the COB: banking on peace

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[00:00:00]I can take you >> from Barangaroo Studios. The OSBiz COV is the key stuff you need to know about the day in business and finance.

[00:00:20]Hello, welcome to the COB. I'm Juliet Sally. Great to have your company this Thursday afternoon. As we have quite a solid session on the local share market, let's take a look at where the SIBO 200 is finishing up the day session. While I can tell you that the S&P ASX 200 is firmer as we head into matchoff by 70 points, 8/10 of 1% 8,863 crossing above its 200day moving average. Uh some really positive movements coming through from the miners today. The material sector is up by 3.3%. Energy though falling by around 3% as we continue to monitor what is occurring in the Middle East. And that really brings us to the three themes of the day. And we are banking here on peace. So the share market rallying as investors digest this growing prospect of a peace agreement between the US and Iran. And we really just track these gains on Wall Street. The S&P 500 uh up another one and a half% overnight.

[00:01:17]Another fresh record high. This on the back of reports that Washington had presented a one-page memo that could hopefully lead to the gradual reopening of the strait of Humuz and Iran is expected to respond in coming days. Now, gold producers also rallying. So, this golden glow, the precious metal up for a third session in a row, trading back around $4,700 US an ounce. So, that's part of the lift in the material space today. Northern Star, for example, was a standout. And then Pokey's problems.

[00:01:46]Tabcourt plunging on news. It's being invested by Ostra over serious concerns relating to its ability to effectively identify, mitigate, and manage money laundering and terrorism financing risks. Uh the CEO saying the company is committed to working constructively with Ostra while the investigation remains in its early stages. But about $700 million wiped from Tabc's market value in its worst intraday trading session on record. Let's have a look at some of the sectoral moves today. Kicking it off with the tech players. Having a look at where they are. Tech is mildly lower, down by around a third of 1%. Quick look at the mining players as well. Of course, materials stocks up by about 3.3% today. And when we have a look at the energy players, well, energy was down by about 3.1%.

[00:02:38]Megaport, meanwhile, when it comes to corporate news, securing a three-year compute and storage contract worth just over $35 million with a US-based high- growth tech company in the developer tooling sector. We touched on Tab Corp there, crashing in its worst intraday session ever on that money laundering probe. Super Retail hit a three-year low on flat like forlike sales due to the impact of the Middle East. And Zip was a front runner after flagging strong momentum in the United States and the exclusives maker Ora jumping the most in a year on a robust outlook and first half. Well, let's get straight into it and welcome to the COB Clifford Bennett from Propex 24. Uh Clifford, good to see you. I mean Jul a a good day on the market, but you have said that Australia is entering its most difficult economic period in modern history.

[00:03:28]>> Well, it certainly is Juliet. I think um it's a very it's kind of a little bit surreal. I mean, US equity markets and the Australian equity market, well, not so much the Australian equity market because it's got a long way to bounce back. The US equity market at new highs and really pricing in total peace.

[00:03:46]Everything's fine. Uh and let's keep going with the excess liquidity rally as well as the AI revolution. Uh meanwhile, um it's really only out of Washington that they're saying they're close to a deal with um rather more circumspect comments coming from the Iranian side.

[00:04:03]We've seen Trump announce a deal as it had two, three times before. I think this might be the fourth time. Perhaps eventually there will be a deal and perhaps it could be this time and we all want that. Um the latest round has been that Tyrron gave Washington a 14-point plan. uh Washington was looking at that but wasn't happy with it. Now Washington has sent back a one-page uh memo. So maybe we're getting to a level where the language can be understood on both sides and um we do get a deal. I think it's a little bit premature of the US equity market. The Australian market though could correct a little bit um after being quite sold he you know sold heavily for quite some time now. Um, I'm hopeful. The oil, what worries me a little bit is the oil market dropped on the news, but then recovered more than half of that drop and has been going sideways for the last 12 hours or so.

[00:04:58]Uh, and so that suggests that oil traders are a little bit cautious as well. And oil traders tend to be more plugged into what's going on behind closed doors with regard to this situation than other markets. So, I would say to people, yes, there's grounds for hope. Uh but I wouldn't be putting, you know, betting your bottom dollar on it. Uh and it's still a time to be a little bit cautious with any tweet or announcement leading to any outcome. I think there's still a 25% probability, which is uh not, you know, 25% chance that this war could actually get become more ferocious. Uh so it's not probable, but it's still a substantial risk. Uh so we'll have to see how things go. Uh I mean you know the Lebanon truce uh there's exchanges of fire between Hezbollah and the Israelis and the Israelis have been attacking Beirut in the last 24 hours which they hadn't done for a while. So there's still a lot of tensions and a lot of people miscalculating or perhaps perfectly calculating in the Middle East. So uh I would suggest to people yes it's nice to hold what you have and it's nice to do some bargain hunting here in the Australian market. I mean, the sectors that will probably do best long term around the world are AI, robotics, and resource stocks. So, I'd still keep an eye on those ones for more upside than other markets. I I'm, you know, I don't want to do this, Juliet, but I I still have to caution, you know, just remain a little bit mindful that this is not a done deal. Uh, and I don't think you should adjust your portfolio as if it were, but certainly you can be a little bit more excited.

[00:06:34]>> All right. So, therefore, how do you position Cliff? Um, do you buy the dip on oil? What do you do with gold? What do you do with um, global stocks, Aussie stocks?

