Morning Wrap: ASX 200 to rise, S&P 500 and Nasdaq surge to record closes on Nvidia-fueled rally

ASX 200 futures are trading 32 points higher, up 0.42% as of 8:30 am AEDT.

Major US benchmarks surged to record levels after Nvidia's monster earnings sparked a global stock market rally overnight, Japan's main stock index closes above its 1989 record high, European PMIs inch towards a recovery in January plus highlights from the Fortescue and Qantas earnings call Q&A.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gaps up and rallies intraday to finish near best levels (Source: TradingView)

ASX TODAY

• Companies to report today include Austal, Bapcor, Brambles, Aracadium Lithium, Monash IVF, Perseus Mining, Pexa Group, Sandfire Resources, Block and more

• Aussie Broadband reports mixed 1H results, downgrades full-year view (Announcement)

• Paladin Energy reports 1H net profit from cont ops of $76.8m (Announcement)

• Saint-Gobain’s $4.3bn bid for CSR two years in the making (AFR)

• Bega Cheese upgraded to Overweight from Neutral at Barrenjoey, target increased to $4.40 from $3.50

• Eagers Automotive upgraded to Buy from Hold at Bell Potter, but target decrease to $15.20 from $15.65

• Iluka Resources downgraded to Underperform from Neutral at BofA, target cut to $6.85 from $7.0 

• Super Retail Group upgraded to Neutral from Underweight at JPMorgan, target increased to $16.10 from $15.50 

• Tabcorp upgraded to Outperform from Neutral at Macquarie, but target cut to $0.85 from $0.90

MARKETS

• S&P 500 finished higher, near best levels and logged a new all-time high

• Nasdaq at record highs, marks best session in more than a year

• Nvidia opens 11.3% higher, rallies intraday to close up 16.4%

• Nvidia driving broad-based gains across semiconductor stocks and megacap names like Meta (+3.9%), Amazon (+3.6%) and Microsoft (+2.4%)

• Cool stat – Nvidia makes up over 4% of the S&P 500 and a little over 5% of the Nasdaq

• Nvidia's outlook saves broader market as AI hype continues (Bloomberg)

• Market price in Fed's outlook on rates, reins in aggressive bets on cuts (FT)

• Bond traders positioning for renewed selloff (Bloomberg)

• Nikkei overtakes 1989 high to hit all-time high (Bloomberg)

STOCKS

• Nvidia revenue and guidance exceed lofty expectations on surging AI demand (Reuters)

• Rivian to cut 10% of workforce as production guidance underwhelms (Bloomberg)

• Intel to produce high-end chips for Microsoft (FT)

• Google to will pause the image generation of people (Bloomberg)

CENTRAL BANKS

• FOMC minutes stress need for greater confidence on inflation (Bloomberg)

• Fed Governor Bowman says time to cut rates 'certainly not now' (Bloomberg)

• BOJ watchers fall in line with April rate hike scenario (Reuters)

• Eurozone money markets push back ECB rate cut expectations (Bloomberg)

• BoE's Greene says needs more evidence that UK inflation becoming less entrenched before backing rate cuts (Bloomberg)

GEOPOLITICS

• White House's proposed sanctions on Russia in response to Navalny's death unlikely to include aggressive penalties (Politico)

• Biden administration planning to strengthen restrictions on China's Semiconductor Manufacturing International Corp in wake of Huawei Mate 60 Pro (Reuters)

• Israeli officials push ahead with Rafah offensive though sources say no clear plan for safe evacuation of civilians (Bloomberg)

ECONOMY

• Eurozone PMIs inch towards growth in February (Reuters)

• UK PMIs suggests economy in recovery, inflation persists (Bloomberg)

• Japan government downgrades economic view on slow consumer spending (Reuters)

• Japan PMIs softer as manufacturing declines deepen (Reuters)

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Slow Tech Response

Nvidia's results dropped around this time on Thursday – So I figured we'd see a pretty strong response for local tech-related names like Megaport (ASX: MP1), Life360 (ASX: 360) and NextDC (ASX: NXT).

Interestingly, most of these names opened flat or lower on Thursday. It wasn't until around 11:00 am AEDT that they started to realise "oh hang on ... I think the AI trade is back" and started to rally. Classic ASX.

Let' see if this strength kicks on today.

Source: TradingView

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Fortescue Earnings Call Highlights

Fortescue (ASX: FMG) shares finished 2.1% higher on Thursday after its reporting better-than-expected half-year revenue, earnings and dividends. Numbers aside, here are the key takeaways from its earnings Q&A.

• Recovering from the late December derailment is on track, with additional rail capacity helping to recover lost tonnes.

• Pilbara decarbonisation program is expected to ramp up in H2, with overall spend for the year within guidance.

• Capital allocation framework continues to prioritise return of capital to shareholders and dividend policy of 50% - 80% remains unchanged

• Two hydrogen projects in Norway and Brazil are being fast-tracked, with Norway likely next for final investment decision (FID)

• No significant issues reported regarding custom clearance delays in China and iron ore demand remains robust despite anticipated scrap supply increase

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Qantas Earnings Call Highlights

Qantas (ASX: QAN) shares opened in positive territory on Thursday but sold off intraday to close 6.8% lower. Numbers for the first-half were largely in-line with consensus but generally 3-5% below Jarden estimates. The company's loyalty earnings guidance and FY25 capex also missed expectations.

• Return to pre-COVID earnings seasonality expected, with cost focus and transformation program set for H2

• Commitment to margin targets reiterated, with confidence in domestic market structure and ongoing transformation work

• New aircraft delivery delays due to supply chain issues but flexibility allows for network adjustments

• A$230 million customer experience investment confirmed as ongoing and improvements seen in on-time performance and customer satisfaction.

• Operating cash flow expected to improve in H2 and beyond, supporting both business investment and shareholder distributions

• A$400M buyback commitment reaffirmed but timing dependent on market liquidity

• Consultants engaged to enhance operational performance using global best practices and improvement seen but aim is for better than pre-COVID levels

ASX corporate actions occurring today:

• Trading ex-div: Bluescope Steel (BSL) – $0.25, Fiducian Group (FID) – $0.18, GWA Group (GWA) – $0.07, Lendlease (LLC) – $0.06, GUD Holdings (GUD) – $0.185

• Dividends paid: Goodman Group (GMG) – $0.15

• Listing: None

Economic calendar (AEDT):

• 12:30 pm: China House Price Index (Jan)

• 8:00 pm: Germany IFO Business Climate (Feb)