Morning Wrap: ASX 200 eyes record highs, S&P 500 and Nasdaq climb, IDP faces steep downgrades

ASX 200 futures are up 23pts (+0.27%) as of 8:30 am AEST.

In a nutshell:

• S&P 500 up for a second straight session, Nasdaq recovered its year-to-date losses

• OECD downgrades US growth forecasts to 1.6% for this year and 1.5% in 2026 due to tariffs and policy uncertainty

• Virgin opens IPO bookbuild, seeks to raise $685m

Let's dive in.

S&P 500 SESSION CHART

S&P 500 higher, closes near best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished higher and near best levels

• Market continued to grind higher, up for a second-straight session, despite the lack of directional drivers

• Notable catalysts include US April job openings came in higher-than-expected, while China’s manufacturing PMI unexpectedly slipped back into contraction, Fed policymakers chalked up stagflation risks, TSMC CEO said AI demand continues to outpace demand and Trump-Xi call expected to take place on Friday

• Deutsche Bank lifts S&P 500 target amid expectations for additional US trade deals (CNBC)

• Hedge funds profited in May from a weaker dollar, equity market volatility, though faced losses in commodities and fixed income (RT)

• Global bonds gained support after strong demand at Japan's 10-year bond sale, but investors still wary ahead of a 30-year auction (BBG)

• US dollar hovers near six-week low as trade war starts to hinder US economic data (RT)

STOCKS

• Tesla's sales in Sweden fall 53.7% year-on-year in May (RT)

• Ford reports 16% rise in US auto sales for May, aided by demand for pickup trucks and crossover SUVs (USN)

• CVS is spending $20 billion over next 10 years to upgrade to a more tech-enabled consumer health experience (YF)

• Microsoft cut more than 300 jobs on Tuesday, adding to 6,000 job cuts announced in May (BBG)

• Alphabet stock could fall as much as 25% in 'black swan event' if judge orders Google Chrome divestiture (YF)

• Walmart's revenue growth through e-commerce and automation raises concerns about the future of retail jobs (FT )

• TSM says tariffs having some impact on company and foreign exchange appreciation affecting margins, but AI demand remains strong (RT)

CENTRAL BANKS

• Fed Governor Cook and Chicago’s Goolsbee both warn that tariffs could lead stagflation, making it harder to lower inflation and weakening economic growth (BBG)

• NY Fed flags $1.06tn unrealized loss on bond holdings in 2024 (YF)

• BOJ Governor Ueda reiterates readiness to tighten policy if board is confident economic outlook will be realised (RT)

• RBA minutes show board discussed a 50 bp rate cut (BBG)

TARIFFS & GEOPOLITICS

• China's goal in tariff talks is a permanent US tariff rollback, offering increased purchases and investments (WSJ)

• China's grip on rare earths gives Xi leverage in trade negotiations (BBG)

• Trump and Xi likely to speak this week, US concerned about China slow-walking licenses for rare-earth exports while China concerned about flurry of new export restrictions (BBG)

• EU warns it could accelerate retaliatory tariffs against the US (BBG)

• Lutnick optimistic about India trade deal before July tariffs (BBG)

• Iran to reject a US proposal to resolve its nuclear dispute, calling it a "non-starter" that doesn't address its interests (RT)

• Ukraine's drone attacks on Russian airfields mark dangerous escalation in the ongoing war (FT)

• Ukraine-Russia remain deadlocked on ceasefire after Istanbul talks, agree only on major prisoner exchange (FT)

• South Korea's conservative candidate Kim Moon Soo has conceded defeat in presidential election (AP)

ECONOMY

• OECD downgraded US growth forecasts to 1.6% for this year and 1.5% for 2026, citing tariffs and policy uncertainty (CNBC)

• US April job openings up to 7.39m vs. 7.1m consensus and up from 7.2m in March (BBG)

• China manufacturing PMI unexpectedly contracts at steepest pace since Sep-2022 (RT)

• Eurozone inflation eased more than expected, down to 1.9% in May, below the ECB's 2% target (BBG)

• Switzerland's inflation rate turned negative for the first time since early 2021, down 0.1% year-on-year, SNB likely to cut rates to zero on July 19 (BBG)

ASX TODAY

• Black Cat Syndicate issues Kal East update, says Myhree open pit cash flow positive in May, boundary open pit ahead of schedule (BC8)

• Eagers Automotive said to have sold McMillan Shakespeare stake in ~4m block trades (AFR)

• PointsBet receives improved proposal from MIXI of $1.20 per share vs. prior offer of $1.06 (PBH)

• Virgin Australia opens IPO bookbuild to raise $685m (AFR)

• West African Resources to increase Burkina Faso's stake in Sanbrado, Kiaka and Toega to 15% from 10%, in-line with latest mining code, reaffirms FY25 guidance of 290-360koz (WAF)

WHAT TO WATCH TODAY

• ASX 200 eyes all-time highs: ASX 200 futures suggests the market will open within 1% of its 14-Feb all-time high and up over 15% from its 7-Apr low.

• Sectors to watch: Tech and Energy were the best performing S&P 500 sectors overnight, both up more than 1%. Our overnight ETF watchlist also highlighting some strong sub-sector performances including bounces for Uranium (+2.7%) and Rare Earths/Lithium (+2.0%).

BROKER MOVES

• IDP Education downgraded to Equal-weight from Overweight; target cut to $4.25 from $17.95 (MS)

• IDP Education upgraded to Buy from Neutral; but target cut to $4.95 from $12 (UBS)

• Judo Capital upgraded to Outperform from Neutral; target up to $1.75 from $1.7 (MQG)

Stocks trading ex-dividend: 

• Wed 4 Jun: Qualitas Real Estate Income Fund (QRI) – $0.01

• Thu 5 Jun: Hancock & Gore (HNG) – $0.01, Resimac (RMC) – $0.12

• Fri 6 Jun: None

Other ASX corporate actions today: 

• Dividends paid: Alcoa (AAI), Tamawood (TWD), United Overseas Australia (UOS) 

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 9:00 am: Australia Ai Group Industry Index (May)

• 11:30 am: Australia GDP Growth (Q1)

• 11:45 pm: Bank of Canada Interest Rate Decision (Ests: Hold at 2.75%)

• 12:00 am: US ISM Services PMI (May)