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Wall Street extended its broad bull market rally into Tuesday with some key indices hitting record highs as investor optimism rises on rate cut hopes. The Dow Jones soared 1.85% to a fresh record high of 40,954.48, while the tech-heavy Nasdaq rose just 0.2% and the S&P500 ended the session 0.64% higher. Corporate earnings results have also started being released in the US which is adding fuel to the bull market. The Bank of America and Morgan Stanley both released results overnight that beat analysts’ forecasts and saw shares in the companies rise 5% and nearly 1% respectively.

Sentiment was boosted overnight by Fed chair Jerome Powell saying that Q2 economic data has bolstered confidence that inflation is cooling, with markets now pricing in two rate cuts this year, with the markets now pricing in a 100% chance of a rate cut in September.

In Europe overnight, markets in the region closed lower as investors responded to key corporate earnings results and assessed the impact of high interest rates on both outlook and earnings across the board. The STOXX 600 fell 0.21% on Tuesday, Germany’s DAX lost 0.39%, the French CAC fell 0.69%, and, in the UK, the FTSE100 ended the day down 0.22%.

Key fashion houses took the biggest hit in Europe overnight with Germany’s Hugo Boss tumbling 7.5% after the company cut its full-year sales outlook, while the U.K.’s Burberry lost 5.2% a day after the company issued a profit warning on weak luxury demand.

Across the Asia region on Tuesday, it was a mixed session across markets with Hong Kong’s Hang Seng falling 1.6%, while China’s CSI ended the day up 0.63%, Japan’s Nikkei gained 0.2% on Tuesday and India’s Nifty 50 hit an all time high, gaining 0.2%.

The local market slipped from record highs on Tuesday to close the day down 0.23% as the big iron ore miners weighed on the market, tracking the declining price of the iron ore futures. Rio Tinto’s share price fell 2% after reporting second quarter results that fell short of market expectations including iron ore shipments of 80.3 million tonnes compared to expectations of 82 million tonnes due to rail delays experienced during the quarter.

Droneshield tumbled 30% yesterday before hitting a trading halt then resuming trade after the counter-drone technology stock responded to a media speculation that cast doubt on the longevity of the company’s stellar rally over the last 12-months.

Lifestyle Communities recovered some ground yesterday with a 5.53% rally after a sell-off on Monday following media reports around treatment of some residents at its homes.

What to watch today:

• Ahead of the midweek trading session here in Australia the SPI futures are anticipating the ASX to open the day up 0.65% tracking Wall Street’s bull run overnight.
• On the commodities front this morning oil has slipped 1.42% to trade at US$80.75/barrel, gold is up 1.92% at US$2469/ounce and iron ore is up just 0.08% at US$109.67/tonne.
• AU$1.00 is buying US$0.67, 106.65 Japanese Yen, 52.02 British Pence and NZ$1.11.

Trading Ideas:

• Bell Potter has slightly increased the 12-month price target on Electro Optic Systems (ASX:EOS) and maintain a buy rating on the Australian defence manufacturer following the release of the company’s 1H24 results outlining a better-than-expected start to the year. Over the first half, EOS reported revenue rose 92% on the PCP to $142.6m which beat BPe, and Bell Potter continues to forecast a return to profitability for the company in CY25.
• And Bell Potter has maintained a buy rating on HUB24 (ASX:HUB) with a 12-month price target of $53.20 following the release of the specialist investment platform provider’s June quarter update including a strong Q4 performance of Funds Under Administration improving to $104.7bn, up 30% on the PCP and net flows of $5bn.