Market Wraps

Morning Wrap: ASX 200 to bounce off 12-month lows, S&P 500 higher + Why easy EV sales are over

Tue 31 Oct 23, 8:34am (AEDT)

ASX 200 futures are trading 29 points higher, up 0.42% as of 8:20 am AEST.

The S&P 500 snapped a three-day losing streak while the Dow posted its best day since June, oil prices tumble amid easing fears of a wider Middle East conflict, data shows Millennials are favouring bond ETFs even more than boomers, US earnings season is punishing companies that are both beating and missing earnings expectations, why the Bank of Japan's Yield Curve Control is a big deal and the era of easy EV sales might be over.

Let's dive in.

Overnight Summary

Tue 31 Oct 23, 8:34am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,167 +1.20%
Dow Jones 32,929 +1.58%
NASDAQ Comp 12,789 +1.16%
Russell 2000 1,647 +0.63%
Country Indices
Canada 18,857 +0.64%
China 3,022 +0.12%
Germany 14,717 +0.20%
Hong Kong 17,406 +0.04%
India 64,113 +0.52%
Japan 30,697 -0.95%
United Kingdom 7,327 +0.50%
Name Value Chg %
Commodities (USD)
Gold 2,006.00 +0.38%
Iron Ore 118.55 -
Copper 3.655 +0.23%
WTI Oil 82.55 -3.50%
AUD/USD 0.6374 +0.00%
Bitcoin (AUD) 54,082 -0.42%
Ethereum (AUD) 2,829 +0.20%
US 10 Yr T-bond 4.875 +0.62%
VIX 20 -7.15%

US Sectors

Tue 31 Oct 23, 8:34am (AEDT)

Sector Chg %
Communication Services +2.06%
Financials +1.71%
Consumer Staples +1.55%
Consumer Discretionary +1.26%
Industrials +1.22%
Information Technology +1.19%
Materials +0.99%
Utilities +0.68%
Health Care +0.55%
Real Estate +0.31%
Energy +0.31%


S&P 500 intraday
S&P 500 higher, finished a bit off best levels (Source: TradingView)


Note: The Overnight Summary, Sectors and ETF data was incorrect prior to 8:40 am AEDT. Apologies for any inconvenience.

  • ASX 200 set to bounce from 12-month lows

  • S&P 500 higher, finished a bit off best levels, breaks three-day losing streak

  • Relatively uneventful session ahead of a busy macro week including Fed, BoJ and BoE interest rate decisions, US ISM Manufacturing and Services PMIs, US jobs report and the second week of Q3 earnings which features 162 S&P results 

  • Oil prices fell around 3% as fears of a wider Middle East conflict eased

  • Goldman Sachs says the tightening of its financial conditions index since August has been the equivalent to 75 bps worth of Fed rate hikes

  • Strategists cut year-end S&P target given geopolitical and rate risks (Bloomberg)

  • Yen hits highest level in 3 weeks on reports BoJ may raise cap on yields (Bloomberg)

  • Millennials prefer bond ETFs even more than boomers (Bloomberg)


  • UAW extends GM strike following Stellantis strike resolution (Reuters)

  • Tesla shares tumbles as Bernstein reiterates Underperform, says FY24 estimates remain ‘too high’ (

  • iPhone 15 falls short of predecessor in Chinese market (Bloomberg)

  • Apple aims to leverage new computer sales with latest Mac lineup (Bloomberg)

  • X valued at US$19bn in new employee stock plan (Fortune)

  • Western Digital announces 2-way split after pressure from Elliott Management (FT)

  • CVS and Walgreens pharma staff launch 3-day strike (Reuters)

  • McDonald's and Chipotle raise prices in California to offset fast food wages (CNBC)


A few quick stats about how US earnings are looking:

  • Q3 S&P 500 blended earnings growth rate currently sits at 2.7%, above the -0.3% expected at the beginning of earnings season

