Latest / ausbiz a.m / 28.10.26 Jonathan Tacadena, MPC Markets
Transcript
- Andrew: Good morning. Welcome to your morning rap from OSBs. It is Wednesday, October the twenty-eighth, and we are expecting a modest modestly positive start on the local market. ASX futures up around ten points in a moment. We'll preview the day ahead with Jonathan Tagadina. First, though, look at the global markets. A rally driven by a surge in AI optimism and falling oil prices ahead of pivotal big tech earnings and central bank decisions. Investor sentiment was buoyed by Anthropic's recent public IPO prospectives filing. The NASDAQ climbing around 1.2%, led by the chipmakers. SP up around 0.6, the Dow ending flat. Gains there are capped by a 10% drop in Boeing after the aerospace firm slashed its delivery targets. Coke reporting robust top and bottom line growth. So Brent crude easing to $114 a barrel. Gold up to $4,050 an ounce. Bitcoin Trading about eighty and a half thousand US dollars and the Aussie dollar has strengthened further to seventy point three US cents ahead of the release of the September quarter inflation data today. And I should also note polls have just closed at the time of recording in the Israeli election, the result of which could determine the outcome of the war with Iran. Well, let's get across it all. Joining us now, Jonathan Tagadina from MPC Markets. Jonathan, good morning. Jonathan: Yeah, good morning and thanks for having me. Andrew: Let's start with what we're seeing on Wall Street at the moment. Clearly very much a focus on those AI stocks, particularly with three of those hyperscalers, JIDA report. also in the wake of that anthropic IPO filing. What are you seeing at the moment? Jonathan: well I I think what you know talked about this on Ozbiz a bit is that you know it's basically the AI trade and the AI JSON trade has been the only driver of the markets. And what we saw was with Fermus and Coreweave, you know, over the last well, probably about month or so, there was a bit of a bump in the AI trade. But what's happened now since is that you know, especially with say SpaceX itself and Tesla and and some of these hyper hyperscalers. They're talking about the actual there's firm numbers now on the build out and how much compute they are planning to you know deploy and you know basically you know the market has seen positivity in that and decided that hey that this trade is back on and I think that speed bump that we had all that pullback in the AI trade has now found a low and I think it's yeah gonna resume and head on back you know maybe maybe not all the way to the new highs, but I do think that in general, the fact that, those hyperscales have shown how much they're going to deploy, people have fo figured out that, hey, there's some bargains to be had here. Andrew: Yes. obviously we s have seen cracks in an AI trade. you mentioned the likes of Fermis and those near clouds that have clearly struggled and we see next DC last week as well. look, there are a growing number of doomsayers out there as far as this AI trade is concerned. Do you think that's justified or not? Just just how cautious would you be? Jonathan: I don't think it's justified at the moment. I mean, like, look, if you just have a think about everyone's usage of AI, it's just on the up and up and up. A lot of people are just kind of just dipping their toe into AI. Some people have like dived headfirst in. and I think the the key is yeah, and we haven't even talked about it, is Anth Anthropics S one. So if you if you look at the the headline numbers there, obviously like they're they're operating at a loss, but if you just have a look at the the token usage and the revenue. you know on only a small part of the actual AI future you can just see that demand is growing and that's why I don't think the doomsdayers have factored that in completely because you know I always say in the markets you want to follow the money. So yeah even though you know there are doomsday is out there just have a look at what what the hyperscalers are spending their money on. They're spending it on compute And I think that means it just drives this AI trade you know back to the highs from here. Andrew: That said, Jonathan, how important are these results going to be from Alphabet, Amazon and Microsoft? Jonathan: I I think they're they'll they'll be very important. But I think what you'll see is so if you just have a look back at Meta, Meta got crushed a bit 'cause they've they've got negative free cash flow for the first time in in a long time. and I think you you you may see some caution because of the amount of money that they are deploying. But you gotta remember that even though they have tapped the markets for some debt and for some funding, Yeah, these guys are printing a lot of money. they've got impeccable balance sheets, even though you they there might be negative free cash flow. The amount of you know cash reserves they do have and their balance sheets are you know even better than most governments out there. So happy to see them you know deploy money as they see fit because you know they've shown that they're you know they they can you know get a good return on their capital so far. and more capital just means that higher returns going forward. Andrew: Jonathan, let's turn our attention to the local market. I mentioned that a quarterly read on inflation today, you would expect once we get that. It'll be pretty obvious what the RBA needs to do next week. With with that in mind, but also I guess just more broadly what you're seeing in the market at the moment, are you seeing opportunities