Morning Wrap: ASX 200 to open at record levels, S&P 500 surges on Fed cut euphoria

Let the good times roll – The S&P 500 closed at a fresh all-time high while ASX 200 futures are pointing towards a fifth straight session of record highs. Big tech and cyclicals led to the upside overnight, the market is pricing in more rate cuts by end-2024 than the Fed's dot pot and plenty of local resource names are set to get a kick after a broad-based rally in commodity prices overnight.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gaps up and not far from best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks gapped up and finished not far from best levels

• S&P 500 closed at an all-time high, Nasdaq still 3.5% below July highs

• Big Tech led the market higher, with Apple, Nvidia and Meta all up ~4%

• Broad-based commodity gains – Gold marked a record close, copper finished at highest level since mid-July and oil at two week highs

• Today’s big story – Continued soft-landing optimism and dampened recession fears drove a rotation into tech and cyclical groups 

• Rate cut is bullish for markets – S&P 500 has been higher on a 1, 3, 6 and 12-month basis in each of the last five easing cycles, according to JPMorgan. If the economy does not enter a recession, S&P 500 typically up 17% in the first 12 months. During this period, earnings drove a bulk of the gains and defensives outperformed 

• Markets price-in more rate cuts by end-2024 than Fed's dot plot (RT)

• BofA now expects Fed to go for 75bp cut in Q4 after jumbo rate cut (RT )

• Gold touches new record highs after Fed makes first rate cut since 2020 (BBG)

STOCKS

• T-Mobile CEO says company seeing more sales of iPhone 16(CNBC)

• Airbnb CEO says company increasing focus on long-term rentals as short-term comes under growing scrutiny (RT)

CENTRAL BANKS

• Fed cuts 50 bps, dot plot has 100 bp of cuts in both 2024 and 2025 (BBG)

• Fed's rate cut seen giving scope for other central banks to cut (BBG)

• Cautious Bank of England holds rates extends bond reduction plan (RT)

• Norway central bank holds rates at 4.5% but flags rate cuts only in 1Q25 (WSJ)

• China expected to cut main policy rate and lending benchmarks (RT)

• Hong Kong cuts base rate by half point in tandem with Fed's move (RT)

POLITICS & GEOPOLITICS

• New polls show presidential race deadlocked nationally (NYT)

• Israel says conflict has entered new phase (BBG)

• Iran vows retaliation after ambassador wounded in Lebanon explosions (BBG)

• Putin under pressure to call up more troops for war of attrition after rebuffing defense officials earlier this year over this (WSJ)

ECONOMY

• China to ramp up stimulus but "bazooka-style" stimulus unlikely (RT)

• EU car sales hit 3-year low as German EV sales dip on economic woes (RT)

• NZ GDP falls less than expected, markets eyeing 50 bp RBNZ rate cut (BBG)

ASX TODAY

• Arcadium Lithium provides investor day update – Outlines path to adjusted EBITDA of $1.3bn by 2028, expects 25% higher lithium volumes in 2024-25 (LTM)

• Auckland Airport $1bn selldown by Auckland Council is shaping up to be one of the next block trades to hit the market, brokers testing out appetite for the shares (The Aus)

• CSL Deputy CFO John Levy to step into role of Interim CFO

WHAT TO WATCH TODAY

• Big risk-on session: Massive tech outperformance overnight. Although I'd argue that local sectors were front-running this move – Just look at how some of our local growth names performed on Thursday. Zip rallied 9.2% to highest level since Feb-22, Xero is breaking out and closed at highest since Nov-21 etc.

• Defensive underperformance: After a brief period of outperformance, the market rotated back into tech and cyclical groups, and out of defensives.

• Resources rally: Lower rates, a weakening US dollar and easing growth concerns drove a broad-based rally for commodities. From our overnight ETF watchlist: Copper Miners (+3.5%) and Nickel Miners (+3.5%) both rallied to a ~3 week high – Keep an eye out for local names like Sandfire, Nickel Industries etc. Rare Earths/Strategic Metals (+3.5%) could see some positive follow through for local lithium names. Gold Miners (+1.6%) eased from session highs despite gold closing at record levels. Overnight Uranium names (+3.6%) are playing catch up since local names like Paladin Energy rallied 8.1% on Thursday. So don't get too euphoric about the uptick (still a net positive though)

BROKER MOVES

• Computershare downgraded to Neutral; target cut to $27 from $29 (JPM)

• Computershare downgraded to Equal-weight; target cut to $27.70 from $30 (MS)

• Sims downgraded to Neutral from Buy; target remains $13.50 (UBS)

• Sims downgraded to Neutral from Overweight; target up to $12.50 from $12 (JARD)

Stocks trading ex-dividend: 

• Fri 20 Sep: Inghams (ING) – $0.08, Vita Life Sciences (VLS) – $0.035, Capitol Health (CAJ) – $0.004, Eureka Group (EGH) – $0.007, Blackwall (BWF) – $0.025 

• Mon 23 Sep: Bisalloy Steel (BIS) – $0.115

• Tue 24 Sep: Pacific Smiles (PSQ) – $0.033, WT Financial (WTL) – $0.005, Briscoe (BGP) – $0.115, Southern Cross Electrical (SXE) – $0.05 

• Wed 25 Sep: H&H High Conviction (HCF) – $0.02, Stealth Group (SGI) – $0.008, Genesis Energy (GNE) – $0.064, Nick Scali (NCK) – $0.33, Imdex (IMD) – $0.013, Cedar Woods (CWP) – $0.17, Teaminvest (TIP) – $0.015

• Thu 26 Sep: Vulcan Steel (VSL) – $0.118, Shine Justice (SHJ) – $0.04, PRL Global (PRG) – $0.03, Garda Property Group (GDF) – $0.018

Other ASX corporate actions today: 

• Dividends paid: ASX (ASX), Clinuvel Pharmaceuticals (CUV), Globe International (GLB), Jumbo Interactive (JIN), Resimac Group (RMC), SDI (SDI), Tabcorp (TAH), Sky Network Television (SKT), GR Engineering Services (GNG), Summerset Group (SNZ), IPH (IPH), Hansen Technologies (HSN), QBE Insurance Group (QBE), Schaffer Corp (SFC)

• Listing: None  

• AGMs: None

Economic calendar (AEST):

• 9:30 am: Japan Inflation (Aug)

• 2:00 pm: Japan Interest Rate Decision

• 4:00 pm: UK Retail Sales (Aug)