Morning Wrap: ASX 200 to fall, S&P 500 eases from record highs ahead of Fed rate decision

ASX 200 futures are down 40pts (-0.45%) as of 8:30 am AEST.

In a nutshell:

• Major US benchmarks slightly lower, with the Nasdaq snapping a nine-day winning streak

• All eyes on the Fed, with markets widely expecting a 25 bp rate cut

• Gold hit yet another record high, uranium miners pulled back sharply

Let's dive in.

S&P 500 SESSION CHART

A sideways session (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks lower in a relatively sideways and uneventful session

• S&P 500 and Nasdaq eased off yesterday’s record close, with the Nasdaq snapping a nine day winning streak

• A fairly quiet session ahead of the highly anticipated FOMC decision, with the Fed widely expected to cut rates by 25 bps

• Worries grow over S&P 500's valuation, largely driven by tech sector but other pockets of the market also appear overpriced (BBG)

• BofA's Hartnett says global equities expected to rise as economic growth outlook improves, along with strong bullish sentiment (BBG)

• Goldman Sachs warns bond traders of potential pain in five-year notes as bearish pressure shifts (BBG)

• Foreign investors plan a significant return to Chinese equities, drawn by tech opportunities and diversification needs (RT)

BofA FUND MANAGER SURVEY

• September FMS showed sentiment at seven month highs while cash levels held near record lows of 3.9%

• Contrarian “Sell” signal triggered back in July when cash fell from 4.2% to 3.9%

• Equity allocation jumped 14 pp to 28% overweight, a seven month high, despite record 58% of investors saying global equity markets are overvalued

• Global growth expectations up 25 pp to 16%, biggest jump since Oct-24

• Inflation views remain sticky, with net 25% expecting global CPI to rise over the next 12 months

• Long May 7 was the most crowded trade for a second-straight month (previously gold)

• “Second wave of inflation” now the biggest tail risk as “trade war triggering global recession” fell from first to fourth

STOCKS

• Nvidia's RTX6000D AI chip for China faces weak demand due to high costs (RT)

• Microsoft lifts quarterly dividend by 9.6% to 91 cps (WSJ)

• Google to invest £5bn in the UK over two years to develop AI economy and support jobs (BBG)

• Eli Lilly to build $5 billion Virginia facility to boost production of targeted cancer drugs (CNBC)

• Canada says Anglo American, Teck still need to convince officials of the net benefits of their merger (BBG)

TARIFFS

• US and China reach framework agreement on TikTok, Trump to speak with Xi over the weekend (BBG)

• Bessent says administration won't sanction China and India over Russian crude purchases unless EU acts first (RT)

• China's exports to the US fell due to tariffs, but global trade surplus increased significantly (BBG)

• US officials arrive in India for trade talks after Trump doubled tariffs (BBG)

• US and South Korea divided over investment component of trade deal (FT)

CENTRAL BANKS

• Senate confirms Miran to Fed board, allowing him to attend this week's FOMC meeting (BBG)

• US appeals court blocks Trump from firing Fed Governor Cook (BBG)

• BOJ expected to leave rates unchanged Friday, markets look to Governor Ueda for rate hike signals (BBG)

• ECB's Kazaks says rates should remain unchanged, with inflation at 2% and weak growth (Bloomberg)

ECONOMY

• US August retail sales up 0.6% month-on-month vs. consensus for a 0.2% increase, growth seen in online stores (+2.0%), clothing and accessories (+1.0%), sporting goods (+0.8%) while miscellaneous, furniture and personal care categories logged small declines (BBG)

• China seen resisting large-scale stimulus to combat downward pressure on economy, instead favoring targeted measures (BBG)

• Eurozone industrial production up by 0.3% in July, indicating resilience despite trade tensions (RT)

ASX TODAY

• Its crickets out there! No major company announcements to report today

WHAT TO WATCH TODAY

• Gold: Gold hit yet another record high overnight, yet the Gold Miners ETF (GDX) fell 2.0%. This disconnect reflects how mining stocks have significantly outpaced the underlying commodity in recent weeks, creating a situation where even rising gold prices fail to boost equities. Miners may need to take a breather.

• Uranium: Tuesday was a massive day for uranium (US-UK deal to accelerate modular nuclear plants, US mulls uranium stockpile). But Global X Uranium ETF (URA) experienced a sharp 3.5% pullback overnight.

• Fed: Interesting article from Bloomberg, which cited data from Ned Davis Research. Going back to the 1970s, the S&P 500 has averaged a 15% gain a year after cuts resumed following a pause of six months or more.

BROKER MOVES

• New Hope downgraded to Underperform from Neutral; target cut to $3.80 from $4.0 (MQG)

Stocks trading ex-dividend: 

• Wed 17 Sep: Auckland International Airport (AIA) – $0.063, Count (CUP) – $0.028, Flight Centre (FLT) – $0.29, Inghams Group (ING) – $0.08, Maas Group (MGH) – $0.035, Supply Network (SNL) – $0.38, Service Stream (SSM) – $0.03

• Thu 18 Sep: a2 Milk Company (A2M) – $0.089, Centrepoint Alliance (CAF) – $0.018, Cochlear (COH) – $2.15, Embelton (EMB) – $0.20, Lycopodium (LYL) – $0.25, Macmahon Holdings (MAH) – $0.01, Mader Group (MAD) – $0.048, NRW Holdings (NWH) – $0.095, PWR Holdings (PWH) – $0.02, SKS Technologies (SKS) – $0.05, South32 (S32) – $0.04, Tourism Holdings Rentals (THL) – $0.036

• Fri 19 Sep: Latitude Group (LFS) – $0.04, Vita Life Sciences (VLS) – $0.045

Other ASX corporate actions today: 

• Dividends paid: Codan (CDA), HiTech Group Australia (HIT)

• Earnings: Iperionx (IPX)

• IPOs: None

• AGMs: None

Economic calendar (AEST):

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

• 4:00 pm: UK Inflation (Aug)

• 10:30 pm: US Building Permits, Housing Starts (Aug) 

• 11:45 pm: Bank of Canada Interest Rate Decision (Ests 25 bp cut)

• 4:00 am: Fed Interest Rate Decision (Ests 25 bp cut)