Morning Wrap: ASX 200 to fall, S&P 500 extends decline as yields and oil spike on US-Iran strikes

In a nutshell:

• Stocks are set to fall on Wednesday after Wall Street finished broadly lower following US strikes on IRGC targets in Iran and bond yields continuing to hit fresh multi-year highs

• Brent rose ~5% overnight to US$95 a barrel, up ~35% since the 2-Jul low. What's worse is that a downstream barometer like US diesel futures (NY Harbor ULSD) surged 6.0% to all-time highs

• The global bond rout deepened as Japan's 10-year yield hit 3% for the first time since 1996 and gilts led a worldwide selloff, with Fed hike odds for September now near 70%

Let's dive in.

• Major US benchmarks finished lower and near worst levels, with the S&P 500 near a one-month low and now down 2.1% from its 13-Aug record high

• Brent spiked 5.0% to US$95 a barrel after the US launched a fresh wave of strikes against Iran, while the IGRC launched attacks against US bases in the region 

• US 10-year yield climbed 3 bps to 4.79%, closing fractionally above the Jan-25 high, now at the highest since Nov-23

• Australian 10-year yields notched their sharpest rise in five months, partly on fears that higher JGB yields will mean fewer Japanese buyers for Australian government debt (RT)

• High-beta names bore the brunt of the risk-off session, with the Invesco S&P 500 High Beta ETF down 2.1% against a 0.2% decline for the Low Volatility ETF (MF)

• Chipmakers led the decline as the VanEck Semiconductor ETF lost more than 2%, with AMD down 3%, Micron off about 2% and Nvidia down 1% (CNBC)

• Housing stocks tumbled after construction spending data disappointed, with the iShares US Home Construction ETF down almost 2%, Builders FirstSource off 4% and Home Depot down 2% (CNBC)

• Dell Q2 FY27 revenue up 58% to $46.97bn, about 6% ahead of ests, with adjusted EPS of $7.04 beating by roughly 44%, AI-optimised server revenue of $16.4bn on record $60.9bn of orders, and full-year guidance lifted $25bn to $192bn, sending shares up ~6% after hours (CNBC)

• Palo Alto Networks Q4 FY26 revenue up 34% to $3.41bn, about 2% ahead of ests, adjusted EPS of $1.02 against 98 cents expected, and next-generation security ARR up 63% to $9.10bn, though shares dipped 5.2% (CNBC)

• Apple handed the chief executive role to hardware chief John Ternus, with Tim Cook moving to executive chairman after nearly 15 years running the company, and shares rose 2.6% (MF)

• Moderna gained 5%, extending an August surge of 156% driven by positive initial late-stage results for a cancer vaccine developed jointly with Merck (CNBC)

• Nike hit a 52-week low of $38.07, a level the sportswear group has not traded at in more than two decades, as travel and leisure names including Wynn Resorts, Las Vegas Sands and Carnival also marked fresh lows (CNBC)

• US Central Command said forces began striking IGRC targets in Iran at noon eastern time, following attempted IRGC attacks on commercial shipping in the Strait of Hormuz and on American service members (CNBC)

• Iranian media reported the strikes hit the southern coast at Bandar Abbas, Jask, Chabahar, Konarak, Minab, Sirik and Qeshm island, with one US official describing the strategy as mowing the lawn (AX)

• Trump warned Iran would face more severe military action if it retaliates against what he called a very justified attack, noting the US is still holding back "the biggest attack of them all" (CNN)

• Two oil tankers were struck by projectiles in the Strait of Hormuz on Monday night, one Saudi-owned and one South Korean-owned, hit within minutes of each other (TS)

• Tehran signalled a willingness to de-escalate, urging a return to the June agreement, with neither side appearing to seek a resumption of full-scale war after six months of conflict (CNBC)

• WTI crude settled above $90 a barrel for the first time in more than a month while Brent traded above $93, its highest level since 24 July, after the fresh round of US strikes (CNBC) 

• Canadian Prime Minister Mark Carney said trade talks with Washington can resume only when the Americans "stop doing memes, stop throwing shade and stop trying to be tough", ten days after he suspended negotiations (CNBC)

• Carney said Washington sought uncompetitive terms for Canadian autos while pushing changes to French-language and cultural protections, adding that any one of those issues was enough to block an agreement (AP)

• Japan's 10-year government bond yield rose 6 basis points to 3%, the highest since 1996, with the milestone reached minutes before the result of a government 10-year auction (BBG)

• That 10-year JGB auction drew demand broadly in line with its 12-month average, with elevated yields enough to bring investors back to the sale (BBG)

• Treasury Secretary Scott Bessent said he has information the market does not, and believes Tokyo and the BOJ will act to strengthen the yen, which traded at 160.1 per dollar for a third straight session beyond that threshold (CNBC)

• Gilts led the global bond selloff as UK 10-year yields climbed as much as 11 basis points to 5.25% and 30-year yields hit 5.89%, the highest since May 1998, with traders pricing nearly two BoE hikes by year end (BBG)

• Euro area flash inflation accelerated to 3.3% year-on-year in August from 2.9% in July, the highest reading since September 2024 and well above the ECB's 2% target (CNBC) 

• US ISM manufacturing PMI slipped to 54.6 in August from 55.6, missing the 55.2 forecast, with new orders dropping to 53.7 against 56.8 expected and prices paid unchanged at an elevated 71.1 (RT) 

• US construction spending fell 0.5% month-on-month in July to its lowest level since October 2023, dragging homebuilder shares lower (CNBC)

• China's RatingDog manufacturing PMI rose to 51.5 in August from 50.9, beating the 50.9 forecast and marking a ninth straight month above 50, the longest upturn in five years (RT)

Only a handful of drill results this morning. It'll probably stay this way since reporting season just finished.

