Market Highlights: Fed’s Powell turbo charges global stocks, and 5 ASX small caps to watch today

Global stocks closed higher on Friday as Fed boss Jerome Powell said “the time has come” for officials to cut interest rates.

Jerome Powell’s remarks turbo charge stocks. Pic via Getty Images

• ASX expected to rise due after Jerome Powell’s dovish speech

• Markets anticipate a September rate cut, with speculation on 50 basis points

• Major indices in Europe and cruise stocks surged

The ASX is expected to open higher on Monday, triggered by the US Federal Reserve chairman's declaration of impending interest rate cuts.

At 8am AEST, the SPI ASX200 futures contract was pointing up by 0.5%.

On Friday, the S&P 500 rose by 1.15%, the blue chips Dow Jones lifted by 1.15%, and the tech heavy Nasdaq climbed by 1.47%.

European shares also closed higher as Jerome Powell said "the time has come" for officials to cut interest rates.

Powell, however, provided little guidance on the timing or extent of these cuts.

He noted the Fed is increasingly focusing on the jobs market while gaining confidence that inflation – now at 2.9%, is moving past the pandemic-driven surge in prices.

“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,” Powell said.

The call for a supersized 50-basis point interest rate cut in September is growing louder, says Nigel Green, CEO of deVere Group.

“The Fed cannot afford to tiptoe around these warning signs with a cautious 25-point cut. It’s simply not enough,” Green said.

To stocks, cruise operators gained following Powell's speech. Norwegian Cruise and Carnival were both up almost 8%.

Nvidia rallied by 4.5% ahead of its earnings release this Wednesday (US time).

Warner Bros. Discovery rose 7% after news broke about the company's plans to overhaul its cable network strategy.

Intuit, the owner of QuickBooks fell 7% after the company reported an unexpected quarterly loss and gave weak profit forecasts for the year.

And, shares of memory and data storage company, Micron Technology, dropped 1.4% after Susquehanna lowered its price target for the stock.

Back home, earnings season continues with Adore Beauty, Star Entertainment, Aussie Broadband, and Viva Energy among the companies set to release their results today.

25 or 50 basis points?

The market is increasingly confident that the Fed will announce its first rate cut in September.

The key question is whether a 25-basis point cut from the current 5.25%–5.5% interest rate – its highest in 23 years – will be sufficient.

In his speech at Jackson Hole, Powell did not provide clear answers, instead offering just enough information to hint at his next move.

Citigroup believes a 50-basis point cut could be possible.

With another jobs report and more economic data due before the September 17-18 Fed meeting, it says, Powell might opt for a 50 bp cut if employment figures continue to weaken.

“The truth is, the Fed was too slow to act when this cycle began. A small cut might signal a shift, but it won’t deliver the jolt needed to prevent a potential hard landing,” said Green.

“Anything less than a 50-basis point cut in September would be a missed opportunity – one that the economy, and Americans, can’t afford.”

In other markets …

Gold price rose by 1% to US$2,509.63 an ounce.

Oil prices rebounded by almost 2.5%, with Brent crude now trading at US$79.02 a barrel.

The benchmark 10-year US Treasury yield fell by 5 basis points after Powell’s speech (bond prices higher) to 3.80%.

The Aussie dollar rallied by over 1% to US67.94 cents.

Bitcoin meanwhile climbed by 1% in the last 24 hours to US$64,463, and Ethereum jumped by 0.6% to US$2,776.

5 ASX small caps to watch today

Kalina Power (ASX:KPO)
Kalina Power, a clean energy focused company, has signed an MOU with a major US data centre developer to build AI-focused data centres in Alberta, Canada using natural gas with carbon capture. Kalina aims to capitalise on Alberta's data centre boom and meet the growing electricity demand. The company says its low-CO2 power projects are well-suited to meet this demand.

Equinox Resources (ASX:EQN)
Equinox reported high-grade rare earths from its Phase I scout drilling at the Rio Negro prospect, with significant cerium anomalies and promising results in clay samples. The next Phase II program will include 4,000 metres of RC drilling to explore deeper monazite sands and hard rock. Ongoing auger drilling at the Campo Grande Project continues to identify new targets.

Tyro Payments (ASX:TYR)
Tyro’s full year gross profit rose by 9.1% to $210.8 million. EBITDA also grew significantly, up 31.6% to $55.7 million, with a margin of 26.4%. Net profit after tax surged four-fold to $25.7 million, and free cash flow soared five-fold to $30.4 million. In FY25, Tyro expects gross profit to grow to $218-$226 million, with an EBITDA margin of around 28%. The company aims to achieve a ‘Rule of 40’ or better from FY26. A company is considered to be performing well if the sum of its revenue growth rate and its EBITDA margin is at least 40% – hence the Rule of 40.

Adore Beauty (ASX:ABY)
Adore reported strong performance in FY24, with annual revenue rising 7.4% to $195.7 million and EBITDA up 661% to $4.8 million. The company improved customer retention to 64.7%, boosted brand awareness to 71%, and grew mobile app sales by nearly 49%. It also doubled retail media revenue and optimised operations, resulting in a debt-free status with a positive cash balance of $32.9 million.

Lumos Diagnostics (ASX:LDX)
Lumos and the Burnet Diagnostics Initiative (BDI) are advancing a new point-of-care liver health test. They have extended their agreement to manufacture a lateral flow test for Alanine Transaminase (ALT), a biomarker for liver injury, and to develop custom Lumos readers and a mobile app for an upcoming clinical trial. This test, building on 2023 feasibility studies, aims to provide quick, on-site results for monitoring liver function and detecting potential drug reactions. Lumos will offer development, regulatory, and manufacturing services over the next 9-12 months, with expected fees between $0.7 million and $1 million.

At Stockhead we tell it like it is. While Lumos Diagnostics and Equinox Resources are Stockhead advertisers, they did not sponsor this article.

Originally published as Market Highlights: Fed’s Powell turbo charges global stocks, and 5 ASX small caps to watch today