Market Wraps

Morning Wrap: ASX 200 to fall, Fed Minutes highlights + Morgans' reporting season upgrades

Thu 17 Aug 23, 8:32am (AEST)

ASX 200 futures are trading 23 points lower, down -0.32% as of 8:20 am AEST.

Major US benchmarks continued to sell off on China fears, Fed minutes flag 'significant' inflation risks that may merit more hikes, Target downgrades its full-year earnings expectations and flags the upcoming resumption of student loan repayments as a major risk on household budgets, Morgans' upgrades two reporting season winners and China stops publishing youth unemployment data as economic pressures mount.

Let's dive in.

Overnight Summary

Thu 17 Aug 23, 8:32am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,404 -0.76%
Dow Jones 34,766 -0.52%
NASDAQ Comp 13,475 -1.15%
Russell 2000 1,872 -1.28%
Country Indices
Canada 19,899 0.00%
China 3,150 -0.82%
Germany 15,789 +0.14%
Hong Kong 18,329 -1.36%
India 65,539 +0.21%
Japan 31,767 -1.46%
United Kingdom 7,357 -0.44%
Name Value Chg %
Commodities (USD)
Gold 1,922.10 -0.68%
Iron Ore 104.81 -
Copper 3.648 -0.53%
WTI Oil 79.26 -2.14%
AUD/USD 0.6424 0.00%
Bitcoin (AUD) 44,970 -0.99%
Ethereum (AUD) 2,816 -0.93%
US 10 Yr T-bond 4.258 +0.88%
VIX 17 +1.94%

US Sectors

Thu 17 Aug 23, 8:32am (AEDT)

Sector Chg %
Utilities +0.46%
Financials -0.21%
Consumer Staples -0.28%
Industrials -0.55%
Materials -0.66%
Health Care -0.78%
Information Technology -0.88%
Energy -0.90%
Real Estate -1.20%
Communication Services -1.21%
Consumer Discretionary -1.27%


S&P 500 intraday chart
S&P 500 sells off intraday to finish at worst levels (Source: TradingView)


  • S&P 500 finished lower and at intraday lows

  • S&P 500 continues to fall below its 50-day moving average, marking its lowest close since 10 July, while the Nasdaq finished at its lowest level since 27 June

  • WTI crude settled 2.2% lower, closing below US$80 for the first time since 2 August

  • The market’s path of least resistance has U-turned to the downside, with bearish concerns about China worsening credit crisis

  • July’s FOMC meeting minutes contained no surprises, flagging inflation risks may merit more interest rate hikes (Bloomberg)

  • Fitch flags junk issuers' capacity to pay back debt (Bloomberg)

  • Bond investors bet on higher-for-longer as US economy stands tall (Reuters)

  • Hedge funds dump Chinese stocks aggressively as growth outlook dims (Reuters)


  • Intel to call off US$5.4bn acquisition of Tower semis as Chinese approval time runs out (Bloomberg)

  • General Motors  face UAW strike threat (CNBC)

  • Occidental to buy Canadian startup Carbon Engineering for US$1.1bn (Bloomberg)

  • Tesla cuts China prices for a second time in three days (Bloomberg)

  • TPG Capital approaches EY about buying stake in consulting arm (FT)


Target (+3.0%): Q2 revenue miss but earnings beat (by almost 30% thanks to firmer margins), guides to Q3 earnings below consensus and downgraded its full-year earnings expectations by 9% at the midpoint. Here are some of the key takeaways:

  • On inventory: "With the benefit of a much-leaner inventory position than a year ago, the team was able to quickly respond to rapidly-changing topline trends throughout the second quarter, while continuing to focus on the guest experience.” – CEO CEO Brian Cornell

  • On student loan repayments: "... the upcoming resumption of student loan repayments will put additional pressure on the already strained budgets of tens of millions of households...[our] updated sales expectation is meaningfully softer than our expectation at the beginning of the year.” – CFO Michael Fiddelke

  • On theft: "During the first 5 months of this year, our stores saw a 120% increase in theft incidents involving violence or threats of violence.” 


