Morning Wrap: ASX 200 to rise + S&P 500, Dow and Nasdaq soar to record levels on Trump win

ASX 200 futures are trading 31 points higher, up 0.37%, as of 8:30 am AEDT.

What a wild overnight session – Major US benchmarks surged to record levels, the Russell 2000 added an unprecedented 5.8%, bond yields and the US dollar surged on Trump deficit, wage and inflation concerns, commodity prices sold off sharply and NAB reported a solid FY24 result this morning.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gapped up, rallied intraday to finish at best levels Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks surged and finished at best levels, with the S&P 500, Dow and Nasdaq all closing at record levels

• Treasury yields surged higher, with US 10-year yield up 15 bps overnight to highest level since 4-Jul on growing deficit concerns, potential for tighter immigration policy to push wages higher

• Key Trump trades – Banks seen as one of the big winners from deregulation and pickup in M&A, crypto-related equities, onshore energy, steel production and retail names

• VIX falls from 20.5 to 16 after speculative shorts clear out and expected to support systematic fund buying

• Corporates are coming out of buyback blackout periods and November is historically the largest buyback execution month of the year

• Trump has proposed cutting the corporate tax rate from 21% to 15%, which could boost S&P 500 earnings by ~4%, according to Goldman Sachs

• US tariff increase to 60% and 10% on goods imports from China and the Rest of the World could represent a 1.4pp headwind on real US GDP in the first 12 months and inflation would rise in the short run, according to Barclays

• Post election, the likelihood of a 25 bp Fed rate cut unchanged at >90% but the market is now pricing a ~33% chance of no rate cut in December

• Bitcoin's price soars above US$75,000, breaking records amid Trump win (FT)

• Oil sees volatile post-election session as market still trying to determine implications of Trump win (CNBC)

STOCKS

• Novo Nordisk narrows its FY sales, profit forecasts but US Wegovy sales up 50% as more insurers agree to pay (BBG)

• BMW Q3 show main measure of profitability fell to the lowest in more than four years after recall, China woes (BBG)

• Nintendo stock rallies as it says current Switch games will be playable on the console's successor (RT)

US ELECTION

• Trump wins US presidency in historic comeback (AX)

• Trump improved on 2020 margins, on way to assembling most diverse GOP coalition in decades (AX)

• Republicans set to retake control of the Senate, with outstanding races potentially adding to their majority (AX)

• VP Harris to deliver concession speech tonight at 4 PM ET (USAT)

• US-UK relations expected to start on a strained note amid wide political differences in leadership (BBG)

• Republicans tracking to gain at least 52-48 advantage in US Senate; House control still unclear (RT)

• Axios outlines Trump's policy proposals after election win (AX)

ECONOMY

• Eurozone services PMIs show October growth keeping the region from contracting for a second month in a row (BBG)

• Japan services PMI declines for first time since June on softer sales (RT)

• German factory orders surge in September in boost for industry facing challenges (BBG)

• New Zealand labor market softens as unemployment rate hits highest in almost four years (BBG)

ASX TODAY

• NAB reports FY24 results, with cash earnings down 8.1% to $7.1bn, in-line with Morgan Stanley estimates. The bank also reported NIM of 1.71% (vs. 1.72% MSe), a final dividend of 85 cents (vs. 85c MSe) and CET1 ratio of 12.35% (vs. 12.13% MSe). So all numbers either met or slightly ahead of expectations. The analysts said NAB has only $0.6bn of its $3bn buyback to go and expected to see another $1bn buyback but no further buybacks were announced (NAB)

WHAT TO WATCH TODAY

• Tech, banks and retailers: These sectors started to trend higher on Wednesday, in parallel with the growing likelihood of a Trump victory. The intraday price action was bullish – E.g. Block opened flat but finished 4.0% higher, Macquarie opened 1.6% higher and finished up 3.5% etc. It'll be interesting to see if these names continue to tick higher after the strong lead in from Wall Street. Other specific stocks that also benefited include Bluescope Steel, QBE Insurance and Worley, which rallied 5.6%, 3.5% and 3.4% respectively on Wednesday

• Commodities: The Trump victory sent the US Dollar Index up 1.62%, the largest one-day move since 23 September 2022. This move sent commodities sharply lower, led by Copper (-5.3%), Silver (-4.4%), Palladium (-3.5%), Gold (-3.0%), Iron Ore (-2.6%) and Aluminium (-1.3%). Local resource stocks already began to falter on Wednesday, with names like Fortescue and Woodside down 1.1% and 1.7% respectively. Sandfire finished the session up 0.6%, down from highs of 3.1%. We could see more negative flows for resources, given most commodity prices trended lower overnight

• Yields: Bond yields are soaring on the prospects that Trump will drive the US deficit, wages and inflation higher. While major US benchmarks rallied, yield-sensitive sectors including Utilities and Real Estate finished 0.9% and 2.6% lower. This could place downward pressure on local names like Charter Hall, Dexus etc.

BROKER MOVES

• Harvey Norman downgraded to Sell from Neutral; target cut to $4 from $4.50 (GS)

• James Hardie upgraded to Overweight from Neutral; target up to $55 from $52 (JPM)

• Zip upgraded to Neutral from Underperform; target up to $3.20 from $1.50 (BofA)

Stocks trading ex-dividend: 

• Thu 7 Nov: Cobram Estate Olives (CBO) – 1.72%, Judo Capital (JDOPA) – 1.68%, Westpac Banking Corporation (WBC) – 2.36%

• Fri 8 Nov: Acorn Capital Investment Fund (ACQ) – 3.16%

• Mon 11 Nov: Champion Iron (CIA) – 1.84%, Macquarie Group (MQG) – 1.15%, Naos Ex-50 Opportunities Company (NAC) – 3.09%, Naos Small Cap Opportunities Company (NSC) – 2.63%

• Tue 12 Nov: GQG Partners (GQG) – 1.43%

• Wed 13 Nov: None

Other ASX corporate actions today: 

• Dividends paid: Arena REIT (ARF)

• Listing: None

• Earnings: National Australia Bank (NAB)

• AGMs: Bendigo Bank (BEN), Breville Group (BRG), Cooper Energy (COE), NIB Holdings (NHF), Seven West Media (SWM)

Economic calendar (AEDT):

• 10:30 am: Australia Balance of Trade (Sep)

• 1:00 pm: China Balance of Trade (Oct)

• 10:00 pm: Bank of England Interest Rate Decision (consensus: 25 bp cut)

• 5:00 am: Fed Interest Rate Decision (consensus: 25 bp cut)