Market Wraps

Morning Wrap: ASX 200 to fall + China's headed for another real estate crisis

Mon 14 Aug 23, 8:32am (AEST)

ASX 200 futures are trading 30 points lower, down -0.41% as of 8:15 am AEST.

Major US benchmarks finished mixed in uneventful Friday trading, US producer prices come in hotter-than-expected amid strong service sector prices, property giant Country Garden brings new pain to China's property sector and uranium prices climb to a near 14-month high amid growing supply risks.

Let's dive in.


Overnight Summary

Mon 14 Aug 23, 8:32am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,464 -0.11%
Dow Jones 35,281 +0.30%
NASDAQ Comp 13,645 -0.68%
Russell 2000 1,925 +0.13%
Country Indices
Canada 20,408 +0.32%
China 3,189 -2.01%
Germany 15,832 -1.03%
Hong Kong 19,075 -0.90%
India 65,323 -0.56%
Japan 32,474 +0.84%
United Kingdom 7,524 -1.24%
Name Value Chg %
Commodities (USD)
Gold 1,945.70 -0.16%
Iron Ore 105.37 -
Copper 3.719 -1.22%
WTI Oil 83.04 +0.27%
Currency
AUD/USD 0.6497 +0.03%
Cryptocurrency
Bitcoin (AUD) 45,169 -0.20%
Ethereum (AUD) 2,841 -0.13%
Miscellaneous
US 10 Yr T-bond 4.168 +2.16%
VIX 15 -6.37%

ASX Morning Brief

S&P 500 SESSION CHART

S&P 500 intraday
S&P 500 slips in a uneventful Friday trading (Source: TradingView)

MARKETS

  • S&P 500 -0.11%, Nasdaq -0.68%, Dow +0.30%, Russell 2000 +0.13%

  • S&P edges lower in a relatively uneventful session, marking a 0.3% weekly decline

  • Treasury yields higher – The US 10-year hits 4.16%, close to a 9-month high

  • WTI crude rallied for a seventh consecutive week, up 0.5%

  • Bullish focus points for the week: Disinflation traction (US core inflation was up 0.16% month-on-month in July), dovish Fed commentary, no signs of a meaningful credit crunch, positioning indicators beginning to moderate

  • Bearish focus points for the week: Moody’s cut credit ratings on ten US small-to-midsize banks, weaker guidance from UPS, negative operating leverage risk for corporate earnings, energy price rally a dent in disinflation narrative, hedge funds have capitulated on shorts, AI hype losing steam, China remains a major global growth concern

  • Discretionary-to-staples stocks ratio shows recession unlikely (Bloomberg)

  • Treasuries may continue to see volatility as Fed casts a mixed shadow (Bloomberg)

STOCKS

  • UBS ends Credit Suisse’s government and central bank protections (CNBC)

  • Chinese property giant Country Garden issued a profit warning amid a decline in real estate sales (CNBC)

CENTRAL BANKS

  • Fed seen pausing after tame CPI data but mission not over (Bloomberg)

  • ECB to pause in September says slim majority of economists (Reuters)

  • RBA Governor Lowe says its possible they may need to hike further (Bloomberg)

ECONOMY

  • US producer prices rose 0.3% month-on-month above consensus for a 0.2% monthly rise, driven by strong service costs (Reuters

  • UK Q2 GDP stronger-than-expected, pressures for more BoE hikes (Reuters)

  • South Korea export slide extends into August (Yonhap)

  • China new bank loans fall sharply in July, well-below expectations (Reuters)

  • IEA downgrades 2024 global oil demand growth forecast (Reuters)


Industry ETFs

Mon 14 Aug 23, 8:32am (AEST)

DEEPER DIVE

China's worsening economic slowdown

Remember the Evergrande debt crisis back in August 2021? This dynamic is coming back into play after China's Country Garden suspended trading on at least a dozen onshore bonds after missing dollar bond coupon repayments.

The real estate developer has total liabilities of 1.4 trillion yuan (US$195bn) at the end of last year and said it had underestimated the market downturn.

China's new bank loans tumbled in July, down 89% month-on-month to the lowest levels since late 2009.

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Source: Bloomberg

Credit rating agency Moody's says that the credit distress at Country Garden is likely to spill over to the country's property and financial markets, weakening sentiment and delaying the property sector recovery.

Commodities like iron ore and copper are down around 8-12% since late July. Could things get worse on the commodity front if we don't see any meaningful support from China?

Sectors to Watch On Monday

The US market continues to pull back in an orderly fashion after an extended rally. Can we find some support or does volatility pick up from here?

Uranium: The Global X Uranium ETF rose 1.8% overnight to a 2-month high. Spot prices advanced for a fourth straight week to US$56.8/lb, close to a 14-month high amid growing supply risks from Russia (sanctions) and Niger (political turmoil might see exports halted to key consumer France). Uranium has a pretty strong track record of fading its rallies but we're seeing the gains somewhat stick this time round.

URA 2023-08-14 08-14-00
Global X Uranium ETF weekly chart (Source: TradingView)

Energy: Energy was the best performing S&P 500 sector last Friday amid a broad-based rise in energy prices including oil, natural gas and coal.

Gold: Gold is finding a little support as it nears a five month low. Do we see a bit of a double bottom dynamic play out around these levels?

GDX
VanEck Gold Miners ETF daily chart (Source: TradingView)

Tech: Tech was the worst performing S&P 500 sector last Friday, led by megacap names as well as semiconductor stocks. The most notable decliner was the iShares Semiconductor ETF, which fell 2.4% to a 6-week low.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Euroz Hartleys (EZL) – $0.035, Suncorp (SUN) – $0.27 

  • Dividends paid: Nickel Industries (NIC) – $0.02, Mayfield Group (MYG) – $0.01, Charter Hall Long Wale REIT  (CLW) – $0.07

  • Listing: Lithium Universe (LU7) 

Economic calendar (AEST):

No major economic announcements.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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