Morning Wrap: ASX 200 to bounce after worst weekly performance since Sep-23, S&P 500 extends selloff

The S&P 500 and Nasdaq turned lower last Friday to cap off six-straight decline and three straight weekly drops, defensive pockets of the market start to shine amid a flight to safety, Citi lowers its ratings for all Australian banks to sell, Air New Zealand downgrades its full-year guidance on deteriorating economic conditions and Cettire's most prominent backer exits the stock.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 sold off from breakeven open to finish near worst levels (Source: TradingView)

MARKETS

• S&P 500 and Nasdaq lower last Friday and finished near worst levels despite opening in positive territory

• Equal-weighted S&P finished in positive territory and outperformed by over 100 bps, reflecting tech-led selloff

• US equities finished mostly lower last week, led by the Nasdaq (-5.5%), S&P 500 (-3.05%) and Russell 2000 (-2.77%) while the Dow rose 0.01%

• Market struggled to shake off the hawkish repricing of Fed rate cut expectations and heightened war tensions in the Middle East

• Global equities added to last week's US$19.6bn outflow with another US$9.1bn outflow, according to EPFR data

• Citi noted this week that of US$52bn long positions on S&P 500, 88% in a loss

• Strategists say tech selloff driven by expectations toward slower earnings growth (FT)

• High bar into tech earnings with group trading at 31x forward earnings (Bloomberg)

• China driving gold rally with strong demand from individuals, funds and its central bank (Bloomberg)

• US junk bond funds experience biggest outflow in 14 months amid spike in Treasury yields (Bloomberg)

ASX TODAY

• ASX 200 set to open higher after a 2.84% drop last week, which marked its worst weekly performance since mid-September 2023.

• ASX 200 somewhat bounced last Friday, finishing the session down -0.98% from session lows of -1.96%

• Sectors to watch on Monday include banks (Citi downgraded major Australian banks), copper miners (copper prices hit US$4.5/lb overnight), nickel miners (nickel prices rallied 5.5% to hit highest since Sep-23), tech (tech-led selloff on Wall Street overnight) and airlines (Air New Zealand downgraded its FY24 earnings)

• Air New Zealand cuts full-year guidance on deteriorating economic and operational conditions (AIZ)

• Cettire's major holder LHC sells stake (AFR)

• Cochlear receives FDA clearance to lower age for the Osia to 5-years old (COH)

• KKR named preferred bidder for Perpetual’s Corporate Trust and Wealth Management units, suggests EQT is no longer in contention (The Aus)

• Origin Energy CEO Frank Calabria discloses sale of ~211,000 shares (ORG)

• Paladin Energy completes ten-for-one- share consolidation (PDN)

BROKER MOVES

A few broker notes of interest that have come out since Friday arvo.

• ANZ downgraded to Sell from Neutral; target remains $26.00 (Citi)

• Goodman Group downgraded to Neutral from Overweight but target increased to $30.00 from $28.00 (Barrenjoey)

• Karoon Energy downgraded to Sector Perform from Outperform; target cut to $2.25 from $2.30 (RBC Capital Markets)

• Lovisa initiated Buy with $39.00 target (Jefferies)

• Netwealth downgraded to Sell from Neutral at Citi but target increased to $18.65 from $18.35 (Citi)

• Pilbara Minerals downgraded to Underweight from Neutral; target cut to $3.10 from $3.25 due to valuation (JPMorgan)

• Westpac downgraded to Sell from Neutral; target remains $22.25 (Citi)

• Whitehaven Coal upgraded to Add from Hold; target increased to $8.90 from $7.75 (Morgans)

INTERNATIONAL STOCKS

• Netflix subscriber growth easily tops estimates following password sharing crackdown, but revenue forecast underwhelms (Bloomberg)

• Apple removes WhatsApp and Threads from China app stores at request of China's internet regulator (Bloomberg)

• Google announces workplace restructure to streamline rollout of AI products (FT)

• American Express shares soar on earnings beat, US consumer spending increased 8% from a year earlier (Barron’s)

• Tesla cuts prices on cars by US$2,000 and FSD software by a third (Bloomberg)

CENTRAL BANKS

• Atlanta Fed President Bostic doesn't believe it is appropriate to ease until towards end of 2024 (Bloomberg)

• Minneapolis Fed President Kashkari says rates could potentially remain unchanged in 2024 (Bloomberg)

• BOJ Governor Ueda reaffirms potential policy change if yen weakness pushes up inflation (Reuters)

• ECB's Simkus says several rate cuts are most likely but does not need to chart the course precisely (Reuters)

• China to leave benchmark lending rates unchanged on Monday (Reuters)

GEOPOLITICS

• Israel carefully calibrated its response to reduce the risk of escalation (NY Times)

• Israel strikes targets inside Iran, according to US officials (NY Times)

• US and Israel held a high-level virtual meeting about a possible Israeli operation in Rafah (Axios)

ECONOMY

• Japan CPI cools more than expected as 'core core' measure falls below 3% for first time since Nov-2022 (Reuters)

• UK retail sales miss expectations in March on high prices (Bloomberg)

Companies trading ex-dividend: 

• Mon 22 April: MFF Capital (MFF) – $0.06

• Tue 23 April: Naomi Cotton (NAM) – $0.01 

• Wed 24 April None

• Thu 25 April: None

• Fri 26 April: None

Other ASX corporate actions today: 

• Dividends paid: Gowing Bros (GOW) – $0.03 

• Listing: None

Economic calendar (AEST):

No major economic announcements.