Market Wraps

Morning Wrap: ASX 200 to fall, S&P 500 claws back early losses + China is set to cut rates

Mon 21 Aug 23, 8:38am (AEST)

ASX 200 futures are trading 23 points lower, down -0.33% as of 8:20 am AEST.

The S&P 500 clawed back early losses to close around breakeven, WTI crude marks its first weekly decline in almost two months, money-market assets climb to a record US$5.57 trillion on Fed rate path uncertainty, China is set to cut interest rates on two core lending rates this afternoon, US housing affordability hits worst point in almost four decades and an ASX 200 seasonality update (and why there's worse to come based on historical trends).

Let's dive in.

Overnight Summary

Mon 21 Aug 23, 8:38am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,370 -0.01%
Dow Jones 34,501 +0.07%
NASDAQ Comp 13,291 -0.20%
Russell 2000 1,859 +0.51%
Country Indices
Canada 19,818 +0.03%
China 3,132 -1.00%
Germany 15,574 -0.65%
Hong Kong 17,951 -2.05%
India 64,949 -0.31%
Japan 31,451 -0.55%
United Kingdom 7,262 -0.65%
Name Value Chg %
Commodities (USD)
Gold 1,914.80 -0.09%
Iron Ore 106.10 -
Copper 3.706 0.00%
WTI Oil 81.89 +0.79%
Currency
AUD/USD 0.6402 -0.10%
Cryptocurrency
Bitcoin (AUD) 40,818 +0.20%
Ethereum (AUD) 2,624 +0.75%
Miscellaneous
US 10 Yr T-bond 4.251 -1.32%
VIX 17 -3.30%

US Sectors

Mon 21 Aug 23, 8:38am (AEDT)

Sector Chg %
Energy +0.94%
Utilities +0.39%
Consumer Staples +0.37%
Real Estate +0.28%
Industrials +0.12%
Information Technology +0.11%
Health Care -0.01%
Materials -0.08%
Financials -0.13%
Consumer Discretionary -0.32%
Communication Services -0.98%

S&P 500 SESSION CHART

S&P 500 intraday chart
S&P 500 bounces intraday to finish around breakeven (Source: TradingView)

MARKETS

  • S&P 500 bounces from session lows of -0.80% to close around breakeven

  • S&P 500 and Nasdaq both down for a third consecutive week

  • US 10-year yield briefly hits 4.33%, the highest since 2007

  • WTI crude down 2% last week, breaking a seven-week win streak

  • Resilient economic data and higher yields add more support for the Fed’s higher-for-longer narrative

  • Sentiment continues to slip, with Investors Intelligence bulls down 5.1 percentage points to 47.1% (down around 10% in the past two weeks) and CNN’s Fear & Greed Index sliping from Extreme Greed (83) to Neutral (45)

  • Bullish focus points for the week: Strong US growth outlook with Atlanta Fed’s GDPNow model forecasting 5.8% expansion in Q3, consumer resilience momentum, disinflation traction and the sentiment decline acting as a potential tailwind

  • Bearish focus points for the week: Upward pressure on rates, hawkish July FOMC minutes and scepticism around peak Fed, China growth concerns, US banking sector downgrades, US excess savings depleted and downside risk to forward earnings

  • Money-market assets hit record high on Fed uncertainty (Bloomberg)

  • Tech stocks suffer as real-yields hit 14-year high (FT)

  • BofA warning of a '5% world' sinks in as yields push higher (Bloomberg)

  • Bitcoin extends drop below US$26,000 for first time in two months (FT)

  • Zero-day options demand sparks fears over heightened market volatility (FT)

  • AI trade faces its first major test with Nvidia earnings (WSJ)

STOCKS

  • John Deere lifts outlook on profit beat, strong demand but shares skid (Reuters)

  • Farfetch shares plunge as weak demand in US, China weighs outlook (Reuters)

  • China’s Xpeng falls on weak forecast as EV price war takes toll (Reuters)