[00:06:45]>> Well, we actually short gold overnight and we've taken profits and we're going to buy oil again if it breaks to the upside out of this range of the last 12 to 18 hours. That's how closely you have to trade these markets at the moment. If you're in the big macroactive sort of sector, uh if you're in, you know, with your equities portfolio, I think it's a time to just hold what you have. Uh perhaps add a little bit into those sectors that I just mentioned. Um the resource sector in Australia is a standout long-term buy. I mean what we're seeing at the moment we saw since Venezuela happened actually I've said that we've entered a new era of resource wars and that was before I knew that there would be this war um so I think going forward uh resources are going to be more openly fought for or negotiated for uh and that is a constant tension that is going to pervade geopolitics moving forward I wouldn't treat an end to this conflict as a calming of geopolitical tensions long term that are quite obvious around the world in different regions. Uh so in that regard, Australian resources because of our geographic location as well and this creates a strong opportunity for the Australian dollar to be the ultimate safe haven currency if you like because of geographic distance, the nature of our government uh and you know the resourcerich nation nature of our society with a relatively small population. Uh I recently made a forecast or about a month ago I started making the forecast as I did many years ago uh that the Australian dollar could in fact be on its way back to par with the US dollar over a 3 to fouryear period. Uh I once made that forecast once before a little higher at 78 cents over a 3 to four year period. We did see par then so I probably can't get it right twice. So the odds would be against me on this. But I just see that a repricing of the US dollar lower and this should be taken into account for all long-term strategic holders and also mining companies should think about hedging their uh currency uh receipts forward at this point. I would think one to three years because the Australian dollar could become uh quite a strong buy. I see it moving up to 73 and a half 76 and a half in the medium term. Uh and then we'll have numbers like 85 and 95.

[00:09:12]But I think there could be a long-term decline of the US dollar and Australia with its strengths could capitalize on that. Um, but this could be an Australian dollar resources story rather than a broad Australian equity market story.

[00:09:28]>> Wow. That's sort of going back to 2010 2011 levels for the for the dollar, isn't it, Cliff? Um, >> some of us were trading it there.

[00:09:37]>> I remember when we had parody party, I think a dollar 10 as well. it got to maybe 2012 or something. Solid 10.

[00:09:43]>> Um, all right. So, teetering into recession potentially. We had a third RBA hike this week. I know that you thought the RBA should cut. Your message to Michelle Bullock. I'm sure she's watching us. Cliff.

[00:09:56]>> Oh, thank you very much for that, Juliet. Um, nice introduction. Um, dear Governor of the RBA, >> please read your economics 101 textbook.

[00:10:07]You raise interest rates to fight inflation when inflation is being caused by an overheating economy. The private sector of the Australian economy is already on its knees. So this is not a time to be raising interest rates and fighting inflation in a 1960s textbook fashion, especially when profit margins are already squeezed by higher energy prices, which means that businesses have to pass on higher borrowing costs to the consumer immediately. So raising rates at this point only adds to the inflation that would otherwise already be there.

[00:10:41]Uh in fact lowering rates will reduce inflation because it gives businesses a little bit more room to absorb energy costs. Uh and also it adds support to an economy that could well be tipped into recession by an energy crisis. It's not rocket science. It's pretty straightforward. It's strong fundamental economics. Uh, and I hope that you're able to change direction.

[00:11:07]>> Yeah. All right. Thank you, Clifford, as always. We'll chat another time.

[00:11:12]Clifford Bennett there from Propex 24.

[00:11:15]All right. Well, getting into the stock of the day. It was advanced micro devices on a global special of the call.

[00:11:20]And Andrew spoke to our experts, Mark Gardner from NBC Markets, Mark Mulland from Value 3.

[00:11:31]I'm a very happy shareholder in AMD. I think they will do better than Nvidia over the next five years and that only from the fact that Nvidia is so much bigger at about $5 trillion market cap.

[00:11:42]AMD is much smaller which means that it doesn't have that uh that hesitancy that people have that Nvidia is too big and it can't keep growing at the current rate of about 80% a year. I think it probably can for a few more years, but uh AMD will grow at a similar rate and I think the return from a shareholders point of view will probably be higher on AMD, but they're both excellent.

[00:12:02]>> I think Nvidia and AMD are in a very safe space like that the entire chip space realistically is um you know is a pretty good place to be. um you know both probably both short-term and long-term and um the revenue just keeps catching up with you know you look at the they've got these enormous forward pees and then the moment the earnings comes through it it just readjusts because their their margins are exploding and and and the revenues exploding so um look and and I think I agree with Mark's point you know Nvidia will struggle just on on sheer just sheer size I mean there's only you know there's supposedly only only so much money in the world in terms of money supply.

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[00:13:12]>> All right, let's have a look at the market leaders on another up day for the local market and Megaport there a front runner uh in a day when we did see a bit of weakness in tech but Megaport rising on its update. Iperion X also looking good along with the furniture retailer Temple and Webster, Sillex Systems and Paladin Energy. To the downside though today, Tab Corp of course having its worst uh fall on record on the back of that offtrack investigation. Index 40 Medical Light and Wonder also after its update. It fell to a nearly three-year low on an earnings miss and New Hope down by 4.7%.

[00:13:48]In the small end of town, Eden uh had a good day up by almost 26% as did Oustl and Bella Vista Resources. While in the um well the lagards I should say in the small end of town we saw Finder down by about 14%.

[00:14:04]Tonight US first quarter earnings continue with McDonald's, Gilead, Airbnb, Data Dog, Coinbase and Expedia.

[00:14:10]We also get the weekly initial jobless claims. And tomorrow, Friday on the docket here, Mcquaryy's fully year 26 earnings report. Also quarterly updates from REA which is of course owned by News Corp. So we'll also hear from News Corp and QBA2 and Westpak of course trading XD there. All right, let's have a look at where the local market has finished. Uh up by 9/10en of 1% there on the SIBO 200. The S&P ASX 200 has finished the day high by 85 points or 1% to 8,878, crossing back above its 200day moving average. We will be back bright and early from 9:45 a.m. Eastern tomorrow.

[00:14:50]See you then.