Market Wraps

Morning Wrap: ASX 200 futures flat + Is a new bull market coming?

Thu 22 Jun 23, 8:20am (AEST)

ASX 200 futures are trading 10 points lower, down -0.14% as of 8:20 am AEST.

The S&P 500 falls for a third consecutive session, underperforming sectors like energy and defensives start to outperform while tech stocks ease, Powell's testimony to Congress contained no new language and reiterated more rate hikes, stock market 'FOMO' sends stock ETFs past bond funds, UK's headline inflation was unchanged while core inflation accelerated and why we could be heading for a new bull market.

Let's dive in.

Overnight Summary

Thu 22 Jun 23, 8:20am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,366 -0.52%
Dow Jones 33,952 -0.30%
NASDAQ Comp 13,502 -1.21%
Russell 2000 1,863 -0.20%
Country Indices
Canada 19,706 -0.24%
China 3,198 -1.31%
Germany 16,023 -0.55%
Hong Kong 19,218 -1.98%
India 63,523 +0.31%
Japan 33,575 +0.56%
United Kingdom 7,559 -0.13%
Name Value Chg %
Commodities (USD)
Gold 1,943.60 -0.07%
Iron Ore 112.85 -
Copper 3.906 -0.20%
WTI Oil 72.47 -0.08%
Currency
AUD/USD 0.6800 +0.05%
Cryptocurrency
Bitcoin (AUD) 43,980 +6.29%
Ethereum (AUD) 2,760 +5.50%
Miscellaneous
US 10 Yr T-bond 3.723 -0.16%
VIX 13 -4.90%

US Sectors

Thu 22 Jun 23, 8:20am (AEDT)

Sector Chg %
Energy +0.92%
Utilities +0.84%
Industrials +0.57%
Consumer Staples +0.39%
Materials +0.35%
Health Care +0.06%
Financials -0.19%
Real Estate -0.45%
Consumer Discretionary -1.17%
Communication Services -1.35%
Information Technology -1.41%

S&P 500 SESSION CHART

S&P 500 Intraday
S&P 500 musters up a last minute rally that fails to stick (Source: TradingView)

MARKETS

  • S&P 500 lower and finished near worst levels

  • A little rotation and mean reversion with underperforming and defensive sectors such as Energy, Utilities, Industrials and Staples leading to the upside

  • No major directional drivers as Powell’s testimony to Congress contained almost no new language compared to last week 

  • Powell reiterated that nearly all FOMC participants expect it will be appropriate to raise interest rates 'somewhat further' by year end

  • Bearish focus points starting to get more attention as the S&P 500 rallies for five straight weeks: Overbought conditions, higher-for-longer Fed, liquidity drag and buyback blackouts into Q2 earnings season

  • ETFs haul in US$102bn so far this year, overtaking bond funds (Bloomberg)

  • Fed policymakers pledge to tackle inflation as top priority (Bloomberg)

  • Goldman Sachs US Equity Sentiment Indicator at 1.2, marks stretched territory for the first time since April 2021

  • Bond market divergence from Fed entrenched in US yield forecasts (Reuters)

STOCKS

  • AMD pulled back 5.7% after rallying almost 50% since May 

  • FedEx flags ongoing 'demand challenges, grounding more planes (Reuters)

  • Tesla returns to S&P 500 ESG Index (Reuters)

  • Uber lays off 200 jobs in recruitment division (Reuters)

  • Amazon sued by FTC over ‘deceptive’ Prime sign-up process (CNBC)

ECONOMY

  • UK inflation exceeds expectations for 4th month in a row (Bloomberg)

  • China policymakers face growing calls for economic support (Bloomberg)

  • China unveils US$72bn tax break for EVs and other green cars (Reuters)

  • Japan manufacturer sentiment remains positive amid uncertainty (Reuters)

Industry ETFs

Thu 22 Jun 23, 8:20am (AEDT)

Description Last Chg %
Commodities
Nickel 28.4 +1.65%
Steel 62.59 +0.51%
Copper Miners 38.64 +0.47%
Aluminum 45.875 +0.44%
Gold 179.49 -0.14%
Uranium 22.31 -0.45%
Strategic Metals 84.27 -0.46%
Lithium & Battery Tech 64.58 -1.18%
Silver 20.84 -1.98%
Industrials
Aerospace & Defense 116.3 +0.92%
Global Jets 20.48 -0.10%
Healthcare
Cannabis 7 -0.43%
Biotechnology 129.82 -0.43%
Description Last Chg %
Cryptocurrency
Bitcoin 16.92 +7.16%
Renewables
CleanTech 14.48 -0.69%
Solar 69.64 -1.22%
Hydrogen 9.46 -1.36%
Technology
Sports Betting/Gaming 17.388 -0.16%
E-commerce 17.86 -1.05%
FinTech 21.545 -1.10%
Robotics & AI 28.94 -1.16%
Electric Vehicles 25.59 -1.24%
Video Games/eSports 55.43 -1.69%
Cybersecurity 23.93 -1.81%
Semiconductor 491.12 -2.44%
Cloud Computing 19.37 -2.52%

Deeper Dive

China's Rate Cuts vs. UK's Hot Inflation

It's supposed to be a quiet week locally but internationally, some big things have been happening. Earlier this week, China cut its main mortgage rates by 10 basis points for the first time in 10 months. It's a small cut but it's being widely viewed as the kind of cut the central bank would use to suggest it has broader concerns for the state of the economy. Risk assets fell on the news with traders betting more cuts are on the way.

Overnight, UK CPI was also released. When he first rose to power, Prime Minister Rishi Sunak promised to halve inflation by the end of 2023. Well, so far, that plan isn't working with headline inflation increasing to 8.7%. Core inflation also continues to remain stubborn, sitting at 7.1%.

It all sets up for a very interesting Bank of England meeting tomorrow where every man and his dog expects the central bank to raise rates by another 25 basis points. Although after this inflation print, you cannot rule out a 50 basis point move and some dissent in favour of that idea.

A Bear Market Rally vs. New Bull Market

Recently, the S&P 500 entered a new technical bull market (+20% from October 2022's lows). And two leading market commentators think that bull market is not only here to stay but that it's hot, hot, hot from here.

Most of the optimists argue that the bull market will turn from something temporary to something cyclical if the Federal Reserve pivots to rate cuts. We have no signs of that yet and the Fed's most recent Dot Plot, though as inaccurate as that is, suggests no Fed board members believe they will cut rates this year. But if the market is right, then something might be about to change. Jurrien Timmer of Fidelity published this chart yesterday, arguing that a resilient corporate earnings picture combined with extra liquidity could make the perfect conditions for a new bull market. The only catch is - We need the Fed to pivot first.

FzGJDOQXsAIq LO
Source: Fidelity

Then, there's Bank of America's Savita Subramanian who argued recently that the bear market is over. She noted that the S&P 500 continued to rise 92% of the time over the next 12 months. Mind you, this is the same person who argued on Bloomberg that there was a bubble brewing in the Treasuries/government bond trade. So you can tell she's a very glass half-full character.

Fy0d08AXgAEqMOk
Source: Bank of America

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: None

  • Dividends paid: CVC (CVC) – $1.69, Elders (ELD) – $0.23 

  • Listing: None

Economic calendar (AEST):

  • 9:00 pm: UK Interest Rate Decision

  • 12:00 am: Fed Chair Powell Testimony

Written By

Hans Lee

Content Editor

Hans is a Content Editor at Livewire Markets and Market Index. He created Signal or Noise and helps write the LW-MI Morning Wrap on Tuesdays and Thursdays.

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