Morning Wrap: ASX 200 set for worst session since April, S&P 500 tumbles on growth fears

ASX 200 futures are trading 144 points lower, down 1.81% as of 8:30 am AEST.

Get ready for a rough one – Major US benchmarks finished lower overnight after poor manufacturing and employment data revived recession fears, Intel to lay off more than 15% of its workforce or 20,000 employees, Facebook-parent Meta beats earnings expectations and guides to a strong Q3, the Bank of England cuts rates by 25 bps as expected and keep an eye out for uranium, copper and lithium stocks this morning.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 trends lower to finish near worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks flipped back to risk-off and finished not far from session lows

• Russell 2000 posted its worst session since February

• Semiconductor stocks had their worst session since 20 March, with Nvidia down 6.6%

• Overnight earnings themes – Big tech capex ramp up remains the biggest theme/concern as well as weak China demand, growing consumer headwinds, improving advertising trends and a focus on cost-cutting

• Growth fears spike on weaker-than-expected US labour and manufacturing data, alongside buildup of consumer-softness commentary in earnings calls

• Swaps traders fully pricing in three 25bp Fed cuts this year (Bloomberg)

• Chip-making stocks becoming increasingly sensitive to investment plans of handful of Big Tech companies (FT)

STOCKS

• Intel shares down 19% after hours after plans to cut 15% of its workforce and suspend its dividend, Q2 EPS was just 2 cents vs. 10 cents consensus (Reuters)

• Meta Q2 revenue beat by 2% while EPS was 9% ahead, Q3 revenue guidance was 2% above consensus, management noted healthy advertising demand but bumped up 2024 capex outlook by US$2bn and expects 2025 capex to increase significantly (FT)

• Qualcomm beats expectations, cautious on phone shipment outlook, shares tumble 9% after management cited flat year-on-year revenue growth (Bloomberg)

• Toyota shares down 8%, profits jump after weak yen and robust demand in North America boosted sales (Reuters)

• Eli Lilly obesity drug Zepbound cuts heart failure risk, late-stage study shows (CNBC)

• Maersk lifts guidance on continued shipping disruptions in the Red Sea (FT)

CENTRAL BANKS

• Bank of England cuts rates from 16-year high, 'careful on future moves' (Reuters)

• Fed leaves rates unchanged, though with some dovish tweaks to policy statement (FT)

• BOJ chief Ueda's hawkish streak signals more rate hikes to come even against backdrop of weaker economy (Reuters)

POLITICS & GEOPOLITICS

• US mulling restrictions on China's access to AI memory chips (Bloomberg)

• Iran orders direct attack against Israel, raises fears of a wider Mideast war (Reuters)

• Israel confirms it killed Hamas military commander Deif (Bloomberg)

• US and EU diplomats holding urgent discussions in bid avoid wider Middle East conflict (FT)

ECONOMY

• US July ISM Manufacturing drops to 46.8 vs. consensus 48.9 or an 8-month low, the employment sub-index hit the lowest since June 2020 (Reuters)

• US initial jobless claims posted 249,000 vs. consensus 235,000, the highest in nearly a year amid summer volatility (Reuters)

• China Caixin manufacturing PMI unexpectedly contracts (Bloomberg)

• Eurozone manufacturing PMI deep in contractionary territory with output declining at fastest pace this year (Reuters)

• UK manufacturing PMI at highest since February 2022, with stronger output, hiring and optimism around new government (Reuters)

• South Korean export growth hits six-month high amid in chip shipments (Reuters)

• China new home sales decline at quicker pace as rescue measures fail (Bloomberg)

ASX TODAY

• Block reports Q2 adjusted EBITDA of US$759m vs. $689m consensus, Q3 and full-year guidance also ahead of consensus (SQ2)

• Pinnacle Investment Management reports FY24 NPAT of $90.4m vs. $81.7m consensus, issues final dividend of 26.4 cents (PNI)

• ResMed reports Q4 EPS of $2.08, in-line with consensus, raises quarterly dividend by 10.4% to 53 cents (RMD)

 WHAT TO WATCH TODAY

Get ready for a rough one. Lots of bearish moving parts overnight – Heavy overnight session for commodities, markets front-running Fed rate cut expectations, megacap tech stocks heavy on capex concerns (plus Intel miss/layoffs) and weak US macro data.

• Uranium: The Global X Uranium ETF nosedived 7.7% overnight to close at a 9-month low. This should see local names open broadly lower.

• Copper: Copper prices took a sizeable hit overnight on growth concerns, down 2.3% to US$4.06/lb or the lowest since early April.

• Lithium: Lithium-related ETFs fell around 3% overnight but the big story was from Albemarle. The lithium giant said “The market is not improving. It’s actually probably getting a little worse. We’re using the term ‘lower for longer’ from a pricing perspective."

• Defensives: S&P 500 sectors including Healthcare, Staples, Real Estate and Utilities all finished more than 1% higher overnight. Let's see if ours can offset some of the weakness that'll occur across everything else.

BROKER MOVES

• Bluescope Steel downgraded to Neutral from Overweight; target $23 (JPMorgan)

• Capricorn Metals upgraded to Buy from Overweight; target increased to $6.28 from $5.80 (Jarden)

• Jupiter Mines initiated Buy with $0.40 target (Argonaut)

• News Corp downgraded to Neutral from Buy; target cut to $46.30 from $36.78 (UBS)

• Orora downgraded to Neutral from Buy; target cut to $2.30 from $2.86 (Citi)

Companies trading ex-dividend: 

• Fri 2 Aug: Several ETFs trade ex-dividend today. See a full list here 

• Mon 5 Aug: PRL Global (PRG) – $0.05, Perpetual Credit Income Trust (PCI) – $0.007

• Tue 6 Aug: BKI Investment Company (BKI) – $0.04

• Wed 7 Aug: Amcil (AMH) – $0.03, Mayfield Group (MYG) – $0.02, Pacific Smiles (PSQ) – $0.07

• Thu 8 Aug: None

Other ASX corporate actions today: 

• Dividends paid: None

• Listing: None  

• Earnings: ResMed (RMD), Block (SQ2), Pinnacle (PNI)

• AGMs: None

Economic calendar (AEST):

• 11:30 am: Australia Home Loans (Jun)

• 11:30 am: Australia Producer Price Index (Q2)

• 10:30 pm: US Non Farm Payrolls (Jul)