Market Wraps

Morning Wrap: ASX 200 to bounce, US debt ceiling optimism, the world's most crowded trade

Thu 18 May 23, 8:34am (AEST)

ASX 200 futures are trading 40 points higher, up 0.55% as of 8:20 am AEDT.

US stocks rallied on positive debt ceiling developments, regional bank stocks rally after Western Alliance says deposits have grown strongly since the end of the March quarter, Target shares higher despite flagging deteriorating sales, key insights from the latest Bank of America Fund Manager Survey and Aussie jobs data will come out at 11:30 am AEST.

Let's dive in.

Overnight Summary

Thu 18 May 23, 8:34am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,159 +1.19%
Dow Jones 33,421 +1.24%
NASDAQ Comp 12,501 +1.28%
Russell 2000 1,774 +2.21%
Country Indices
Canada 20,296 +0.27%
China 3,284 -0.21%
Germany 15,951 +0.34%
Hong Kong 19,561 -2.09%
India 61,561 -0.60%
Japan 30,094 +0.84%
United Kingdom 7,723 -0.36%
Name Value Chg %
Commodities (USD)
Gold 1,985.10 +0.01%
Iron Ore 107.38 -
Copper 3.747 -0.20%
WTI Oil 72.67 -0.22%
AUD/USD 0.6660 -0.01%
Bitcoin (AUD) 41,098 +1.28%
Ethereum (AUD) 2,739 -0.15%
US 10 Yr T-bond 3.581 +0.90%
VIX 17 -6.23%

US Sectors

Thu 18 May 23, 8:34am (AEST)

Sector Chg %
Financials +2.09%
Energy +2.07%
Consumer Discretionary +2.04%
Industrials +1.70%
Real Estate +1.29%
Information Technology +1.28%
Communication Services +1.18%
Materials +0.67%
Health Care +0.10%
Consumer Staples -0.10%
Utilities -0.36%


S&P 500 intraday
S&P 500 rallies and closes at session highs (Source: TradingView)


  • S&P 500 rallied, closed at best levels and marked its first move of more than 1% after seven consecutive sessions of incremental changes

  • US 2-year Treasury yield is up ~25 bps in the last four sessions

  • US Dollar Index rallies to a six week high

  • Risk-on attitude supported by positive debt ceiling developments and positive regional banking data, notably from Western Alliance

  • Tight trading ranges seem fitting with current inflection points such as soft vs. hard-landing, Fed cut vs. higher for longer and US core inflation sitting above 5%

  • Fed officials highlight need to monitor impact of past tightening, others maintain hawkish and higher-for-longer bias (Bloomberg)

  • BofA strategists say hedges to profit off debt ceiling breakdown are cheap (Bloomberg)


  • Western Alliance says deposits have grown by more than US$2bn since the quarter's end (Bloomberg)


Target (+2.6%): Double beat but cut its second quarter profit expectations, reaffirmed full-year guidance, flagged that sales slowed and further decelerated in April.

  • "Based on softening sales trends in the first quarter, the Company is planning for a wide range of sales outcomes in the second quarter.” – CEO Brian Cornell

  • “Strength in Food & Beverage, Beauty and Household Essentials offset ongoing softness in discretionary categories.”

  • Beauty was the best performing category with ~15% comp growth, food and beverage was up 8-9%, househould essentials rose 1-3% but discretionary categories such as apparel, home and hard lines fell 5-11%


  • US single-family building permits at 7-month high, housing slump persists (Reuters)

  • Eurozone April inflation accelerated, with rising services and energy costs offsetting a slowdown in food price growth (Reuters)

  • Japan's Q1 GDP rebounds by more than expected, emerging from recession on post-pandemic consumer rebound (Reuters, FT)

  • China home price growth slows in April (Reuters)

  • Biden and Congressional leaders show cautious optimism that debt ceiling deal can be reached within days (Bloomberg)

Industry ETFs

Thu 18 May 23, 8:34am (AEST)

