Morning Wrap: ASX 200 to bounce, S&P 500 claws back early losses as US pauses tariffs on Mexico

ASX 200 futures are up 39pts (+0.46%) as of 8:30 am AEDT.

In a nutshell:

• US stocks opened sharply lower but ended well off worst levels

• Trump said he will postpone tariffs on Mexico for a month in exchange for increased security around the US border

• Gold prices hit another fresh all-time high overnight

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower but off worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished lower but well-off session lows

• S&P 500 traded as low as -1.9%, Nasdaq down -2.48% in early trade

• Of the 36% of S&P 500 companies that have reported Q4 earnings, 77% have beaten consensus EPS expectations (in-line with one-and-five year averages)

• Near-term US market downside risk of ~5%, with every 5 percentage point increase to US tariff rate to reduce S&P 500 EPS by 1-2%  (BBG)

• Treasury yield curve flattens as Trump's trade tariffs renew stagflation talk (BBG)

• US dollar briefly surges on trade war fears, sending peers to multi-year lows (FT)

• Metals tumble as trade war raises inflation, growth fears (BBG)

• Autos selloff in wake of Trump's tariff on Mexico and Canada (CNBC)

STOCKS

• Vanguard to lower fees for nearly 100 funds; will save investors US$350m this year (CNBC)

• Meta's total investment in virtual and augmented reality is set to top US$100bn this year (FT)

CENTRAL BANKS

• Fed's Collins said Fed is unlikely to react to tariff-driven inflation (BBG)

• Trump says Fed was right to pause its rate-cutting path in its decision last week (BBG)

• BOJ board discussed likelihood of more rate hikes at January meeting, minutes show (RT)

• BoE to rate more amid economic stagnation, inflation concerns (FT)

TRADE WAR

• Bank of America does not expect 25% tariffs on Canada and Mexico to be permanent, arguing it could be too disruptive for the US but it could raise inflation and lower growth by a few tenths of a percent

• Deutsche Bank says tariff exceeded previous expectations in scope and breadth, could see 30 bp impact on US inflation in coming months

• Morgan Stanley said sustained tariffs could raise headline PCE of up to 0.6 pp, hit consumer spending by 20 bps and push real GDP growth down 1.1 pp

• Mexico’s Sheinbaum said her conversation with Trump was productive and he agreed to pause tariffs for a month and Mexico would reinforce its northern border with ~10,000 troops (X)

• Indian Prime Minister Modi has delivered rapid series of concessions to Trump in effort to avoid trade war (BBG)

• China prepares an initial proposal for trade talks with the Trump administration (CNBC)

• Trump faces backlash from businesses and analysts with fresh tariffs re-igniting inflation worries (WSJ)

• Tariffs spark panic and anger in Canada, with economists warning of recession risk (BBG)

• Trump considering hitting EU with 10% tariffs (TG)

• EU to respond "firmly" if Trump imposes tariffs on region (FT)

• Trump suggests trade issues with UK 'can be worked out' (FT)

ECONOMY

• US January ISM Manufacturing PMI printed 50.9 – the highest since Sep-22, ahead of 49.6 consensus and expanding after 26 consecutive months of contraction (RT)

• China Caixin Manufacturing PMI prints 50.1 vs. 50.5 consensus (BBG)

• Eurozone inflation rises to hotter-than-expected 2.5% in January amid surging US dollar, looming trade war and higher gas prices (FT)

• UK manufacturing PMIs signal prolonged contraction amid cost pressures (RT)

ASX TODAY

• Nufarm provides trading update at AGM, demand for crop protection products has been strong, expects to achieve $100m in omega-3 revenue in FY25, cost saving and inventory reduction initiatives announced in Aug-24 are on track, have identified $50m of annualised cost savings to be realised in FY26 (NUF)

• Star Entertainment under the eyes of Blackstone, suitor will likely wait to make a move after the company enters voluntary administration (SGR)

WHAT TO WATCH TODAY

• Trump volatility: Developments during the overnight session eased some tariff concerns, particularly around comments from Mexico's President Sheinbaum that tariffs on her country would be postponed for a month in exchange for a commitment to send more troops to the US border. Trump is currently speaking with Trudeau, repeats he will speak to China's Xi in the next 24 hours. These developments could drive substantial volatility for both related stocks and broader indices

• Gold: Bullion prices hit another fresh all-time high overnight, briefly tagging US$2,830 an ounce. In Aussie dollar terms, prices briefly hit A$4,604 but pulled back sharply amid some US dollar weakness. Regardless, this should drive positive flow for the local gold sector.

BROKER MOVES

• Brickworks upgraded to Buy from Neutral; target up to $30.50 from $29.50 (UBS)

• DigiCo Infrastructure REIT initiated Outperform with $5.33 target (MQG)

• News Corp upgraded to Buy from Neutral; target up to $64.50 from $51 (UBS)

• Nine Entertainment downgraded to Neutral from Buy; target cut to $1.45 from $1.65 (UBS)

• oOh!Media downgraded to Neutral from Buy; target cut to $1.25 from $1.85 (UBS)

• Qantas upgraded to High Conviction Outperform; target up to $10.90 from $10.70 (CLSA) 

• Reliance Worldwide downgraded to Neutral from Buy; target cut to $5.85 from $6.35 (UBS)

Stocks trading ex-dividend: 

• Tue 4 Feb: Amcil (AMH) – $0.01

• Wed 5 Feb: None

• Thu 6 Feb: Midway (MWY) – $0.384

• Fri 7 Feb: None

Other ASX corporate actions today: 

• Dividends paid: None

• Listing: None

• Earnings: None

• AGMs: Nufarm (NUF)

Economic calendar (AEDT):

No major economic announcements.