Morning Wrap: ASX 200 to rise, S&P 500 at record highs, China stimulus boosts mining stocks

ASX 200 futures are trading 25 points higher, up 0.30%, as of 8:30 am AEST.

The S&P 500 and Dow continued their rally into fresh all-time highs, China unleashed a broad range of stimulus measures on Tuesday – sending commodity prices and mining stocks like BHP and Rio Tinto sharply higher and copper marked its best one-day rally since May while gold hit fourth straight record high.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 recovers from early weakness to close near best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished higher and near best levels

• S&P 500 set its 41st record high for the year, Dow also closed a record highs

• Today’s big story – China announced a flurry of additional stimulus measures, sending commodity prices and resource stocks sharply higher

• Debt markets see sharp inflow of corporate borrowers after Fed rate cut (BBG)

• Stock markets in developing nations hit highest level in two-and-a-half years as China stimulus spurs risk-on move (BBG)

• OPEC raises world oil demand outlook for medium and long term citing growth in India and Middle East along with slow EV transition (RT)

CHINA

• China announced a sweep of policy support measures – Shanghai Composite soared 4.1%, the largest one-day gain in four years.

• Additional stimulus included a 20 bp cut in the 7-day reverse repo rate, a 50 bp reserve requirement rate cut, a 50 bp rate cut on existing mortgages and a reduction in downpayment ratio of second-home purchases from 25% to 15% nationwide

• Another 25-50 bp reserve requirement rate cut may be in the pipeline this year – Lowering this ratio allows banks to lend more

• New equity market support measures included a PBOC-backed 500bn yuan borrowing facility for non-bank financials and a relending program to support share buybacks

• Overall – New support measures appeared more aggressive than expected but early takeaways flagged scepticism about a meaningful recovery

CENTRAL BANKS

• Markets price 50% chance of ECB rate cut next month after weak data with Eurozone PMIs and German IFO missing expectations (BBG)

• Fed's Bowman reaffirms 'prominent' upside inflation risks; and worries about cutting too fast (CNBC)

• Fed officials voice support for further rate cuts, stress data dependency (BBG)

• RBA on hold, set to remain on pause as it balances incoming data and ongoing inflation risks (BBG)

• ECB's Lagarde says European monetary policy detached from Fed policy (BBG)

• BoE's Bailey says rates will come down gradually but does not expect return to very low levels (BBG)

POLITICS & GEOPOLITICS

• Iran's new president says he is prepared to ease tensions with Israel (BBG)

• Israeli strikes mark Lebanon's deadliest day for decades, pushing region closer to all-out war (FT)

• Biden team aims to de-escalate tensions between Israel and Hezbollah (BBG)

• US proposes banning Chinese software and hardware in connected vehicles on American roads (FT)

ECONOMY

• US September consumer confidence printed 98.7 vs. 104 consensus, marks the largest decline since Aug-21 (RT)

• Japan's factory activity in September slips due to softer production but service sector expands further (RT)

• German IFO business outlook worsens, reinforcing fears that Europe's biggest economy is in a recession with no quick rebound imminent (BBG)

• Taiwan's export orders exceeded expectations in August as demand for AI chips continue to surge (RT)

ASX TODAY

• ASX Small and Mid-Cap Conference is on today, with over 20 companies including Droneshield and Guzman y Gomez set to present in a series of 20-minute presentations (ASX)

• Australian government approves extension of three coal mines in Hunter Valley NSW, including Whitehaven’s Narrabri Underground Mine Stage 3 Extension Project (The Aus)

• Commonwealth Bank sells 5% stake in Vietnam International Commercial Bank for $160m, transaction expected to raise CET1 ratio by ~3 bps (The Aus)

WHAT TO WATCH TODAY

• Woolworths and Coles: Both stocks down around 6-7% in the last two sessions after the ACCC initiated legal proceedings against the two supermarkets. For Woolworths, this marks the worst two-day streak since February reporting season (missed earnings and dividend expectations, unexpected CEO departure). A key issue highlighted by analysts was the erosion of consumer trust and potential market share shift towards competitors like Aldi and Metcash. Will be interesting to see if these two names can bounce

• Resource rally day two: The China stimulus news hit the market around 11 am on Tuesday, sending pretty much every major miner sharply higher. A few key movers include BHP (+3.2%), South32 (+4.0%), Pilbara Minerals (+4.6%), Sandfire Resources (+6.1%). Our market is front-running this move since the news hit us first. It will be interesting to see if the run can continue for a second day

BROKER MOVES

• Webjet Group initiated Add with $0.95 target (MORG)

Stocks trading ex-dividend: 

• 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

• Fri 27 Sep: Tasmea (TEA) – $0.04, Dexus Industria REIT (DXI) – $0.041, Dexus Convenience Retail REIT (DXC) – $0.051, Rural Funds (RFF) – $0.029, Arena REIT (ARF) – $0.046, 360 Capital Mortgage (TCF) – $0.05, Charter Hall Social Infrastructure REIT (CQE) – $0.037, Charter Hall Long Wale REIT (CLW) – $0.063, Centuria Office REIT (COF) – $0.025, Centuria Industrial REIT (CIP) – $0.041, Comms Group (CCG) – $0.003, Coventry Group (CCG) – $0.003, Lindsay Australia (LAU) – $0.028

Other ASX corporate actions today: 

• Dividends paid: Aurizon (AZJ), Coles Group (COL), Domino's Pizza (DMP), EQT Holdings (EQT), NZME (NZM), Regis Healthcare (REG), Santos (STO), SG Fleet Group (SGF), Suncorp Group (SUN), The Lottery Corp (TLC), Viva Energy Group (VEA)

• Earnings: Premier Investments (PMV), Sigma Healthcare (SIG), Core Lithium (CXO)

• Listing: None

• AGMs: AGL Energy (AGL)

Economic calendar (AEST):

• 11:30 am: Australia Monthly CPI Indicator (Aug)