Morning Wrap: ASX 200 to fall, US stocks bounce but give back early gains, Volatility is here to stay

Major US benchmarks bounced overnight but off best levels, the Fed and Asia policymakers urged calm against the global market rout, Caterpillar and Uber shares soar on better-than-expected earnings, Arcadium Lithium reports its Q2 earnings and JPMorgan flips its ratings for two major banks.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 tries to bounce but gives back some of its gains into close (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished higher but off best levels – S&P 500 up 1.04% from session highs of 2.43%, with most of the selling taking place around market close

• Nikkei bounced 10.2% after the 12% selloff on Monday – The Index is still down 11% over the past four sessions 

• Turnaround Tuesday influenced by several dynamics including Fed pushback against hand-landing concerns, Japanese officials trying to dampen selloff concerns, Nvidia’s positive AI commentary, oversold conditions and positive US ISM services data

• Nomura says investment managers still have a fairly long aggregate net long position in US equities and expect them to continue unwinding as long as the S&P 500 stays below 5,500

• BofA says corrections are not unusual and historically, the S&P 500 experiences pullbacks of 5% or more three times a year and a 10% selloff once per yer

• Asia policy makers seek to calm market anxiety (Bloomberg)

• Dip buyers ease Monday's tech rout, but most content to remain on sidelines with volatility persisting (Bloomberg)

• Monday's selloff stokes concerns of large unwind as investors reassess bullish narratives that powered markets higher (Bloomberg)

• Goldman Sachs says snapping up US stocks after selloffs of this size has usually been profitable (Bloomberg)

• JPMorgan latest to say recent unwinding in carry trades not over yet (Bloomberg)

• Global hedge funds boost positions in China on policy stimulus hopes (SCMP)

• DoE seeking up to 3.5m barrel of oil for Strategic Petroleum Reserve (Reuters)

STOCKS

• Caterpillar shares rise 3% on Q2 earnings beat, supported by strength in its energy and transportation business, profit margins improved (CNBC)

• Uber shares soar 10.9% on Q2 results, revenue up 16% to US$10.7bn or slightly ahead of analyst expectations, trips by self-driving vehicles up six fold in the quarter (Reuters)

• Nvidia says Hopper demand very strong, worries over production delay may be exaggerated, Blackwell production on track to ramp in 2H (Reuters)

• Retail brokers experienced outages on trading platforms during the US stock sell-off (FT)

• Kellogg's to streamline production as slowing demand pressures sales (Reuters)

CENTRAL BANKS

• Emergency rate cut unlikely as they are only used during extreme crisis (Yahoo)

• Fed’s Daly says policy adjustments are necessary in the coming quarters, but notes the Fed can still wait for more data (FT)

• Fed's Goolsbee reassures the market that the US is not in a recession, though attentive to slowing labor market (FT)

• RBA on hold, says policy will need to be sufficiently restrictive, upgrades inflation and GDP growth forecasts (Bloomberg)

POLITICS & GEOPOLITICS

• Harris selects Minnesota Governor Walz as her VP (Bloomberg)

• Iran says will definitely respond to Israel but seeking to avoid total war (FT)

• Israel considering preemptive attack on Iran and Hezbollah (Bloomberg)

• Chinese tech giants stockpile high-end Samsung chips ahead of US curbs (Reuters)

ECONOMY

• Japan real wages growth positive for first time since March 2022 (Bloomberg)

• German industrial orders rise for the first time since December (Bloomberg)

• UK retail sales experience modest growth in July, boosted by warm weather (Bloomberg)

ASX TODAY

• Arcadium Lithium reports June quarter earnings – consensus is expecting $250.5m revenue, $99m adjusted EBITDA and $0.05 EPS 

• Energy Resources of Australia commences legal proceedings regarding government decision not to renew Jabiluka Mineral Lease (ERA)

• Kingsgate Consolidated issues operational update at Diggers & Dealers, says 1Q25 will be a transformational quarter with the ramp up of mining operations (KCN)

• Liontown Resources CEO dismisses possibility of near term equity raise (The Aus)

 WHAT TO WATCH TODAY

The Nikkei experienced a powerful bounce on Tuesday, the US market faded from session highs overnight and ASX futures are pointing to a slightly lower open. While the market is very oversold, volatility remains elevated and anything is possible. You could argue that the path of least resistance for markets has been higher since last October, buoyed by several themes including easing inflation, rate cut expectations, solid corporate earnings and AI. But now, things are a mess. This is the classic crossroad where five experts will say "we're bullish and buying the dip" and five more will say "we're bearish and going full cash". And in a few months' time, you'll never hear from the ones that got it wrong. The only certainty is volatility – so let's see how the dust settles over the coming days and weeks.

BROKER MOVES

• ANZ upgraded to Neutral from Underweight; target remains $27 (JPMorgan)

• Westpac downgraded to Underweight from Neutral; target remains $25 (JPMorgan)

Stocks trading ex-dividend: 

• Wed 7 Aug: Mayfield Group (MYG) – $0.02, Pacific Smiles (PSQ) – $0.07

• Thu 8 Aug: None

• Fri 9 Aug: Djerriwarrh Investments (DJW) – $0.08, Aloca (AAI) – $0.107

• Mon 12 Aug: None

• Tue 13 Aug: None

Other ASX corporate actions today: 

• Dividends paid: Centuria Industrial (CIP) – $0.04

• Listing: None  

• Earnings: Arcadium Lithium (LTM), Transurban (TCL) – after market close results include AMP (AMP), BWP Trust (BWP), Charter Hall Long WALE REIT (CLW) and Mirvac (MGR) 

• AGMs: None

Economic calendar (AEST):

• 9:00 am: Australia Industrials Index (Jul)

• 4:00 pm: Germany Balance of Trade (Jun)