  • Estee Lauder sees weak annual profit on slow recovery in Asia travel retail (Reuters)

CHINA

  • Evergrande files for Chapter 15 bankruptcy in New York (Reuters)

  • China's state developers warn of losses as crisis spreads (Bloomberg)

  • China's hidden financial dangers erupt with shadow bank crisis (Bloomberg)

  • PBOC says it will keep policy "precise, forceful" to aid recovery (FT)

  • PBOC extends special loan support for ailing developers (Caixin)

  • China urges more loans, debt risk reduction as woes compound (Bloomberg)

  • PBoC set to announce biggest cuts this year to two core lending rates on Monday (FT)

ECONOMY

  • US housing affordability hits worst point in nearly four decades (Bloomberg)

  • US GDP forecasts for 5.8% growth likely to be revised lower (Barrons)

  • UK retail sales fall as wet weather depresses spending (FT)

  • Japan's core inflation eases, bolstering view BoJ will stand pat (FT)

Industry ETFs

Mon 21 Aug 23, 8:38am (AEDT)

Description Last Chg %
Commodities
Uranium 22.38 +2.05%
Silver 20.87 +0.34%
Steel 65.3656 +0.25%
Gold Miners 27.45 -0.58%
Copper Miners 35.97 -0.72%
Strategic Metals 72.3 -0.78%
Lithium & Battery Tech 56.97 -1.15%
Industrials
Agriculture 21.35 +0.80%
Aerospace & Defense 114.64 +0.75%
Construction 53.42 +0.39%
Global Jets 19.23 -0.62%
Healthcare
Biotechnology 125.405 -0.12%
Cannabis 6.82 -0.87%
Description Last Chg %
Cryptocurrency
Bitcoin 13.44 -6.54%
Renewables
Hydrogen 8.53 -0.23%
Solar 57.01 -0.45%
CleanTech 12.2 -0.81%
Technology
Cloud Computing 19.27 +0.57%
Semiconductor 480.69 +0.54%
Cybersecurity 22.99 +0.52%
Robotics & AI 25.42 +0.16%
FinTech 20.98 +0.10%
Sports Betting/Gaming 16.9538 +0.07%
Electric Vehicles 23.81 -0.17%
Video Games/eSports 52.23 -0.74%
E-commerce 18.08 -1.09%

Sectors to Watch

The S&P 500 and Dow tried to stabilise overnight but remain in a precarious place. The market has a lot of unanswered questions right now, mostly surrounding yields, China and interest rates. As we all know, markets hate uncertainty and that's causing a rather volatile pullback. Hopefully this is a week where answers begin to emerge via more policy headlines from China and the Jackson Hole Symposium on Thursday night. As for sectors to watch:

Uranium: Global X Uranium ETF (+2.05%) continues to kick on. Uranium spot prices rose for a fifth straight week to US$57/lb, not far off a 14-month high. Is it time for local names like Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL) to continue trending?

Energy: WTI crude rose 1.7% to US$81.2 a barrel and the S&P 500 Energy sector was the best performing sector overnight.

Lithium & Battery Metals: VanEck Rare Earth/Strategic Metals ETF (-0.78%) continues to fall, down to levels not seen since March 2021.

Seasonality Update

August has historically been a sideways month, which makes it a rather rough one this time round, with the index down 3.5% month-to-date (1-18 August).

September is another heavy month when it comes to seasonality, down an average 1.2%.

ASX 200 seasonality
ASX 200 historical monthly performance (Source: Market Index)

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Vicinity Centres (VCX) – $0.06, Bailador Technology (BTI) – $0.03, US Student Housing REIT (USQ) – $0.012, Steadfast Group (SDF) – $0.09, Ryder Capital (RYD) – $0.04

  • Dividends paid: Metcash (MTS) – $0.11, Transurban (TCL) – $0.315

  • Listing: None

Economic calendar (AEST):

  • 11:15 am: China Loan Prime Rate

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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