• It’s getting rough out there: The last thing you want to see when you wake up is Brent up 5.0%, yields trading broadly higher (US 2-year up 5 bps to 4.40%, now highest since Jul-24 and 10-year up 4 bps to 4.79%, highest since Nov-23), the VIX starting to spike and the likelihood of a September Fed hike rising to 68% (from 65.4% a day ago and 39.6% a week ago). This tanked commodities overnight, with copper, gold, platinum, silver and palladium all down more than 2%. Consumer-facing sectors like Discretionary were also the worst performing sector on Wall Street. US-listed ETFs like Gold Miners (-3.9%), Copper Miners (-3.9%), Uranium (-3.4%), Semis (-2.1%) and Airlines (-2.1%) traded broadly lower. I've been watching US diesel futures (via NY Harbor ULSD futures) closely the past couple of days, with prices surging 6.0% overnight (and up 12.8% in the last four) to all-time highs. Even as oil prices trade 20-25% away from those May highs, downstream markets remain extremely tight (great for refiners like Ampol and Viva Energy).

Stocks trading ex-dividend: 

• Wed 2 Sep: Australian Clinical Labs (ACL) – $0.092, Australian Ethical Investment (AEF) – $0.10, Downer EDI (DOW) – $0.163, Integrated Research (IRI) – $0.05, Karoon Energy (KAR) – $0.012, Liberty Financial Group (LFG) – $0.23, Medibank Private (MPL) – $0.109, Mercury NZ (MCY) – $0.141, Monadelphous Group (MND) – $0.59, Newmont Corporation (NEM) – $0.26, Objective Corporation (OCL) – $0.08, Origin Energy (ORG) – $0.30, PLS Group (PLS) – $0.05, Prime Financial Group (PFG) – $0.009, Seek (SEK) – $0.25, Shaver Shop Group (SSG) – $0.055, Shriro Holdings (SHM) – $0.01, Solvar (SVR) – $0.085, Sonic Healthcare (SHL) – $0.63, Steadfast Group (SDF) – $0.128, Tribeca Global Natural Resources (TGF) – $0.10, Universal Store Holdings (UNI) – $0.17, Whitehaven Coal (WHC) – $0.06, Yancoal Australia (YAL) – $0.07

• Thu 3 Sep: Acumentis Group (ACU) – $0.005, Amcor (AMC) – $0.92, Ashley Services Group (ASH) – $0.011, Beacon Lighting Group (BLX) – $0.034, BHP Group (BHP) – $1.392, Cash Converters International (CCV) – $0.01, Clinuvel Pharmaceuticals (CUV) – $0.05, Coles Group (COL) – $0.37, Euroz Hartleys Group (EZL) – $0.05, Fenix Resources (FEX) – $0.01, Finbar Group (FRI) – $0.03, GTN (GTN) – $0.052, Ironbark Balanced Income (IBC) – $0.006, Jumbo Interactive (JIN) – $0.15, Jupiter Mines (JMS) – $0.007, Korvest (KOV) – $0.40, Laserbond (LBL) – $0.008, Mayfield Group Holdings (MYG) – $0.024, Meridian Energy (MEZ) – $0.132, Nib Holdings (NHF) – $0.21, Pacific Current Group (PAC) – $0.28, Peter Warren Automotive Holdings (PWR) – $0.006, Qualitas (QAL) – $0.077, Ramsay Health Care (RHC) – $0.485, Resimac Group (RMC) – $0.06, Schaffer Corporation (SFC) – $0.45, Sigma Healthcare (SIG) – $0.02, Symal Group (SYL) – $0.049, Woodside Energy Group (WDS) – $0.795, Wotso (WOT) – $0.014

• Fri 4 Sep: Ampol (ALD) – $1.85, Aussie Broadband (ABB) – $0.036, Big River Industries (BRI) – $0.02, Comms Group (CCG) – $0.001, Eagers Automotive (APE) – $0.25, Embark Early Education (EVO) – $0.015, Generation Development Group (GDG) – $0.01, Hitech Group Australia (HIT) – $0.04, Viva Energy Group (VEA) – $0.077, Whitefield Industrials (WHF) – $0.052

Other ASX corporate actions today:       

• Dividends paid: None

• Earnings: Ballard Mining (BM1), Forrestania Resources (FRS), Vital Metals (VML)

• IPOs: Axiant Resources (AXR) at 11:00 am

• AGMs: None

Economic calendar (AEST):

• 9:00 am: Australia Ai Group Industry Index

• 11:30 am: Australia Q2 GDP Growth (Ests: 1.8%) 

• 11:45 pm: Bank of Canada Interest Rate Decision (Ests: Hold at 2.25%)