right now? Jonathan: yeah, absolutely. And it's it's the AI adjacent trade again. so I was actually on Osbys on the trade well probably about a month ago and I was talking about engineering companies and how you know they're gonna be the beneficiaries of this build out. That turned out to be a bit bit of a bell ringer 'cause I think two days after that the firmness problems you know surfaced and you know basically took the wind out of those engineering companies. But Wha I think what you're seeing now is that most of them have found the low and I think there'll be you know good good beneficies going forward. And obviously because you know, these hyperscalers have to deploy capital, and someone has to be in charge of the build out and you know that they'll they'll benefit from that. Andrew: also seeing a lot of MA activity at the moment. I I know that you're looking closely at Challenger. What are you seeing in terms of the outcome there? Jonathan: Yeah, look, have a look at the chart of clean away. So what happened was clean away was there was a bid from I I forget a Swedish conglomerate. and yeah, there was a bit of a pullback just straight you know after the first bid, and then you know, that pullback was on very low volume, then straight away there was another bid and it shot up. And what I'm looking for is something similar in Challenger. So Challenger, one of their major shareholders, lobbed an eleven eighty dollar bid. the MA sort of arbitrage experts you know thought that bid was a bit low. And you can see it's actually trading f last I looked yesterday was in the eleven nineties. So I'm expecting a higher bid from Daiichi and I'm I'm guessing you know back into the I think the highs were around the thirteen dollar mark. So I think there's a good trade on there for Challenger. And just in general, our market is cheap. And you know, you can just see that, you know, we haven't gone to the highs of the S P and the Nasdaq and it just means that especially in the mid cap and the in the lower end in the in the local market, there are some bargains to be had. Andrew: Any particular sectors you're looking at. I I know you guys there at MPC certainly focus on the resources. Those commodity prices, in particular the metals, pulled back fairly sharply last week. Is that presenting an opportunity for you? Jonathan: absolutely. I I dipped my toe in and bought a little bit of BHP for some clients yesterday, just on the pullback. And what you have to have a look at is the spot prices of the actual commodities themselves, they they've pulled back, you know, quite a bit. But the thing is the miners have been absolutely beaten down and belted much harsher than the actual spot prices. So I think that that meant that means that it's been overdone on the miners themselves. And they should rebound here. So, I'm looking at the lithium space. you know, obviously PLS, Lion Town and Min are the the standouts there. But also in the gold space, if you have a look at some of the the results that came out, most of these gold miners are still printing cash, even though you know, gold is back around the four thousand US dollar mark. But even at these levels with you know A six around the two thousand, yeah, yeah, there's plenty of free cash flow in in these miners here. So I think they should rebound from the current levels. Andrew: Well, and in fact, one of the biggest players locally in gold, Northern Star, obviously also a focus for and A at the moment. Too would you expect Jonathan: Yeah. Andrew: that perhaps goldfields is gonna come back with a improved offer? Jonathan: Yeah, I think so as well. So, you know, same thing. The the board's playing hard to get there. They they think that that bid is undervalued. And you know, Northern that Northern Stars sitting on some great assets. You know, we had the leadership and the activist investor coming in saying that the the assets have been underworked over this time. So, you know, Goldfields does see that opportunity and I do I do think they'll come up and come in with a high bid. Andrew: And how are you viewing the banks at the moment? they've been fairly volatile. In fact, we look at the two largest sectors, resources and banks. They seem to have one's up, one's down. clearly also linked to what we're seeing in the property sector. What what's your outlook for the financials at the moment? Jonathan: so my outlook is that it it seems that the the banks have found a low here and you know basing out 'cause obviously, you Commonwealth Bank, you know, back at one ninety and now here in the one twenties presents a bit of a bargain. And I think you know, even though there's a lot of doom and gloom in the property market, what I'm hearing is that there's there's a few sellers that are starting to you know loosen up a little bit and I think that could s present a few bargains here and I think that's what you're seeing in the banks here. So there's a bit of a bounce in the banks itself. Obviously, you know, if the RBA has to hike, you know, it might eat it eat into their net interest margins. But just in general, I don't think that you know the the the property market will collapse to you know much lower levels than around current levels. And I think the banks themselves are showing that price action that there's a bit of support to be had here. Andrew: Well Jonathan, great to get your view of the markets both here and on Wall Street. thanks for joining us. I hope you have a good day. Jonathan: Well thanks for that and thanks for having me, Andrew. Andrew: And that is your Osbys Morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.