Morning Wrap: ASX 200 to fall, S&P 500 stumbles on soaring oil prices and bond yields

ASX 200 futures are trading 4 points lower, down 0.04%, as of 8:30 am AEDT.

US stocks finished lower as the US 10-year yield topped 4.0% for the first time since August – raising doubts over the Fed's cutting outlook, oil prices continued to gain on strong macro data and Middle East tensions and the Chinese market returns after a week-long holiday.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 trends lower to finish near worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished lower and near worst levels

• A broad risk-off day with a lot of focus on recent backup in yields amid re-inflation concerns, no-landing scenario and extended positioning  

• Today’s big story – US 10-year yield up 29 bps in the last four sessions, back above 4.0% for the first time since 1-Aug, driven by geopolitical risk and hawkish Fed repricing after strong macro data

• Brent crude settled 3.8% higher and above US$80 a barrel for the first time since 27-Aug, prices are now up 12.6% in the last five sessions

• Likelihood of a 50 bp rate cut at the Fed’s November meeting has hit 0%, from 34.7% a week ago (CME)

• Friday’s blowout nonfarm payrolls boosts analyst confidence in economic growth – Morgan Stanley’s Wilson raises view on economy-linked cyclical stocks (BBG)

• Goldman’s Kostin boosts 12-month S&P 500 target to 6,300 from 5,600 and raises EPS outlook on solid macro (BBG)

• Goldman Sachs cuts probability for US recession over the next year to 15% after a blowout payrolls report (BBG)

• China chip stocks rally on Beijing stimulus talk (BBG)

• Hedge funds turn bullish on the Yen just before dovish comments by Japan's new PM, US jobs data (BBG)

STOCKS

• Obesity drug-maker Rivus Pharma mulls IPO as soon as this year (BBG)

• SMCI says it is shipping over 100,000 GPUs per quarter (RT)

• Lucid Group's electric vehicle production dropped in the third quarter and missed analysts' forecasts (BBG)

• BP abandons target to cut oil and gas output by 2030 as CEO scales back the firm's energy transition strategy (RT)

• Activist investor Starboard Value has taken a stake of US$1bn in Pfizer as it pursues a turnaround (BBG)

CENTRAL BANKS

• ECB will probably cut interest rates on Oct 17 as economic growth is weak says French central bank chief (RT)

• BOJ's rate hike plans faces fresh challenges from new political leadership (RT)

• ECB's Villeroy signals likely October rate cut as inflation risks shift (RT)

POLITICS & GEOPOLITICS

• Big oil tries to persuade Trump and his Republican allies not to slash provisions of Biden's IRA (WSJ)

• Israel marks one year anniversary of Hamas attacks, strikes Gaza to thwart renewed Hamas attacks (FT)

• China weighs retaliation options after EU's EV tariff vote (BBG)

ECONOMY

• China to outline policies to promote economic growth on Tuesday (BBG)

• Eurozone investor confidence and retail sales show improvement (RT)

• German factory orders slump in another blow to the country's industrial sector (BBG)

• UK wage growth slows to three year low as labor market loosens (BBG)

ASX TODAY

• KKR explored a potential buyout proposal for the $2bn Domain but baulked in the end (The Aus)

• Lotus Resources completes FEED program, reports accelerated restart to Kayelekera project (LOT)

• Perenti launches on-market share buyback of up to 10% of issued shares, to run for 12 months from 7-Oct (PRN)

• West African Resources dipped 19.5% on news Burkina Faso plans to withdraw some mining permits, company is not aware of such plans and held constructive dialogue with the government earlier this year (WAF)

WHAT TO WATCH TODAY

• Yield run up: Bond yields are ripping higher amid a hawkish repricing of Fed rate cut expectations. This will likely place downward pressure on markets and yield sensitive sectors like Utilities and Real Estate

• Energy: A 3.8% gain for oil prices should see some positive flow for local energy stocks. Newcastle coal futures up 2% overnight to US$154 a tonne, the highest since Dec-23

• Nickel: Brazilian miner Vale temporarily halted operations at its Onca Puma nickel plant amid damage from strong winds. The company anticipates a 1,500 to 2,000 tonne impact on Q4 nickel output

BROKER MOVES

ARG for Argonaut Securities – A Perth based stockbroker and investment house.

• Ampol downgraded to Neutral; target cut to $34 from $36.90 (BofA)

• Arcadium Lithium downgraded to Hold from Buy; target up to $6.55 from $6.25 (BP)

• Bellevue upgraded to Buy from Hold with $1.60 target (ARG)

• Judo Capital initiated Buy with $2.10 target (UBS)

• HMC Capital initiated Buy with $8.94 target (GS)

• Magellan Financial upgraded to Neutral from Underperform; target up to $9.50 from $9.45 (MQG)

• Ora Banda upgraded to Buy from Hold; target $0.70 (ARG)

• Ramelius Resources upgraded to Buy from Hold with $2.60 target (ARG)

• Spartan Resources upgraded to Speculative Buy from Hold with $1.55 target (ARG)

• Technology One downgraded to Neutral from Buy; target $24.05 (GS)

Stocks trading ex-dividend: 

• Tue 8 Oct: Clime Capital (CAM) – 1.65%, Katana Capital (KAT) – 0.42%, MFF Capital Investments (MFF) – 1.80%, Perenti (PRN) – 3.83%, Reece (REH) – 0.65%

• Wed 9 Oct: Naos Emerging Opportunities (NCC) – 4.55%.

• Thu 10 Oct:  Duxton Water (D2O) – 2.63%, Wam Active (WAA) – 3.33%

• Fri 11 Oct: Turners Automotive Group (TRA) – 1.28%, Wam Research (WAX) – 4.18%

• Mon 14 Oct: None

Other ASX corporate actions today: 

• Dividends paid: Adairs (ADH), Chorus (CNU), NIB Holdings (NHF), Orora (ORA), Silk Logistics (SLH), WOTSO Property (WOT)

• Listing: None

• AGMs: Amcil (AMH), Djerriwarrh (DJW)

Economic calendar (AEST):

• 10:30 am: Australia Business Confidence (Sep)

• 10:30 am: RBA Meeting Minutes 

• 12:00 pm: China National Development and Reform Commission Briefing

• 10:30 pm: US Balance of Trade (Aug)