Morning Wrap: ASX 200 to fall, S&P 500 and Nasdaq notch record highs, Powell warns of high rate risks

ASX 200 futures are trading 41 points lower, down -0.53% as of 8:30 am AEST.

The S&P 500 and Nasdaq nabbed new recorded closes overnight, analysts expect market gains to slow in the second half amid slow earnings growth, Powell wants to see more encouraging inflation data before cutting rates and Insignia Financial pushes back takeover speculation.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 ticks higher in a relatively muted session (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished mixed overnight, with the S&P 500 and Nasdaq logging a fifth consecutive record close

• Big tech continued to pull benchmarks higher, notably Tesla (+3.7%), Nvidia (+2.4%)

• Equal Weight S&P 500 underperformed the official benchmark by 24 bps as cyclical sectors like resources, industrials and staples ticked lower

• Relatively quiet session as markets wait for US CPI (Thursday night) and bank earnings

• Citi says it's time to take profit in high flying AI stocks (Bloomberg)

• Hedge funds have averaged a 5% YTD return compared to S&P's 15% (CNBC)

• Goldman Sachs Asset Management expects US economy to grow at 2% in the second half with equities flat (Reuters)

• JPMorgan says CPI report could add volatility to subdued market (Bloomberg)

• Big tech gains could slow in the second half amid stretched valuations and slowing earnings growth (Bloomberg)

STOCKS

• BP says weak refining margins and oil trading to lower Q2 profit (Bloomberg)

• Novo Nordisk stock falls following analysis that finds Lilly drug leads to better weight loss results (Reuters)

• Nike brings back retired senior executive to help drive retail turnaround (Bloomberg)

• Major Japanese chipmakers such as Sony and Mitsubishi Electric to spend US$30bn in production race (Nikkei)

• Bain Capital nears deal for financial software firm Envestnet for US$3.5bn (Reuters)

• Dyson to cut around 1,000 UK jobs amid increasingly competitive global market (CNBC)

CENTRAL BANKS

• Powell says first quarter data did not support the greater confidence in inflation’s path needed to cut rates, notes restrictive policy is still placing downward pressure on inflation and holding rates too high for too long could jeopardise economic growth (Fed)

• ECB's Panetta says they can continue to gradually reduce rates without jeopardising the current fall in inflation (Bloomberg)

• Bank of Korea governor says disinflation likely to continue (Korea Times)

• PBOC could loosen grip on yuan without triggering market disruption (Bloomberg)

GEOPOLITICS

• Biden and Macron political turmoil seen overshadowing NATO summit as leaders head to Washington (Bloomberg)

• Biden administration trying to get foreign companies to invest in chip-making in the US to blunt risks tied to China (NY Times)

• France's left-wing alliance pushing to lead government, seeking to decide PM candidate this week (Bloomberg)

POLITICS

• Biden tells Democrats in Congress he is not going anywhere, challenges contenders in combative call (Reuters)

• Research shows most US CEOs are largely keeping money away from presidential politics in 2024 (Yahoo Finance)

ECONOMY

• Taiwan's exports rise more than expected in June, the fastest growth since 2022 on AI demand (Bloomberg)

• Mexico's inflation accelerated more than expected in June (Bloomberg)

• Australian business confidence worsened in June, job outlook dims (Reuters)

• Australian consumer confidence slipped in July, stuck in the deeply pessimistic range that has dominated the last two years, tax relief yet to be felt (Reuters)

ASX TODAY

• ASX 200 set to give back some of yesterday's gains (+0.86%)

• Insignia Financial says it has not engaged Citi to field any offers and not aware of any offer – This was in response to an AFR article (12:45 pm on Tuesday) that said PE firms were circling it as a potential M&A target, which sent the stock up 13.6% (IFL) 

 WHAT TO WATCH TODAY

• Biotech – Not so much a today thing but biotech ETFs (SPDR S&P Biotech ETF and iShares Biotech ETF) are starting to form a few high highs and lower lows, and approaching recent highs. A few local charts like PNV and NAN are starting to take shape, and towards the more speculative end of town, names like ALA, BOT, PYC etc.

• Insignia Financial will likely pull a Cleanaway (stock rallied 15.8% on a Bloomberg article about potential PE interest, the company rejected the rumours after hours and the stock fell 10% the next day)

• Lithium stocks may face more selling pressure as the VanEck Rare Earth and Strategic Metals ETF fell for a third straight session overnight, down 2.2%. This ETF is a useful barometer for the lithium sector. Albemarle, the world's largest lithium producer, fell 8.8% overnight after analysts downgraded the stock. Chinese lithium carbonate futures have traded relatively flat over the past five sessions but lithium names are threatening to undercut recent lows

BROKER MOVES

• Regis Resources upgraded to Buy from Hold; target up to $2.40 from $2.0 (Argonaut) 

• Telstra upgraded to Outperform; target up to $4.40 from $3.70 (Macquarie)

Companies trading ex-dividend: 

• Wed 10 July: None

• Thu 11 July: Transmetro Corp (TCO) – $0.05, Westgold Resources (WGX) – $0.013

• Fri 12 July: None

• Mon 15 July: None

• Tue 16 July: Metcash (MTS) – $0.085 

Other ASX corporate actions today: 

• Dividends paid: Fisher & Paykel (FPH) – $0.213

• Listing: None

• Earnings: None

• AGMs: None

Economic calendar (AEST):

• 1:30 am: China Inflation Rate (Jun)

• 12:00 am: US Fed Chair Powell Speech