Morning Wrap: ASX 200 to fall, S&P 500 slips on credit market concerns, Gold surges past US$4,300

ASX 200 futures are down 31 pts (-0.34%) as of 8:30 am AEDT.

In a nutshell:

• Major US benchmarks opened higher, but faded early strength to finish broadly lower

• US banks dipped on credit concerns, including bankruptcy filings from subprime auto lenders and bad loans/fraud allegations for Zions Bancorp and Western Alliance

• AI sector continues to find more momentum off bumper Q3 earnings and guidance upgrade from TSMC

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower, faded early gains but off worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks faded early gains to finish lower but off worst levels

• Today’s big story: Potential cracks in riskier pockets of the credit market, including bankruptcy filing from subprime auto lender Tricolour, First Brands bankruptcy, Zions Bancorp and Western Alliance shares dip on bad loans

• Traders bet on 50 bp Fed cut, delayed data to offer more evidence of economic weakness (BBG)

• Last Friday's selloff marked biggest options volume day ever in latest signal of retail trading's support for market (CNBC)

• Shutdown may have narrowed IPO window to about four weeks through year-end (BBG)

• Asset managers scaling back exposure to high yield bonds amid large decline in credit spreads (FT)

STOCKS

• TSMC Q3 revenue up 39% year-on-year, GMs up 90 bps quarter-on-quarter to 59.5% vs. 57.5% ests, upgrades 2025 guidance to 35% revenue growth vs. prior 30%, narrowed FY25 capex to $40-42bn vs. prior $38-42bn, management note conviction in the AI ‘megatrend’ is strengthening and demand is even stronger than it thought three months ago (BBG)

• Oracle says it could generate 35% gross margins for AI infrastructure projects, shares up 3.0% following recent margin and profitability concerns (BBG)

• GM to pause second phase of battery plant in Canada amid EV pullback (BBG)

• Nestle plans to slash 16,000 jobs amid ongoing turnaround (CNBC)

• Zions, Western Alliance banks disclose bad loans tied to alleged fraud (BBG)

• Salesforce sees double-digit revenue growth, targeting $60bn by January 2030 (BBG)

• Hewlett Packard Enterprise shares dip 10% on underwhelming guidance update at analyst day (CNBC)

• Foxconn shares rise after chairman's meeting with OpenAI, plans to focus on AI servers for US tech firms (WSJ)

TARIFFS

• CEO confidence dips slightly lower into negative territory amid trade worries (AX)

• EU goods exports to US fell 26% month-on-month in August to lowest level since Aug-21 (WSJ)

CENTRAL BANKS

• Fed Governor Waller reiterates case for additional easing amid what he considers moderately restrictive monetary policy (BBG)

• Fed's Miran says he is not concerned about rising asset prices, but focused on inflation and employment (RT)

• RBA Bullock questions need for further cuts amid inflation risks (RT)

• ECB official says Chinese restrictions on rare earth exports could renew price pressures in the Eurozone (BBG)

GOVERNMENT SHUTDOWN

• Shutdown persists as both parties believe they hold the upper hand, Trump not indicating potential support for a deal (WSJ)

• Senate bill fails for 10th time with no end in sight (CNBC)

• US budget deficit for FY25 was $41bn lower year-on-year, supported by $195bn in net customs receipts (RT)

ECONOMY

• Germany GDP forecast to rise slightly in Q4 2025, though recession probability sits at 34.8% (RT)

• UK GDP up only by 0.1% in August, providing slight relief for Chancellor Reeves amid a budget preparation (FT )

• Australian unemployment rate unexpected spikes to to highest since Nov 2021, RBA rate cut odds rise (AFR)

ASX TODAY

• Australian Finance Group reports Q1 mortgages lodged up 17.7% year-on-year to 43,799 (AFG)

• Australian Ethical reports 30-Sep FUM of $14.28bn, up 5.8% month-on-month (AEF)

• Iress confirms engagement with new third parties, this follows prior speculation of a potential offer from Blackstone (IRE)

WHAT TO WATCH TODAY

• Gold: Wow, prices continue to go vertical, now trading above US$4,300. It feels like we're just two sleeps away from US$4,500 (joking, but also not joking). VanEck Gold Miners ETF (GDX) up another 3.6% overnight, with a name like Newmont up 5.0% (closing near intraday highs).

• Lithium: Lithium Americas (US government bought a 5% stake late last month) shares dipped 21.7% overnight. Recent hype around the sector is starting to die down, with dual-listed names like Ioneer and 5E Materials down 12% and 5.6% respectively.

• Financials: S&P 500 Financials sector down 2.7% amid credit market/regional bank concerns. Could take a hit to the broader market and/or local financials sector.

• REITs: Food for though about REITs as yesterday's unemployment data drove the Australia 10-year yield down almost 10 bps to 4.14% and on the cusp of trading at 4.0% for the first time since October 2024. A breakdown in yields could be a positive catalyst for rate-sensitive sectors like real estate.

BROKER MOVES

• Genesis Minerals downgraded to Neutral from Overweight but target up to $6.20 from $6.00 (JPM)

• Premium Investments initiated Sector Perform with $19.80 target (RBC)

• Super Retail initiated Sector Perform with $18.20 target (RBC)

Stocks trading ex-dividend: 

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

• Mon 20 Oct: Clover Corp (CLV) – $0.01, WAM Capital (WAM) – $0.077

• Tue 21 Oct: WAM Alternative Assets (WMA) – $0.03

• Wed 22 Oct: None

• Thu 23 Oct: None

• Fri 24 Oct: None

Other ASX corporate actions today:       

• Dividends paid: Ambertech (AMO), ARB Corp (ARB), Embelton (EMB), Verbrec (VBC)

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEDT):

No major economic announcements.