Market Highlights: S&P500 sets yet another record, why ASX is undervalued, and 5 small caps to watch

ASX to open higher after S&P set yet another record
Bitcoin falls from the US$40k psychological level
Why ASX valuations are attractive compared to rest of the world

Aussie shares are poised to open higher on Wednesday as the S&P soared yet to another record high. At 8am AEDT, the ASX 200 index futures contract was pointing up by 0.2%.

Overnight, the S&P 500 rose 0.29% and set a record for the third consecutive day.

The blue chips Dow Jones index however was down -0.25%, while the tech-heavy Nasdaq lifted by +0.43%.

Earnings season goes into full swing in New York as United Airlines, Verizon and Procter & Gamble rose on upbeat results.

3M collapsed by -11% after its outlook for 2024 fell way below expectations. Johnson & Johnson also fell almost -2% as the company narrowly topped quarterly estimates.

Next on the docket to release earnings are the “Magnificent 7” group of megacap companies.

Bitcoin fell from the psychological US$40k level, trading now at US$39,182 after having fallen by -2% in the last 24 hours.

Separately shares in Coinbase, the dominant US crypto exchange, fell by -3% after getting a downgrade from a “neutral” to an “underweight” rating by JP Morgan.

Meanwhile, the VIX index, also known as Wall Street’s Fear Index, fell -4.55%.

“If we don’t get earnings that are better than expected, and Treasury yields remain elevated, we can see a further jump in the VIX,” Matt Maley at Miller Tabak + Co told Bloomberg.

ASX valuations “lower than global markets”

Martin Currie Australia, part of Franklin Templeton, has released its outlook paper on what will shape the Australian equities landscape for 2024.

Reece Birtles, chief investment officer of Martin Currie, says that forward price -to-earnings ratio (P/E) for Australia is much lower than for global markets.

“Therefore, we see better value in the more discounted Australian market,” said Birtles.

“Unfortunately, the outlook for dividend growth is dominated by this poor earnings growth outlook, even though Australian company balance sheets are generally strong and payout ratios are modest versus history,” Birtles said.

“As a result, being selective in stock picking for income and growth is as important as ever.”

Birtles adds that within the attractively valued Australian market, he continues to see a wide dispersion between Growth- and Value-style stocks.

“Our view is that the greater the valuation dispersion between typical value stocks and growth stocks, the greater the excess return opportunity for a disciplined valuation investment approach.”

In other markets …

Gold price rose by +0.35% to US$2,028.40 an ounce.

Oil prices fell by -0.3%, with Brent now trading at US$79.80 a barrel.

The benchmark 10-year US Treasury yield climbed 4 basis points (bond prices lower) to 4.14%.

Iron ore futures lifted 2.5% to US$132.25 a tonne, as China announced a rescue package to prop up its stock market.

The Aussie dollar jumped by +0.1% to US65.77c.

Meanwhile, Bitcoin was down -2% in the last 24 hours to US$39,182.

5 ASX small caps to watch today

Perpetual Resources (ASX:PEC)
PEC says it has identified significant lithium soil anomalies at Itinga prospect, in association with outcropping and interpreted subsurface pegmatites. Results from 133 samples confirmed Li index values of up to 255ppm, with clearly anomalous values across a broad sample area. Additional rock chip results are expected in coming weeks.

Control Bionics (ASX:CBL)
CBL announced that its 100% owned US subsidiary has received a research grant of US$379k from the Amyotrophic Lateral Sclerosis Association (the ALS Association) to further the development of CBL’s world’s first commercially offered autonomous wheelchair module for power wheelchairs, known as DROVE, in the US. The DROVE autonomous, self-driving wheelchair module allows people with advanced ALS to move safely and independently around their home or other locations.

iCetana (ASX:ICE)
Annualised recurring revenue (ARR) came in $1.8m as at December 2023, up 11% on the pcp. Quarterly revenue in the December quarter was $2.2m, up 425% on the pcp, and 392% quarter on quarter, largely as a result of the successful installation of a $1.5m hardware contract. The company remains well capitalised with $2.6m cash at bank.

Octava Minerals (ASX:OCT)
Octava has signed a binding conditional agreement for the acquisition of 100% of the issued capital of Byro Mining, which holds the Byro sedimentary REE and Li project. This option provides Octava with low-cost entry into a potential new source of critical minerals. Octava will now commence material characterisation and extraction studies of critical minerals on existing samples.

NickelSearch (ASX:NIS)
Infill soil sampling results over high priority areas of interest have confirmed significant lithium-caesium-tantalum (LCT) anomalies to the west and south of the quarry. LCT anomalies measured between 250m x 500m and 200m x 100m. Values peaked at 3x average background for lithium (Li), 4.5x for caesium (Cs), and 4.7x for tantalum (Ta).

At Stockhead we tell it like it is. While NickelSearch is a Stockhead advertiser, it did not sponsor this article.

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