Morning Wrap: ASX 200 to fall + J Capital's newest short report + Harvey Norman upgraded by two brokers

ASX 200 Futures are trading 5 points lower at 7,148, as of 8am AEST.

US markets finished mixed overnight after a listless session, and after the prior session’s big rally. Semiconductor stocks took a hit amid worries about Chinese export restrictions – the White House is considering new restrictions on AI chip exports - whilst big tech provided some support. Elsewhere, commentary from the ECB remained hawkish, while a Bloomberg report also flagged consideration of a faster reduction of the central bank's balance sheet. Powell said that the Fed would not rule out moving at consecutive meetings, although it didn’t really move the needle following the last 50 bp jump in the median dot.

Let's dive in.

S&P 500 Session Chart

A late buying spree wasn't enough to save a midday selling wave. (Source: TradingView)

MARKETS

• US weighs new restrictions on exports of AI chips to China

• Money-market funds exiting RRP and buying bills

• Market may be ignoring inverted yield curve amid expectations any downturn will be shallow

• Liquidity cycle bottomed in October 2022 and looks set to trend higher

STOCKS

• Nvidia hit by report White House could close loopholes on sale of AI chips to China

• Samsung expanding its chip foundry business to compete with TSMC while fending off challenge from Intel

• UBS plans to cut more than half of Credit Suisse's 45K workforce beginning in July

ECONOMY

• Yen depreciation continues but moderate momentum may not prompt intervention

• Flurry of strong US data underlines economy's resilience, raising hopes recession can be averted

• China industrial profits remain weak, though pace of declines slows

• Italy's inflation rate fell to a 14-month low in June

• Australia's budget surplus swells on commodities strength and tight labor market

• South Korea consumer sentiment at 13-month high amid easing inflation

• ECB policymakers reiterate expectations for more rate hikes in coming months

• ECB chief economist warns markets against pricing in rate cuts within the next two years

• China's central bank expected to ease monetary policy further

The Nickel and Aluminium ETFs have been removed and will be replaced by Invesco Agriculture ETF (DBA) and Invesco Construction ETF (PKB). Changes coming soon. A new education piece is out about the above ETF list. If you want to learn more about why this list can be helpful (or you just want to suss what the tickers are) read here.

Deeper Dive

J Capital's Latest Short

Australian-based short seller J Capital Research has been known to tackle controversial ideas at both the local and international level. Sometimes, they work out (Lake Resources) and sometimes, they have the opposite effect (WiseTech Global and Vulcan Energy).

This time, they are going after a US-listed lithium play.American Lithium (NASDAQ: AMLI)'s stock is up 26% in the past year. In its most recent earnings release, it reported after tax profits of US3.26 billion. It also took a near-10% stake in rival Surge Battery Metals and received its first uranium drill permit in Peru.

But J Capital argues that AMLI may have "siphoned off" (their words, not ours) more than $100 million to relatives - most of which is undisclosed. They also argue that Peruvian uranium asset will never actually be mined. Finally, the firm alleges that management have paid three well-known penny stock promoters.

You can read their entire thesis here. The company has yet to respond to the allegations, as of writing. Shares in AMLI finished 0.5% lower overnight.

Note: A permanent injunction was granted against J Capital for its report into Vulcan Energy Resources. The lawsuit (and apology) were received in December 2021.

Harvey Norman upgraded

Despite issuing a material downgrade to its earnings forecast yesterday, Harvey Norman shares finished yesterday's session up nearly 5%. And even though the story around the slowdown in consumer spending is well-known, two brokers have upgraded their views on the discretionary retailer anyway.

• Harvey Norman (ASX: HVN) is now a HOLD after an upgrade at Jefferies. The price target is still $3.20/share.

• Harvey Norman is now EQUAL-WEIGHT at Morgan Stanley (upgraded from underweight). The price target remains at $3.50/share. Ironically, the same report also downgrades JB Hi-Fi (ASX: JBH) to UNDERWEIGHT from equal-weight. The price target for JB Hi-Fi moves from $44.30 to $38.90/share.

The impulse property purchase fades away

When interest rates were near-zero and pandemic-era stimulus was plentiful, properties could have been bought with extra-large mortgages. Now that the tide is out, the data is revealing a lot about who has been caught (proverbially) naked.

New data from CoreLogic suggests the portion of loss-making sales (i.e. people who sold their homes for less than when they bought it) ticked up in the capital cities.

Source: CoreLogic

Loss-making unit sales ticked up to 14% while loss-making house sales ticked down to 3.6%. Loss-making investment property sales also ticked up 1% to 11.2% quarter-on-quarter.But perhaps most interesting of all, around 10% of loss-making resales nationally were held for less than two years. That is, anyone who tried to make a short-term gain in the property markets were left far worse off.

Conclusion? Don't trade property. (Oh, and the free money never lasts forever.)

ASX Corporate Actions:

• Trading ex-div: None

• Listing: DY6 Metals Ltd - 29 June 2023 11:00 AM AEST

Economic Calendar:

• 5pm: German and Spanish preliminary CPI

• 10:30pm: US GDP and Jobless Claims