Morning Wrap: ASX 200 to rally, S&P 500 snaps four-day losing streak on cool inflation data

ASX 200 futures are up 43pts (+0.53%) as of 8:30 am AEDT.

In a nutshell:

• Major US benchmarks higher but struggled to hold intraday highs (e.g. S&P 500 up 0.79% vs. session high of 1.41%)

• Micron pumped life back into AI stocks by smashing Q1 earnings expectations, Q2 guidance well-ahead of consensus, management expect memory shortage to persist beyond 2026

• US delayed CPI data highlighted Sep-to-Nov inflation of 2.7% vs. market expectations of 3.1%, though economists warn of flaws in the numbers due to missing data

• That's a wrap on 2025! A huge thank you to everyone who's been reading along this year. It's been an absolute rollercoaster for markets, and I hope these notes have helped you navigate the chaos. The Blog, Morning and Evening Wraps will resume on Wednesday, 7 January. Wishing you a wonderful Christmas and a Happy New Year.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gapped up but closed off best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks higher but off best levels

• Today's big story – Two key drivers for the overnight bounce: i) cooler-than-expected US inflation data, with core inflation at the lowest in ~5 years and ii) bounce in AI/tech sector after Micron smashed quarterly earnings expectations

• US stocks enter 2026 with bullish momentum, though risks like AI concentration, inflation and geopolitics remain (BBG)

• JGBs see largest weekly inflow from foreign investors (BBG)

• Global M&A hits US$4.8tn, the second-highest on record as cross-border deals surge and mega-bids top $50bn (RT)

STOCKS

• Micron Q1 revenue and EPS beat expectations, guides Q2 revenue more than 30% above ests amid robust HBM growth, expects memory shortage to persist beyond 2026 (BBG)

• OpenAI in talks to raise billions at $750bn valuation (TI)

• Elliott builds stake of over $1bn in Lululemon, lines up potential ex-Ralph Lauren CEO candidate (BBG)

• Olive Garden owner Darden Restaurants hikes revenue outlook as value plays help bring in diners (CNBC)

• DoorDash adds ChatGPT grocery shopping plugin (BBG)

• Birkenstock sale and earnings rise on strong demand for premium sandals and clogs (BBG)

TARIFFS

• China buys ~7m tons of US soybeans, purchases now at the halfway point of its 12m-ton deal with the US (BBG)

• China reverse-engineers ASML's extreme ultraviolet lithography machines to help make cutting-edge AI chips (RT)

• China issues general licenses for rare-earth exports to speed shipments, November exports up 13% month-on-month (RT)

• US approves record $11bn arms sales to Taiwan, risking tensions with China (RT)

• Canadian PM says trade deal with US unlikely, to be addressed in USMCA review next year (RT)

CENTRAL BANKS

• ECB holds rates as expected, upgrades GDP growth forecasts for second time since Mar-24 (FT)

• BoE cuts by 25 bp as expected, though says future cuts likely a closer call (FT)

• Sweden's central bank keeps rate on hold and expects no change through to 2027 as economic recovery gathers momentum (BBG)

• Norway's' central bank holds rates at 4% and signals gradual cuts next year (BBG)

ECONOMY

• US Sep-to-Nov inflation was up 2.7% year-on-year vs. 3.1% ests, core inflation down to 2.6% vs. 3.0% ests, though many component-level details missing due to government shutdown (BBG)

• Economists warn of flaws in November CPI report due to missing data after shutdown (FT)

• New Zealand GDP growth rebounds as lower interest rates work their way through economy (BBG)

ASX TODAY

• Austal awarded two contracts for additional Evolved Cape-class Patrol Boats, valued at over $135m (ASB)

• Dyno Nobel’s Phosphate Hill under the eyes of Indonesia’s PT Petrokimia Gresik for a second time, PT put forth a non-binding bid for $1bn in 2024 (DNL)

• PeopleIn to divest First Choice Care and Edmen to Healthcare Australia for $20.3m, proceeds to pursue accretive acquisitions in defence, engineering, trades and labour sectors (PPE)

• PeopleIn guides to 1H26 normalised EBITDA of $15-16m, notes general improving trading conditions in Q2 (PPE)

• RPMGlobal and Caterpillar scheme receives green light from ACCC (RUL)

• Wisetech completes board review, no evidence to support allegations of misuse of company funds by Richard White (WTC)

WHAT TO WATCH TODAY

• In a nutshell: Material stocks traded slightly higher overnight despite relatively flat commodity prices. We're starting to see a small bounce in the obliterated tech sector, but the price action is far from bullish (e.g. FinTech ETF up 1.49% overnight but faded intraday high of 2.64%). Equal-weight S&P 500 up only 0.21% vs. official benchmark up 0.79%. Overall, a net positive, but market remains selective and dicey.

BROKER MOVES

• Boss Energy downgraded to Underweight from Neutral; target cut to $1.00 from $1.60 (JPM)

• Lovisa upgraded to Overweight from Equal-weight; target cut to $38.00 from $42.00 (MS)

Stocks trading ex-dividend: 

• Fri 19 Dec: None

Other ASX corporate actions today:       

• Dividends paid: ANZ Group Holdings (ANZ), Bisalloy Steel Group (BIS), Dalrymple Bay Infrastructure (DBI), Liberty Financial Group (LFG), Westpac Banking (WBC)

• Earnings: None

• IPOs: Channel Infrastructure NZ (CHI) and Trade Window Holdings (TWL)

• AGMs: None

Economic calendar (AEDT):

• 10:30 am: Japan Inflation Rate (NOV)

• 2:00 pm: Bank of Japan Rate Decision (Ests: 25 bp hike to 0.75%)

• 6:00 pm: UK Retail Sales (NOV)