  • 78% have topped consensus EPS expectations, above the 74% one-year average

  • Earnings are coming out 7.7% ahead of expectations, better than the 4.4% one-year average

  • Companies with positive earnings surprises have seen an average share price decrease of 1% two days before the earnings release through to two days after, according to FactSet

  • The above suggests companies are being punished for both beats and misses

  • Companies with negative earnings surprises have seen an average price decrease of 5.2% over the same period as above

McDonalds (+1.7%): Double beat, Q3 comparable sales up 8.8% vs. 7.8% expected, EPS up 18%, hiked quarterly dividend by 10%, pricing and traffic ahead of expectations with franchise margin up 50 bps. “US comparable sales results benefited from strong average check growth driven by strategic menu price increases.” Management also noted benefits from trade down from pricier options.     


  • Fed expected to hold rates at 22-year high but leave hikes on the table (FT)

  • Yen set for big swing as BOJ discusses its next step (FT)

  • ECB's Simkus says central bank unlikely to lift rates for rest of year (Bloomberg)

  • BoE seen keeping rates unchanged as inflationary pressures remain strong (FT)


  • German inflation comes in cooler than expected (Reuters)

  • German economic contraction better than feared (Bloomberg)

  • Australia Sept retail sales climb at fastest pace in 8 months (Reuters)

  • World Bank warns crude could rise to US$150 if Middle East conflict escalates (FT)

Industry ETFs

Tue 31 Oct 23, 8:34am (AEDT)

Description Last Chg %
Uranium 25.76 +1.90%
Silver 21.34 +0.76%
Steel 62.41 +0.66%
Lithium & Battery Tech 48.05 -0.46%
Copper Miners 33.33 -1.16%
Strategic Metals 57.52 -1.29%
Gold Miners 28.77 -1.47%
Global Jets 15.03 +1.97%
Construction 47.37 +0.89%
Aerospace & Defense 107.72 +0.44%
Agriculture 21.9 -0.68%
Biotechnology 113.03 +0.55%
Cannabis 5.13 -0.60%
Description Last Chg %
Bitcoin 17.53 +2.45%
Solar 41.35 +0.98%
CleanTech 8.95 +0.34%
Hydrogen 5.94 -0.34%
Sports Betting/Gaming 14.5982 +2.01%
FinTech 18.45 +1.43%
E-commerce 16.85 +1.38%
Cloud Computing 17.65 +1.09%
Robotics & AI 22.53 +0.85%
Video Games/eSports 49.69 +0.75%
Cybersecurity 22.74 +0.58%
Electric Vehicles 20.79 -0.29%
Semiconductor 438.38 -1.34%

Yield Curve Control and Inflation Expectations

Two central banks over the next two weeks will probably dominate the most attention. And no, I'm not talking about the Federal Reserve as traders already expect a 97% chance of a hold.

#1 The Bank of Japan will hand down its decision some time today and everyone has one question in mind - Will they finally move the needle on yield curve control?

Screenshot 2023-10-30 at 10.39.11 am
Source: Macrobond

To cut a very long story short, Japan has been using this unconventional form of monetary policy since 2016 and often out of lockstep with the rest of the world. You can read more about that here.

The Bank has recently allowed the 10-year yield, once capped at a very hard 0.5% limit, to move gradually to a higher level of 1.0%. Markets have tested the Bank's ability for many months now to hold this 1% threshold and avoid the "normalisation" debate (i.e. eliminating negative interest rates).

And when it couldn't sell off more Japanese government bonds (JGBs), it's tested the Bank through the Yen-US Dollar cross-rate. That cross-rate is at 30+ year lows and is actually a big reason why Japanese equities have done so well this year.

So now, the big question is will they move YCC again or will they eliminate it altogether?

If it's the latter, then a huge move is coming for bond and currency markets - which in turn affect equities. If it's the former, then the world's longest cat-and-mouse game will continue with a near-US$5 trillion balance sheet on the line.

