Morning Wrap: ASX 200 to fall, S&P 500 slips but small caps outperform, Fed eyes more rate cuts

ASX 200 futures are down 15pts (-0.16%) as of 8:30 am AEST.

In a nutshell:

• S&P 500 and Nasdaq slightly lower after the Fed delivered a widely expected 25 bp rate cut

• Russell 2000 and Dow both higher, but faded earlier gains

• XRG has pulled its bid for Santos, Mitsubishi lifts stake in Fleetwood

Let's dive in.

S&P 500 SESSION CHART

S&P 500 rallies on the rate cut but dips on the press conference (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished mixed in an incredibly volatile session

• S&P 500 briefly up 0.25% on the rate cut but dipped as much as -0.82% amid Powell’s statements

• Small caps and defensives outperformed in a rotation away from tech and broader growth/momentum themes

• Nvidia (-2.6%) and other AI-related names dipped after China ordered big tech companies to stop buying chips from Nvidia

• Today’s big story – Fed cut rates by 25 bps and signaled another 50 bp of easing this year, lots of moving pieces (more on that below) 

• Russell 2000 briefly hit a level not seen since Nov-21 (BBG)

• BlackRock doubling down on US equities and AI exposure across its portfolio (YF)

• Deutsche Bank says foreign buyers purchased $300bn in US equities in Q2 after buying almost nothing in recent years (FT)

• Japanese bonds rally on strong auction, offering investors respite amid political uncertainty (BBG)

• Chinese tech shares surge on AI bets, Hang Seng Index hits new high (BBG)

STOCKS

• Nvidia CEO Huang says he's "disappointed" Beijing ordering companies not to buy its China-specific chips (CNBC)

• BofA raises minimum hourly wage to $25/ph across the United States (RT)

• Eliott has built a $2bn stake in Workday, highlights support for management (CNBC)

• Online ticket platform StubHub IPO priced at $23.50 a share, valuing company at $8.6bn (CNBC)

• Nestle chairman exits early amid turmoil, Pablo Isla to take over 1-Oct (RT)

TARIFFS

• Chinese regulators banned the country's biggest technology companies from buying Nvidia's AI chips, including the RTX Pro 6000D chip that was tailor-made for the Chinese market (FT)

• Trump's China trip depends on Boeing, soybean deals, sources reveal "significant progress" (SCMP)

• China calls US TikTok deal a 'win-win', to review technology and IP transfers (RT)

• US begins USMCA review, setting stage for potential trade tensions with Mexico, Canada (AX)

• EU companies face rare earths license delays in China, chamber urges trade barrier reduction (FT)

FED RATE CUT

• Fed cut rates by 25 bps to 4.00-4.25%, in-line with market expectations

• Only Trump’s recent appointee, Stephen Miran, dissented in favour of a 50 bp rate cut

• Latest Summary of Economic Projections showed 75 bps of rate cuts by year end, 25 bps in 2026 and 25 bps in 2027

• Fed projections show 9 of 19 officials see two additional cuts in 2025

• Real GDP forecast for 2025 upgraded by 0.2 pp to 1.6%

• Median unemployment rate for 2025 unchanged at 4.5%

• Powell said no widespread support for 50 bp rate cut, viewing today’s move as a “risk management rate cut”

CENTRAL BANKS

• US rate futures lift odds of further easing in October (RT)

• Bank of Canada cut rates by 25 bps to 2.5%, in-line with market expectations, policymakers cited weaker economy and less upside risk to inflation (BBG)

ECONOMY

• UK inflation steady at 3.8% in August, in-line with market expectations, rising food prices influencing the outlook (CNBC)

ASX TODAY

• Mitsubishi coughs up 12% premium to lift its stake in FleetPartners from 5.1% to 20% (AFR)

• Symal signs $11m conditional agreement to acquire McFadyen Group, to be EPS accretive from first year of ownership and add ~$2m to FY26 EBITDA (SYL)

• XRG walks away from $19bn Santos takeover (BBG)

WHAT TO WATCH TODAY

• Santos: XRG's offer ($8.89) was a 28% premium to pre-takeover prices. Santos is currently trading at $7.65 or 9.0% above pre-takeover levels. Could see some downward pressure today now that XRG is out.

• Post-cut volatility: A relatively positive overnight session, all things considered. Defensives/value higher, notably Financials (+0.96%), Staples (+0.90%), Materials (+0.36%) and Utilities (+0.29%). Dow and Russell 2000 both higher but well-off best levels. Our overnight ETF watchlist had a few pockets of softness, with sub-sectors like gold miners, copper miners, defence and homebuilders lower. Let's see how the market goes today.

BROKER MOVES

• Adore Beauty initiated Hold with $1.25 target (BP)

• Audinate downgraded to Equal-weight from Overweight; target cut to $5.00 from $11.00 (MS)

Stocks trading ex-dividend: 

• Thu 18 Sep: a2 Milk Company (A2M) – $0.089, Bisalloy Steel Group (BIS) – $0.165, Briscoe Group Australasia (BGP) – $0.09, Centrepoint Alliance (CAF) – $0.018, Cochlear (COH) – $2.15, Embelton (EMB) – $0.20, Lycopodium (LYL) – $0.25, Mader Group (MAD) – $0.048, Macmahon Holdings (MAH) – $0.01, NRW Holdings (NWH) – $0.095, PWR Holdings (PWH) – $0.02, SKS Technologies Group (SKS) – $0.05, South32 (S32) – $0.04, Tourism Holdings Rentals (THL) – $0.036

• Fri 19 Sep: Latitude Group Holdings (LFS) – $0.04, Vita Life Sciences (VLS) – $0.045, Wam Income Maximiser (WMX) – $0.003

• Mon 22 Sep: Bisalloy Steel Group (BIS) – $0.165, New Hope Corporation (NHC) – $0.15

• Tue 23 Sep: Ipd Group (IPG) – $0.062, Southern Cross Electrical Engineering (SXE) – $0.05, WT Financial Group (WTL) – $0.005

• Wed 24 Sep: Genesis Energy (GNE) – $0.065, IMDEX (IMD) – $0.01

• Thu 25 Sep: Ambertech (AMO) – $0.006, PRL Global (PRG) – $0.02, Salter Brothers Emerging Companies (SB2) – $0.02, Teaminvest Private Group (TIP) – $0.015, Verbrec (VBC) – $0.001, Wiseway Group (WWG) – $0.006

• Fri 26 Sep: SRG Global (SRG) – $0.03, Veris (VRS) – $0.002

Other ASX corporate actions today: 

• Dividends paid: Ansell (ANN), Challenger (CGF), Infomedia (IFM), Ingenia Communities Group (INA), Insurance Australia Group (IAG), Lynch Group Holdings (LGL), Mayfield Group Holdings (MYG), Maxiparts (MXI), oOh media (OML), Praemium (PPS), ResMed (RMD), Shaver Shop Group (SSG), Sigma Healthcare (SIG), Sonic Healthcare (SHL)

• Earnings: Bannerman Energy (BMN)

• IPOs: DPM Metals (DPM)

• AGMs: None

Economic calendar (AEST):

• 11:30 am: Australia Unemployment Rate (Aug)

• 9:00 pm: Bank of England Rate Decision (Ests: Unch)