Morning Wrap: ASX 200 to fall, US markets gear up for big tech earnings + Credit Corp FY24 results

ASX 200 futures are trading 55 points lower, down -0.69% as of 8:30 am AEST.

Major US benchmarks finished relatively flat overnight as the market braces for a massive week of high-profile earnings and macro events, McDonalds shares rally despite reporting weaker-than-expected Q2 revenue and earnings, another major Fortescue holder is seeking to sell almost $2 billion worth of shares and Credit Corp is set to kick off August reporting season with its FY24 results this morning.

Let's dive in.

S&P 500 SESSION CHART

A choppy, sideways session for the S&P 500 (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmark were mixed overnight – the S&P 500 and Nasdaq finished just above breakeven in a relatively sideways session

• Small caps saw a modest pullback after last week’s outperformance, where the Russell 2000 rallied 3.5%

• A relatively uneventful session as far as macro and company earnings are concerned – But the next couple of days are stacked 

• More than 170 S&P 500 companies will report later this week, including four of the Magnificent 7 names (which make up 20% of the index)

• Market positioning remains elevated but not stretched – JPMorgan says positioning fell from the 95th percentile on 16-Jul to now the 80th percentile

• Morgan Stanley says last week was the largest selling period for semiconductor stocks since 2022 and investors are the most underweight Magnificent 7 relative to markets since 2016

• Over 40% of the S&P 500 has now reported, with Q2 earnings growth running at 9.8% or 100 bps above expectations – 78% of stocks have beaten consensus EPS expectations, in-line with the one-year average

• Latest M&A deal activity data currently tracking 10-15% above 2023 levels (Axios)

• BofA strategists say market overdue for pullback with seasonal headwinds, elevated VIX adding to downside risk (WSJ)

• Investors buying bond ETFs year to date at fastest pace on record (link)

• DOE announces nearly 5 million barrels of oil purchased for strategic petroleum reserves (Bloomberg)

STOCKS

• McDonalds (+3.7%) missed Q2 comparable sales, revenue and earnings, management noted pressures on lower-income households have deepened and broadened, expects customers to remain under pressure over the next several quarters, the stock rallied as the results were considered better than feared (CNBC)

• Apple seen rolling out upcoming AI features later than anticipated (Bloomberg)

• Disney's 'Deadpool & Wolverine' takes in $205m on opening weekend in US (Variety)

• Tesla shares soared after getting crowned the top pick among US autostocks by Morgan Stanley

• US Airlines cutting growth plans for second half of year amid domestic oversupply (CNBC)

CENTRAL BANKS

• Fed seen keeping interest rates steady this week (FT)

• Fed rate cut finally in sight with September move widely expected (WSJ)

• BOJ meeting this week sets stage for an era of rate hikes (Reuters)

• BoE decision hangs on a knife edge (FT)

• RBA rate hike could hinge on Wednesday's Australia Q2 CPI data (Bloomberg)

POLITICS & GEOPOLITICS

• Republicans sharpen verbal attacks on Harris as her poll rating climb up to tighten the presidential race (Bloomberg)

• Biden will call for lawmakers to pass new binding ethics rules and term limits for Supreme Court justices on Monday (FT, Bloomberg)

• Israel weighs retaliation to deadly Golan strike (Bloomberg)

• Venezuelan leader Maduro declares himself election winner (FT)

ECONOMY

• China's factory activity likely shrank for a third consecutive month in July, keeping stimulus hopes alive (Reuters)

ASX TODAY

• Fortescue holder looking to sell $1.9bn stake at A$18.55-19.19 a piece or a 6.1% to 8.8% discount to last close (AFR)

• Fletcher Building mulls JV for NZ$1bn land bank to avoid raising equity (The Aus)

• Regional Express Holdings may seek to raise additional capital (AFR)

• WOTSO Property proposes up to 16.2m-unit on-market buyback from 19-Aug to 18-Aug-25 (WOT)

 WHAT TO WATCH TODAY

ASX 200 futures are pointing towards a pretty weak open. Our overnight ETF watchlist was rather heavy, with sectors including Rare Earths/Strategic Metals, Uranium, Airlines, Biotech and Copper leading to the downside.

• Credit Corp FY24 results: Macquarie ests include: $450.5m revenue, $87.8m EBITDA, $36.6m NPAT and full-year DPS of 51 cents

• Fortescue: The above selldown is almost double the previous selldown ($1.1bn block trade on 17-Jun) at a larger discount (previous had a 6% fixed discount). Not a good look for Fortescue. Watch out for a sizeable gap down.

• Kogan: I was actually rather bullish on the Kogan update yesterday, which reported unaudited full-year revenue down 29.8% to $459.7m and adjusted EBITDA growth of 33.2% to $40m. These figures were a respective 0.6% below and 8.1% above Citi estimates. The stock opened pretty strong, up 8.3% but finished 0.9% lower. I guess one of the red flags from the update was the line "will no longer include regular updates on customer numbers and subscribers." Citi also warned that the numbers weren't "enough for us to turn positive" and that "competitive pressures don’t look to have abated heading into FY25."

• Pinnacle Investment Management FY24 results: Macquarie ests (from 21 May) include: $75.5m attributable NPAT, EPS of 37.8, DPS of 36.1, Pinnacle Affiliate performance fee of $105.3m, Funds Under Management (Closing) of $106.5bn

BROKER MOVES

• Deterra Royalties upgraded to Outperform from Hold; target cut to $4.20 from $4.25 (CLSA)

• Viva Energy Group upgraded to Positive with $3.60 target (E&P)

Goldman Sachs initiates coverage of several automotives.

• ARB Corp initiated Neutral with $38.50 target

• Amotiv initiated Buy with $13 target

• Bapcor initiated Neutral with $5.20 target

• PWR Holdings initiated Buy with $13.40 target

• Supply Network initiated Buy with $27.40 target

Companies trading ex-dividend: 

• Tue 30 July: Mirrabooka Investments (MIR) – $0.09, 360 Capital Mortgage REIT (TCF) – $0.042, KKR Credit Income Fund (KKC) – $0.017, Gryphon Capital (GCI) – $0.014

• Wed 31 July: None

• Thu 1 Aug: None

• Fri 2 Aug: Non

Other ASX corporate actions today: 

• Dividends paid: Transmetro Corp (TCO) – $0.05, Virgin Money (VUK) – $0.03

• Listing: Bhagwan Marine (BWN) at 12:00 pm  

• Earnings: Credit Corp (CCP), Ecofibre (EOF)

• Quarterlies: IGO (IGO), Champion Iron (CIA)

• AGMs: None 

Economic calendar (AEST):

• 11:30 am: Australia Building Permits (Jun)

• 3:30 pm: France GDP (Q2)

• 6:00 pm: Germany GDP (Q2)

• 7:00 pm: Eurozone GDP (Q2)

• 10:00 pm: Germany Inflation Rate (Jul)

• 12:00 am: US JOLTs Job Openings (Jun)