprise me w that we got that sort of adverse reaction yesterday. Andrew: So where where are you seeing opportunity in the local market at the moment, Angus? Angus: Well, believe it or not, there's a lot of bearishness around the banks. we know that that you know the domestic hedge fund industry is very short, the sector. I'm a bit more bullish. I think you know, the banks over the medium to longer term are a cost-out story. technology AI is going to allow them to reduce their cost base significantly, and I think that's somewhat underappreciated by the market. obviously the housing market's in a a terrible state at the moment, but you know, that might change next year, particularly if the RBA moves moves into an easing cycle. And, you know, I think, you know, there's a bit of value beginning to come come through in those stocks. I think the cost out story is is really being overlooked. Look, the other the other sector that we're really bullish on, of course, is the resources sector. And you know, we saw a bit of a sell-off around the disappointment this week in BHP, around the quarterly production numbers. But you know, we're quite I'm quite sort of optimistic and bullish on the outlook for copper. You know, it's the i it's a key metal that's enabling electrification of the world and you know, demand's not going to slow down on that front. So you know, with the the sell-off in BHP over recent weeks, I think there's opportunity there as well. Andrew: what so you're actually adding to to the likes of BHP at the moment? Angus: Yeah, I we're we're adding to our copper exposure. And there there is a bit of a c a short term cloud over the copper price in terms of what the US will do in terms of tariffs, whether they put tariffs on imports, imports. If they don't, you could see metal come out of US warehouses and that might put a bit of downward pressure on copper. But I think, you know, fundamentally, you know, this the the the the growth demand narrative around copper is is is pretty robust over the next five years. So yeah, I think I think the local copper stocks are looking interesting. and I also like gold at these levels, Andrew. I think you know, we've seen the US dollar kind of show a little bit of fatigue. It's it's been running. And it wouldn't surprise me if we got a reset in oil prices And a reset lower in bond bond yields. And we've certainly seen the US bond market stabilize in in recent weeks, that the dollar could come off. And I think you know the the gold price could do quite well. It could do well in a in a rising interest rate environment where investors are worried about inflation. It could also do very well in a stagflationary environment. And I think central bank buying is going to increase at a you know at a decent pace. given the geopolitical events that we've seen around the Middle East this year. Andrew: Just briefly, which Gold Socks are you liking? Angus: N N Northern Star is looking interesting because it's in play. Andrew: Mm. Angus: you know, there's corporate activity going on behind the scenes. I think that's interesting. But I think, you know, some of the the mid to larger tier players such as Evolution, Regis Resources, Remelius, you know, we like all of those stocks. And of course the the Bellwether, which is which is Newmont, that's the the largest gold producer in the world. Andrew: Angus, great to get your view. enjoy the rest of your week. Thanks so much for joining us from Fat Prophets. And that is your Angus: Thanks, Andrew. Bye for now. Andrew: Ospies morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.