Morning Wrap: ASX 200 to fall, S&P 500 tumbles on bond yield spike, US 30-year yield tops 5%

ASX 200 futures are down 82pts (-0.98%) as of 8:30 am AEST.

In a nutshell:

• US stocks tumbled amid a selloff in global bonds (driving yields sharply higher)

• US 30-year Treasury yield tops 5% overnight – this marks the second time since 2007 that the 30-year has topped the key 5% level

• Hutchison receives a takeover offer, another block trade crossed for Webjet Group and Wesfarmers expects lithium losses to widen

Let's dive in.

S&P 500 SESSION CHART

S&P 500 lower, finished near worst levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished broadly lower and near worst levels

• Breadth was firmly in the negative, with the Equal-weight S&P 500 underperforming the official benchmark by 57 bps

• S&P 500 posted its first back-to-back decline since 6-May and worst day since 21-April

• Today’s big story – 20-year US Treasury auction (the first since Moody’s US credit rating downgrade) faced weak demand, driving its yield above 5.1% for the first time since October 2023 due to US fiscal concerns

• US 30-year bond yield also up 12 bps to 5.1%, this marks only the second time since 2007 that the 30-year has topped the 5% level 

• Morgan Stanley flips overweight on US stocks and Treasuries, expecting Fed rate cuts and lower odds of a recession to benefit equities (BBG)

• Bond market reflecting fears around US debt load, tax cuts and deficit spending (NYT)

• Bitcoin hits record high after advancement of stablecoin regulation (BBG)

• Hedge funds cut holdings of Magnificent 7 exposure and lifted investments in US listed Chinese companies in the March quarter (BBG)

STOCKS

• Target shares fall 5% on Q1 revenue and EPS miss, full-year sales guidance lowered to low single-digit decline vs. previous guidance for a ~% increase, management blamed weaker consumer spending and tariff uncertainty (BBG)

• LVMH is warning investors that demand in luxury market remains soft (BBG)

• OpenAI to buy iPhone designer Jony Ive's AI devices startup for US$6.4bn(CNBC)

• Tesla on track to launch robotaxi trial in Austin, Texas, by June end (RT)

• Super Micro Computer plans to lift its server production capacity in the US due to rising AI demand (WSJ)

• Google announces smart glasses partnerships as it takes on Meta and Apple (YF)

• Ford scaling back its electric vehicle plans, allowing Nissan to use part of its US battery plant (WSJ)

CENTRAL BANKS

• Fed officials continue to stress patience and assess incoming data before adjusting policy amid heightened uncertainty (BBG)

TARIFFS

• China-US trade soars as exporters race to hit trade truce window, bookings on freighters more than doubled to 228,000 in early May (BBG)

• US sets stage for anti-subsidy duties on imports of China battery components (BBG)

• EU to send revised trade proposal with US, including zero tariffs on non-sensitive agricultural products and industrial goods (BBG)

ECONOMY

• UK April inflation surges to 3.5% in April, up from 2.6% in May and above 3.3% estimates as household bills spike (FT)

• Japan export growth slowed in May as tariffs weighed on shipments to US, China (BBG)

• China's budget deficit in Jan-Apr hits record high as government ramps up support amid trade tensions (BBG)

ASX TODAY

• Australian Agricultural Co reports FY25 statutory loss of -$1.1m vs. -$94.6m a year ago, revenue up 15% to $388m (AAC)

• Hutchison Telecommunications (Amsterdam) to launch off-market takeover bid for Hutchison Telecommunications (ASX: HTA) at 3.2 cents cash per share or a 52% premium to its last close (HTA)

• Smart Parking reports FY-to-April revenue up 19% year-on-year, sites under management up 23% (SPZ)

• Webjet Group 20.7m-share block trade crosses at 89 cents, a 2.1% premium to its 87 cent close on Wednesday (WJL)

• Webjet Group block-trade (representing ~5.3% of the company) buyer likely to be Helloworld, which lifts their stake to more than 15% of the company (AFR)

• Wesfarmers strategy briefing day guides to FY25 WesCEF’s 50% share of spodumene concentrate production of 140-150kt vs. prior 150-170kt, expects lithium business to lose $60m vs. prior $48m (WES)

WHAT TO WATCH TODAY

• Yield-driven selloff: Yields are going to be the talk of the town for a while. US yields surged on fiscal concerns, UK yields jumped on stronger inflation data and Japan yields soared after a weak bond auction. This is all happening amid the beginning of a rate cut cycle and ongoing constructive trade talks.

• Seek, Catapult upgrades: Seek lifted its guidance to the top end of its guidance range yesterday (stock up 6.95%) and Catapult reported a strong FY25 result (stock up 13.7% to all-time highs). Will be interesting to see if this momentum can continue today (though the broader market is very weak).

• Webjet Group speculation: Another big block trade crossed for WJL at the close on Wednesday. As RBC Capital noted last week, shareholders will likely only entertain offers starting from $1.26-1.50. Though both BGH and Helloworld have yet to make any formal offers.

BROKER MOVES

• Syrah Resources downgraded to Neutral from Outperform; target up to $0.30 from $0.27 (SYR)

Stocks trading ex-dividend: 

• Thu 22 May: Aristocrat Leisure (ALL) – $0.44, Orica (ORI) – $0.25

• Fri 23 May: None

Other ASX corporate actions today: 

• Dividends paid: HomeCo Daily Needs REIT (HDN)

• Earnings: Australian Agricultural Co (AAC)

• IPOs: None

• AGMs: Karoon Energy (KAR), Ventia Services (VNT)

Economic calendar (AEST):

• 9:00 am: Australia Manufacturing and Services PMI Flash (May)

• 5:30 pm: Germany Manufacturing and Services PMI Flash (May)

• 6:30 pm: UK Manufacturing and Services PMI Flash (May)

• 11:45 pm: US Manufacturing and Services PMI Flash (May)