Description Last Chg %
Steel 59.1 +3.12%
Nickel 28.5343 +1.89%
Aluminum 47.675 +1.60%
Strategic Metals 85.37 +1.39%
Lithium & Battery Tech 63.09 +0.98%
Uranium 20.02 +0.96%
Copper Miners 37.65 +0.53%
Silver 21.82 +0.05%
Gold 184.23 -0.35%
Global Jets 18.61 +4.26%
Aerospace & Defense 113.04 +1.72%
Cannabis 8.36 +3.59%
Biotechnology 129.33 +0.22%
Description Last Chg %
Bitcoin 15.85 +1.80%
Hydrogen 9.26 +1.65%
CleanTech 14.61 +1.04%
Solar 71.66 +0.94%
Semiconductor 431.4 +2.47%
Electric Vehicles 23.19 +2.25%
FinTech 20.598 +2.07%
Cloud Computing 17.27 +1.83%
Video Games/eSports 52.69 +1.68%
E-commerce 17.29 +1.59%
Sports Betting/Gaming 17.18 +1.48%
Robotics & AI 25.9 +0.97%
Cybersecurity 22.61 +0.89%

Deeper Dive

Sectors to Watch

The ASX 200 performed quiet poorly on Wednesday, breaking towards the downside from its recent tight trading range. Futures are up 0.55% so it will be interesting to see just how strong we can bounce.

Financials: Financials was the best performing S&P 500 sector overnight. The S&P Regional Banking ETF rallied 7.4% after Western Alliance said deposits increased US$2bn since the end of the first quarter, while noting an uptick in the percentage of insured deposits.

Energy: Oil prices rose almost 3% overnight. The US Department of Energy also plans to purchase 3 million barrels of oil to begin refilling its Strategic Petroleum Reserve.

Travel: The US Global Jets ETF rallied 4.3% overnight, close to a fresh 2-month high. The ETF is comprised of mostly US airlines and some exposure to Qantas. This could see some positive flow for local travel names including Webjet, Flight Centre and Corporate Travel.

Fund Managers: Saying One Thing, Priced for Another

The latest Bank of America Fund Manager Survey is creating some interesting reading. While 47% of respondents expect a recession within the next 12 months, the consensus is much more split on whether an earnings recession will occur. 29% believe the contraction will be between 0 and 5%, while 28% believe there will be a 0 to 5% expansion. Here are some other highlights from the report:

  • Investor sentiment at 2023 lows

  • Cash levels up 0.1% m/m to 5.6%. The cash level figure has now been above 5% consistently since November 2021.

  • 47% of surveyed fundies believe a US-led recession is coming in the next 12 months

  • The overweight allocation to bonds is now the highest since March 2009

  • But.... the allocation to commodities has shrunk to May 2020 levels

And here is the crowded trade chart. No prizes for guessing what number one is.

Screenshot 2023-05-17 at 9.48.09 am
Source: Bank of America

Economy: Jobs Data

The Australian jobs report hits the wires at 11:30am today. If the consensus is right, there will be no change to the headline unemployment rate. Just as importantly, the Australian economy will have (once again) created jobs last month in defiance of the general wisdom that employment and inflation are inversely correlated (i.e. they go in opposite directions.)

Forecast: +24,800 / Unemployment rate: 3.5%

Today's data follows yesterday's Wage Price Index which continues to run at near-decade-long highs. For its part, the RBA expects wages growth to peak at 4% by the end of this year.

And speaking of wages, here is a chart of interest from Alex Joiner at IFM Investors. Real wages are still deeply negative in Australia - and that not many people are getting wage increases. Yet, the wage price index continues to climb well ahead of the pace of people reporting boosts to their pay cheque. How is this possible? That's a conundrum for the economists to solve.

Source: RBA

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Virgin Money (VUK) – $0.062

  • Dividends paid: None

  • Listing: None

Economic calendar (AEST):

  • 10:50 am: Japan Balance of Trade

  • 12:30 pm: Australia Unemployment Rate

  • 11:30 pm: US Initial Jobless Claims 

Written By

Hans Lee

Senior Editor

Hans is one of the Senior Editors at Livewire Markets and Market Index. He created Signal or Noise and leads the team's coverage of the global economy and fixed income markets.

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