Morning Wrap: ASX 200 to fall, Nasdaq posts worst day since December 2022, blue-chip Dow extends gains

ASX 200 futures are trading 43 points lower, down -0.53% as of 8:30 am AEST.

The Dow closed at a fresh all-time high while the S&P 500 and Nasdaq sold off sharply, the Russell 2000 briefly traded at its most overbought point in history, UK inflation remained at the Bank of England's 2% target in June and expect a pretty choppy session for local equities.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gaps down to close at worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished mostly lower, with the Nasdaq experiencing its worst session since December 2022

• Rotation dynamics continued to persist, with Magnificent Seven names down between 1-6% while the ~73% of Dow constituents finished higher

• Small caps and cyclicals took a bit of a pause after recent big rotation, the Russell 2000 had rallied 12% in the prior five sessions or almost 4.5 standard deviations above its 50-day moving average

• No other major US benchmark (Dow since 1900, S&P 500 since 1928 and Nasdaq since 1971) has ever closed at that much of an extreme, according to Bespoke

• "Trump trade" supercharged by hopes his policies will lift corporate profits (Reuters)

• Commercial real-estate debt market defaults are surging, triggering losses (WSJ)

• Asset managers forego billions in fees from US fund investors last year in race to bottom (FT)

• Copper hovering near two-week lows amid demand uncertainty out of China (Bloomberg)

STOCKS

• Adobe Analytics says US online sales hit US$7.2bn on first day of Amazon's Prime event (Reuters)

• ASML shares drop 10% as Q2 results flag clouded outlook of more severe US export curbs (Reuters)

• Spirit Airlines shares dip 10% after downgrading Q2 forecast on weak non-ticket sales and fee revenue (Reuters)

• Klarna lining up financial advisors for planned US IPO (FT)

• Equity trading revenues across investment banks up 18% year-on-year, more than triple estimates (Bloomberg)

CENTRAL BANKS

• Fed’s Waller said he’d like to see a bit more evidence inflation is heading towards 2% but believes the Fed is getting closer to the time when a cut is warranted (Bloomberg)

• Fed Kugler says it will be appropriate to begin cuts later this year (Bloomberg)

• PBOC readies plans to short sell bonds amid bubble concerns (Bloomberg)

POLITICS & GEOPOLITICS

• Biden says he'd consider exiting race if 'medical condition' emerged (NYT)

• Trump says he won't remove Powell mid-term, wants to cut corporate tax rate to 15% (Bloomberg)

• JD Vance pick as Trump's VP likely to fuel momentum from tech leaders frustrated with Biden administration (Reuters)

• US exploring tougher restrictions against companies giving China access to advanced semiconductor technology (Bloomberg)

• Trump voices skepticism about defending Taiwan unless it pays for defense (FT)

• French PM Attal resigns, caretaker government to manage affairs amid political uncertainty (Reuters)

ECONOMY

• US June housing starts beat consensus but still down 4.4% year-on-year to eight-month low (Reuters)

• UK June inflation remained at 2% target but services still elevated (Bloomberg)

• New Zealand CPI softens more than expected but domestic inflation pressures elevated (Bloomberg)

• Singapore exports down sharply amid dip in electronics shipments (Bloomberg)

ASX TODAY

• Domino’s Pizza to close up to 80 low volume stores in Japan, France business targeting a net 10-20 store reduction in FY25 and expecting FY25-26 store openings to be below the 3-5 year outlook of 7-9% new store openings (DMP)

• Fortescue pushes back on hydrogen dream, target of 15 million tonnes of green hydrogen by 2030 on the backburner and "de-prioritised" several green hydrogen projects, 700 jobs slashed (AFR)

• Healius has received two non-binding indicative bids for its Lumus Imaging business at around $700 million (AFR)

• Iress in focus for private equity buyout, sources point to Blackstone (The Aus)

 WHAT TO WATCH TODAY

A few sectors like Staples, Energy, Financials and Real Estate managed to tick higher and outperform overnight. It will be interesting to see if local names can do the same. Outside of defensives and yield-sensitive sectors, it was pretty heavy.

• Tech: It was a sea of red for big US tech stocks. Let's see if this translates into any weakness for local names.

• Uranium: Global X Uranium ETF down 4.4% overnight and not far from 3-month lows. Local uranium names somewhat lead this decline on Wednesday (DYL, BOE and PDN down 1-3%). But weakness could very well persist in today's session.

• Healius: The AFR says Healius has received two PE bids for its Lumus Imaging businesses. Sources said the bids valued Lumus around $700 million. Macquarie was expecting a sale which valued the business between $590-709 million, with proceeds used to pay down debt and improve productivity.

• Droneshield: Droneshield shares are down 30% in the last two sessions. It managed to bounce pretty hard on Wednesday (finished 9% lower, from session lows of -23%). Let's see what madness DRO has in store for us today.

BROKER MOVES

• Jumbo Interactive initiated Underweight with $14.50 target (JPMorgan)

• Liontown Resources initiated Neutral with $1.30 target (E&P)

• Praemium downgraded to Hold from Buy; target cut to $0.50 from $0.55 (Ord Minnett)

• Zip Co upgraded to Outperform from Sector Perform; target up to $1.90 from $1.10 (RBC Capital)

Companies trading ex-dividend: 

• Thu 18 July: None

• Fri 19 July: Plato Income Maximiser (PL8) – $0.006

• Mon 22 July: None

• Tue 23 July: None

• Wed 24 July: None

Other ASX corporate actions today: 

• Dividends paid: Graincorp (GNC) – $0.14

• Listing: None

• Earnings: None

• AGMs: None

Economic calendar (AEST):

• 9:50 am: Japan Balance of Trade (Jun)

• 11:30 am: Australia Unemployment Rate (Jun)

• 4:00 pm: UK Unemployment Rate (May)

• 10:15 pm: ECB Interest Rate Decision