  • China's Zhongrong missed dozens of payments as shadow bank's troubles grow (Bloomberg)

  • China home prices fall for first time this year in further sign of the deepening property downturn (Reuters)

  • Banks slash China growth forecasts, with JPMorgan seeing 4.8% (Bloomberg)

  • China digs deeper into toolbag in grapple with investor gloom (Bloomberg)


  • UK headline inflation falls but core holds firm (Reuters)

  • Eurozone industrial output jumps more than expected (Reuters)

  • US housing starts surge in July amid severe shortage (Reuters)

  • Atlanta Fed’s GDPNow model upgrades Q3 GDP outlook to 5.8% (Atlanta Fed)

  • US student loan debate intensifies as Credit Karma survey flagged that over half the borrowers will be forced to choose between making loan repayments or covering necessities like rent and groceries (CNBC)

Industry ETFs

Thu 17 Aug 23, 8:32am (AEDT)

Description Last Chg %
Steel 65.1964 -0.16%
Uranium 21.99 -0.27%
Silver 20.56 -0.53%
Strategic Metals 73.34 -0.89%
Copper Miners 36.14 -1.09%
Lithium & Battery Tech 57.65 -1.23%
Gold Miners 27.83 -1.35%
Agriculture 21.19 +0.52%
Aerospace & Defense 114.8 -0.39%
Global Jets 19.65 -0.81%
Construction 55.7 -1.54%
Cannabis 6.7969 +0.43%
Biotechnology 126.18 -1.43%
Description Last Chg %
Bitcoin 15.03 -0.27%
Solar 58.19 -2.33%
CleanTech 12.38 -2.52%
Hydrogen 8.65 -2.92%
FinTech 21.9 -0.73%
Cloud Computing 19.52 -1.01%
Cybersecurity 23.41 -1.10%
Video Games/eSports 52.91 -1.29%
E-commerce 18.51 -1.39%
Sports Betting/Gaming 17.1233 -1.48%
Electric Vehicles 24.04 -1.80%
Robotics & AI 25.81 -1.83%
Semiconductor 482.84 -1.94%

Deeper Dive

Sectors to Watch in a nutshell: Brace for another heavy session where the market ventures deeper into oversold territory, where its due for a bounce (but who knows when). This pullback has allowed sentiment to somewhat reset (e.g. Investors Intelligence bulls fell to 47.1% from 52.2%, CNN Fear & Greed is at Neutral from Extreme Greed a month ago). But the way in which the pullback has occurred (heightened volatility) is rather worrying.

Fed Minutes: Upside risks to inflation

The Fed Minutes flagged concerns about the pace of inflation and said more rate hikes could be on the horizon unless conditions change. Here are the key highlights:

  • Upside risks: "With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy."

  • The previous hike: "Almost all participants judged it appropriate to raise the target range ... A couple of participants indicated that they favored leaving the target range for the federal funds rate unchanged or that they could have supported such a proposal."

  • Real estate concern: "Participants also commented on risks associated with a potential sharp decline in CRE valuations that could adversely affect some banks and other financial institutions, such as insurance companies, that are heavily exposed to CRE."

  • Recession is not the base case: "Since the emergence of stress in the banking sector in mid-March, indicators of spending & real activity had come in stronger than anticipated; as a result, the staff no longer judged that the economy would enter a mild recession toward the end of the year."

Morgans' Two Reporting Season Upgrades

Reporting season is throwing up some real clangers and the surprises have been mostly to the upside (for now). Some people will argue it's because the analyst estimates bar was set so low and others will say that corporate Australia really has been able to navigate this tougher period. But two companies who had headwinds long before COVID are now bearing serious fruit. So much so that Morgans has seen it fit to award them both ratings upgrades.

  • Pro Medicus (ASX: PME) is now a HOLD (from reduce) with a new price target of $66.00. The broker points out being efficient from contract win to go-live at the customer end is extremely valuable. It's felt the main surprise in the result stemmed from these integration efficiencies rather than a step-change to organic volume or study pricing. Morgans also calls PME one of the highest quality businesses on the ASX - a sentiment that many of its fellow sell-side companions would agree with.

  • Treasury Wine Estates (ASX: TWE) is now an ADD (from hold) after its results didn't present "an undemanding valuation compared to other luxury brand owners" (to quote FNArena). The broker expects earnings will accelerate from the 2H of FY24 as Penfolds is outperforming expectations. The new price target is $13.00.

China Cancels a Key Data Point

In a move that raised quite a few eyebrows this week, the Chinese government decided to suspend the publication of a key component of its employment report. The decision to cancel the publication of youth unemployment data comes at a time when the youth jobless rate in China sits at an all-time record high of 21.3%.

Unofficially, there are estimates which say it could be as high as 50%. One private sector survey already suggests nearly half of the country's university graduates end up coming home less than six months after they graduate but cannot find a job in a major city.

And as this New York Times graphic shows, the divergence between adult unemployment and youth unemployment has been growing dire for a long time.

Source: New York Times

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Korvest (KOV) – $0.35, Scentre Group (SCG) – $0.083, QBE Insurance (QBE) – $0.14 

  • Dividends paid: None

  • Listing: None

Economic calendar (AEST):

  • 9:50 am: Japan Balance of Trade

  • 11:30 am: Australia Unemployment Rate

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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