Morning Wrap: ASX 200 to fall for a third straight session, S&P 500 books worst week since April

ASX 200 futures are trading 67 points lower, down -0.85% as of 8:30 am AEST.

Major US benchmarks sold off for a third straight session on Friday, a major IT outage affected companies from banks to airlines on Friday, Netflix added 8 million paid users in Q2, Alcoa will replace Alumina in the ASX 200 on Wednesday and Macquarie issues a big sweep of REIT upgrades and downgrades.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 trends lower to finish near worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished lower on Friday, with the S&P 500 and Nasdaq down for a third straight session

• Another risk-off themed session with bond yields higher, US dollar index up 0.2%, VIX up to a near three-month high and defensive (Healthcare, Utilities, Real Estate) outperformance 

• US weekly benchmark recap: Russell 2000 +1.68%, Dow +0.72%, S&P 500 -1.97%, Nasdaq -3.65%

• BofA Flow Show report notes US equities attracted US$44.8bn in inflows for week-ended 17-Jul, the fourth-largest inflow on record and small caps attracted US$9.9bn, the second-largest inflow ever

• Widespread tech outage disrupts flights, banks, media outlets and companies around the world (Bloomberg)

• Big Tech suffers violent rotation with inflows heading into US small-cap stocks (FT)

• Big Tech companies facing tougher comparisons, elevated expectations into upcoming earnings reports following recent rotational pressure (Bloomberg)

• Chinese investors sold record amount of US stocks and bonds in May (Bloomberg)

STOCKS

• Microsoft-CrowdStrike issue causes 'largest IT outage in history' (CNBC)

• IT experts say many businesses likely will need days or even weeks to fully recover from global computing outage (FT)

• Global cyber outage has exacerbated scrutiny on Microsoft that it has neglected development of traditional products with ramp in focus toward cloud computing (link)

• Netflix reports stronger-than-expected paid net adds of ~8m in Q2, raised 2024 revenue growth guidance from 13-15% to 14-15% and lifted margin outlook (Bloomberg)

• Activist Elliott has taken big stake in Starbucks and talking to management about ways to improve performance (link)

• Berkshire Hathaway sold nearly 34m shares (~US$1.5bn) of Bank of America (Reuters)

CENTRAL BANKS

• Fed officials laying groundwork for September rate cut amid growing confidence inflation target in sight (Bloomberg)

• ECB's Villeroy and Simkus agree with market bets on rate path of two more cuts as reasonable (Bloomberg)

• BOJ to skip July rate hike according to Reuters poll (Reuters)

POLITICS & GEOPOLITICS

• Biden remains publicly defiant amid ramp in pressure to exit race (NBC News)

• More than 35 congressional Democrats have called for Biden to step aside (WP)

• Trump accepts GOP presidential nomination (Reuters)

• Senator Rubio expects US to continue supporting Taiwan if Trump wins election (Reuters)

• Trump vows to end Biden's EV mandate (Bloomberg)

• Houthis claim responsibility for what would be their first attack on the Israeli city Tel Aviv (Axios)

ECONOMY

• Japan core inflation rises below consensus (Bloomberg)

• UK retail sales volumes slide in June amid cooler weather (Reuters)

• UK consumer confidence inches up despite muted response to Labour election victory (Bloomberg)

ASX TODAY

• ASX 200 Index changes effective prior to open on 24-Jul: Aloca in, Alumina out

• Bain considering revised bid for Bapcor (The Aus)

• Cash Converters reports preliminary full-year revenue of $382.6m vs. $388.8m consensus, operating profit not expected to differ vs. a year ago (CCV)

• Highfield Resources to raise $220m from share placement investors including Yankuang Energy to fund Muga potash project (HFR)

• Iress expects increase in adjusted EBTIDA for 1H24 (IRE)

• Paladin Energy reports Q4 net cash outflows of $43.7m, first customer shipment of 319,229 lb of uranium departed on 12-Jul (PDN)

• South32 reports Q4 prod, Alumina production of 1,249kt vs. 1,382kt consensus, cuts alumina, copper and zinc FY25 guidance (S32)

 WHAT TO WATCH TODAY

• Energy weakness: Energy was the worst performing S&P 500 sector following a sharp downward move for oil prices. Brent crude fell around 2.5% on Friday amid China slowdown concerns, renewed hopes of a ceasefire in Gaza and a stronger US dollar.

• Gold, copper volatility: Gold prices fell for a third straight session on Friday, down 1.8% to US$2,406 an ounce while copper prices continued to tick lower, down 1% to near four-month lows. Interestingly, the VanEck Gold Miners ETF finished 1.2% lower overnight, up from session lows of -2.85%.

BROKER MOVES

A big sweep of REIT upgrades and downgrades from Macquarie.

• Abacus Group downgraded to Neutral from Outperform; target cut to $1.16 from $1.21 (Macquarie)

• Acrow upgraded to Buy from Accumulate; target up to $1.31 from $1.25 (Ord Minnett)

• ALS upgraded to Buy from Neutral; target up to $17 from $14.55 (UBS)

• ANZ Group downgraded to Underweight from Neutral; target remains $27 (JPMorgan)

• Arena REIT downgraded to Neutral from Outperform; target up to $4.09 from $3.96 (Macquarie)

• Centuria Industrial REIT downgraded to Neutral from Outperform; target cut to $3.22 from $3.66 (Macquarie)

• Cochlear upgraded to Positive from Neutral; target up to $355 from $330 (E&P)

• Goodman Group downgraded to Neutral from Outperform; target increased to $36.51 from $36.37 (Macquarie)

• MinRes upgraded to Add from Hold; target increased to $69 from $66 (Morgans)

• Region Group upgraded to Outperform from Neutral; target up to $2.42 from $2.30 (Macquarie)

• Whitehaven Coal downgraded to Neutral from Outperform; target cut to $8.75 from $9 (Macquarie)

Companies trading ex-dividend: 

• Mon 22 July: None

• Tue 23 July: None

• Wed 24 July: None

• Thu 25 July: None

• Fri: 26 July: None

Other ASX corporate actions today: 

• Dividends paid: Prestal Holdings (PTL) – $0.07

• Listing: None

• Earnings: South32 (Q4), 

• AGMs: None

Economic calendar (AEST):

No major economic announcements.