Morning Wrap: ASX 200 to fall, S&P 500 and Nasdaq slip from record levels, China tightens export controls for lithium

ASX 200 futures are down 38 pts (-0.42%) as of 8:30 am AEST.

In a nutshell:

• Major US benchmarks finished broadly lower in a relatively uneventful session

• US Q3 earnings season kicked off with better-than-expected numbers from Pepsi and Delta Airlines

• Busy session for commodities: China imposed export controls on rare earths and lithium, copper prices continued to climb on supply disruptions and gold flagged a pullback, now below US$4,000

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower but off worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks lower but off worst levels

• S&P 500 and Nasdaq eased off yesterday’s record close but on track for solid weekly gains

• Q3 earnings kicked off, with better-than-expected numbers from Pepsi (+4.2%) and Delta Airlines (+4.2%)

• A relatively quiet session, still no progress on the US government shutdown and mixed Fedspeak, path of least resistance remains a grind higher on AI optimism, upbeat expectations for Q3 earnings season, elevated retail inflows and positive December quarter seasonality

• Gold miners outperforming underlying commodity, tech and Bitcoin, but memories of post-2011 crash linger (FT)

• Stock investors face warnings of frothy market after 36% surge (BBG)

• Yen depreciation raises concerns about loss of safe haven status with investors turning to other assets like gold and Bitcoin (BBG)

• JPMorgan's Dimon warns of a potential stock market correction in the next six months to two years, citing various risks (RT)

• Hedge funds increasingly favour US dollar in options market, betting on its continued rebound against major currencies (BBG)

STOCKS

• Delta believes premium-cabin revenue set to eclipse sales from standard coach seats (CNBC)

• PepsiCo beats earnings on steady demand for sodas and snacks (BBG)

• Alliance Laundry rallies after IPO, shares closed at $24.82 vs. IPO price of $22 (BBG)

• TSMC posts a 30% rise in Q3 sales as US tech firms invest heavily in AI (BBG)

• Google plans to invest €5bn in Belgium over two years, expanding data centre operations (WSJ)

• Netflix launches video games for TV play, allowing subs to use phones as controllers (BBG)

• Hang Seng Bank shares surges 25% as HSBC's privatisation bid values the bank at over $37bn (FT)

• Porsche AG's China sales dip 21% in Q3, as local EV makers like BYD gain dominance (BBG)

TARIFFS

• Trump not expected to impose tariffs on generic drugs, representing major scaling-back of pharma tariff plan (WSJ)

• Commerce Department approves Nvidia chip exports to UAE after country made concrete plans for investment in US (BBG)

• China tightens controls on rare earths exports including processing technologies (BBG)

CENTRAL BANKS

• NY Fed's Williams supports further rate cuts this year, noting improved inflation outlook and job slowdown, but wants to avoid inadvertently stoking inflation (NYT)

• Japan's next PM Takaichi vows to influence monetary policy, raising concerns about political interference amid weak yen (RT)

US SHUTDOWN

• Trump says he will use the shutdown to permanently close "very popular Democrat programs" (CNBC)

• Senior GOP lawmakers warn White House against mass layoffs and government program cuts amid concerns efforts will backfire (WSJ)

GEOPOLITICS

• Trump announces Israel and Hamas agree to first phase of peace plan (BBG)

• NATO weighs more forceful response to Putin's provocations, including armed drone deployment (FT)

• Japan's Takaichi's PM appointment delayed, impacting US and China diplomacy; Diet vote now expected on 20-Oct or later (NK)

• France's Macron will appoint a new PM within 48 hours following the government's recent resignation crisis (POL)

ECONOMY

• Chinese holiday spending hit a three-year low during Golden Week (RT)

• US records $1.8tn budget deficit for FY25, little changed from prior year despite tariff revenue (CBO)

• Moody's says 22 US states are either in recession or near a downturn (AX)

ASX TODAY

• Arafura upsized share purchase plan raises $9.8m vs. $5.0m target (ARU)

• Capstone Copper major shareholder Hadrian Capital Partners offloads $668m via $13.75 per share block trade, will hold 6.7% stake after the selldown (AFR)

• MinRes exploring sale of lithium assets, JPMorgan brought in to review broader WA lithium portfolio including its 50% stake in Mt Marion (AFR)

• Mount Gibson Iron proposes name change to MGX Resources at AGM (MGX)

WHAT TO WATCH TODAY

• Rare earths, lithium and critical metals: Massive news out of the Chinese Ministry of Commerce on Thursday. Export controls applied to rare earths, with exports to foreign military users or entities on China’s control lists will generally not be approved. Exports for advanced semis and AI development will be reviewed case by case. Similar controls applied for lithium and downstream products (batteries, cathode/anode materials etc). This sector is going wild, with Lynas and other rare earth names seemingly going more vertical with every passing day. Also seeing some life come back to graphite.

• Gold: A ~1.5% pullback overnight, with prices back below US$4,000. This drove a sharp downward move for gold equities, with the VanEck Gold Miners ETF down 4.4%. Goes to show how aggressive miners have moved in recent weeks. Will be interesting as to how things settle.

BROKER MOVES

• Bank of Queensland re-initiated Sell with $6.79 target (GS)

• Bendigo & Adelaide Bank re-initiated Neutral with $13.06 target (GS)

• Computershare upgraded to Neutral from Underweight but target cut to $36.50 from $37.00 (JPM)

• Judo Capital re-initiated Buy with $2.08 target (GS)

• Macquarie Group initiated Sell with $207.58 target (GS)

• Syrah Resources upgraded to Outperform from Neutral; target up to $0.70 from $0.30 (MQG)

Stocks trading ex-dividend: 

• Fri 10 Oct: None

• Mon 13 Oct: Civmec (CVL) – $0.035, Shriro Holdings (SHM) – $0.03, Turners Automotive Group (TRA) – $0.062

• Tue 14 Oct: Sandon Capital Investments (SNC) – $0.005, Star Combo Pharma (S66) – $0.004, Wam Income Maximiser (WMX) – $0.003

• Wed 15 Oct: Cadence Capital (CDM) – $0.03, Cadence Opportunities Fund (CDO) – $0.07, Horizon Oil (HZN) – $0.015, Perenti (PRN) – $0.043, United Overseas Australia (UOS) – $0.005, Wam Research (WAX) – $0.05

• Thu 16 Oct: Gowing Bros (GOW) – $0.03, K & S Corporation (KSC) – $0.08, Latitude Group Holdings (LFSPA) – $2.107, Wam Microcap (WMI) – $0.053

• Fri 17 Oct: FFI Holdings (FFI) – $0.125

Other ASX corporate actions today:       

• Dividends paid: AUB Group (AUB), Cash Converters International (CCV), Genesis Energy (GNE), Lindsay Australia (LAU), Macmahon Holdings (MAH), Pacific Current Group (PAC), Pepper Money (PPM), Red Hill Minerals (RHI), SRG Global (SRG), Westgold Resources (WGX), Wiseway Group (WWG)

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 10:30 am: Canada Unemployment (Sep)

• 12:00 am: US Consumer Sentiment (Oct)