One thing is for sure: The BoJ is conducting an incredibly unconventional policy while US Treasury yields are at ~5% and Aussie yields are not far away from this figure. If yields become more attractive in Japan, investors there may take their money out of overseas markets and bring their cash back home. Unwinding super-easy policy in a major market like Japan has huge implications for other markets like Australia and all asset classes.

#2 Meanwhile, in Australia: Q3 CPI came in hot last week. It was hot enough that I had to stop my holiday in Canada to look at it! And while every economist and their dog was busy changing their forecasts from hold to 25bps hike, this is the chart that really caught my eye.

Screenshot 2023-10-30 at 10.42.32 am
Source: Morgan Stanley

The RBA has consistently talked about how important it is to anchor medium-term inflation expectations. Compressed expectations help with psychology which will help with getting inflation back to that 2-3% target.

The only problem? This chart shows that inflation expectations are now at their highest in more than a decade. If the RBA takes this seriously, it may end up hiking rates next week. The breakout in inflation expectations also coincides with a breakdown in the ASX 200, which closed at a fresh 12-month low on Monday.

Easy EV Sales Are Over

Hi, Kerry here. I was going to turn this into a separate piece but here we are.

The lithium sector might be experiencing a wave of M&A activity (which is buoying valuations). However, it's a very different story at the end of the supply chain where downstream players are struggling to turn a profit and EV manufacturers are shifting their focus from volume to profitability.

Here are some of my key takeaways from recent company earnings.

  • Losses continue to mount: “We also remain bullish on Model e and our EV future, but clearly, the market is a moving target … our EV start-up incurred US$1.3 billion of losses in the quarter, reflecting continued investment in our next-generation products and a more challenging market.” – Ford CEO Jim Farley

  • By the numbers: Ford lost around US$36,000 for every EV it sold in the third quarter

  • EV demand falling short: “EV demand is not materialising quite as robustly as we were expecting this year. Pricing is a little bit down. Costs are going to be up with labor. So, I mean, you know, as you mentioned, EVs are going to become more challenging going forward.” – BofA analyst John Murphy 

  • Oversaturation: “You know, EVs are still in high demand. It's just, as you said, the pricing is much lower, and there's a lot of overcapacity in the middle of the market.” – Ford CEO Jim Farley 

  • Dialing down production: "Given the dynamic EV environment, we are being judicious about our production and adjusting future capacity to better match market demand.” – Ford CFO John Lawler

  • Profitability not volume:"We are also moderating the acceleration of EV production in North America to protect our pricing, adjust to slower near-term growth in demand, and implement engineering efficiency and other improvements that will make our vehicles less expensive to produce, and more profitable.” – General Motors CEO Mary Barra

  • Tesla’s third quarter revenues rose 9% year-on-year, marking the company’s slowest growth rate since Q2 2020. Net income tumbled 44% to US$1.85 billion as operating margins tumbled 1,000 bps to 7.6% as a result of deep price cuts.

  • Ganfeng, one of the world's largest lithium producers said its Q3 net profit slumped 97.88% compared to last year.

The bottom line: It’s pretty hard to maintain a bullish near-term stance on lithium if the end market is struggling.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Namoi Cotton (NAM) – $0.05, Brickworks (BKW) – $0.42, Autosports Group (ASG) – $0.10 

  • Dividends paid: Magontec (MGL) – $0.006, Steamships Trading (SST) – $0.12, Rural Funds (RFF) –$0.02, Kelly Partners Group (KPG) – 0.004 

  • Listing: None 

Economic calendar (AEDT):

  • 11:30 am: Australia Housing Credit 

  • 12:30 pm: China NBS Manufacturing and Services PMI

  • 2:00 pm: Bank of Japan Interest Rate Decision

  • 9:00 pm: Eurozone Q3 GDP and Inflation 

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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