Morning Wrap: ASX 200 to rise, S&P 500 higher ahead of megacap earnings, Oil prices plummet

ASX 200 futures are trading 35 points higher, up 0.42%, as of 8:30 am AEDT.

Major US benchmarks finished higher but off best levels, bond yields continued to creep higher on the prospect of a Trump victory, oil prices plummet following limited Israeli military strikes on Iran, China hints are more stimulus (sending miners higher) and more quarterlies!

Let's dive in.

S&P 500 SESSION CHART

S&P 500 higher but finished near session lows (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks higher in fairly quiet trading, S&P 500 and Nasdaq both finished near session lows

• Bond yields continued to tick higher, trading around 3-month highs but still not denting equity market performance given growth expectations, resilient earnings outlook

• Today’s big story – Oil prices down ~5% after Israeli strikes on Iran over the weekend were limited to military targets

• Markets waiting for peak Q3 earnings (~40% of S&P 500 market cap) to report over the next few days

• Big tech results this week include Alphabet (Wed), Meta and Microsoft (Thu), Apple and Amazon (Fri) – The Group is expected to post slowest EPS growth in six quarters and may remain under pressure to outline plans showing stronger revenue growth opportunities after years of massive AI capex

• Market positioning has cooled from max levels, BofA says CTA US equity longs are 70% of the stretched levels seen in mid-July

• Yen slides as Japan election result points to slower interest rate hikes ahead (RT)

• PBOC activates open market outright reverse repo operations facility (RT)

STOCKS

• Meta reportedly working on its own AI search engine (Bloomberg)

• Boeing plans US$15bn capital raise to boost liquidity amid industry challenges (BBG)

• McDonalds rules out beef patty issues in E.Coli outbreak (Reuters)

• Volkswagen explores deep cost-cutting measures, including wage cuts and production site reviews (RT)

• Philips shares drop most in 26 years after downgrading full-year sales to 1.5% from previous forecast of 5% due to China weakness (BBG)

CENTRAL BANKS

• BoE Governor signals reluctant progress on digital pound amid banking innovation concerns (RT)

• Reserve Bank of India sticks to 7.2% FY growth projection despite evidence of slowing activity (BBG)

POLITICS & GEOPOLITICS

• Israeli Prime Minister Netanyahu said he's open to a short truce in the country's war with Hamas (BBG)

• Russian troops capture city stronghold in Ukraine's East; making way to key Ukraine logistics hub (BBG)

• Japan's ruling coalition loses lower house majority FT)

ECONOMY

• No major economic announcements overnight

ASX TODAY

• Bellevue Gold completes $112m debt reduction, unlocking free cash flow to self-fund five-year growth plan (BGL)

• Coronado Global reports Q3 ROM production 6.3Mt vs. 6.6Mt consensus, downgrades FY24 guidance to 15.4-16.0Mt vs. prior 16.4-17.2Mt at higher costs of $105-110/t vs. prior $95-99/t (CRN)

• Myer board approvals $1bn acquisition of brands from Premier Investments and Solomon Lew will end up with 30% control of the merged entity, Myer is likely to pay in shares (AFR)

• Resolute Mining under pressure after Q3 production headwinds, guides to FY production at or below lower-end of prior guidance, AISC at upper end of prior guidance (RSG)

• Southern Cross Electrical Engineering reaffirms FY EBITDA guidance of at least $53m, guides further growth in FY26 onwards (SXE)

WHAT TO WATCH TODAY

• Energy – Oil prices fell more than 5% on Monday after Israel's attacks on Iran did not target any crude oil export and refining capabilities. What's fascinating is that most energy stocks tumbled in early trade on Monday but rallied back up to breakeven. Woodside and Karoon finished unchanged, from session lows of -1.4% and -3.6% respectively.

• Palladium – Palladium prices are up 14.0% in the last three sessions (and up 1.6% overnight). The key catalyst was on Thursday, when the US asked G7 allies to consider sanctions on Russian palladium and titanium. While Chalice Mining is the main ASX-listed beneficiary, the stock has only ticked 2.6% higher over the same time period. Chalice was previously one of the most shorted stocks on the market, but short interest has fallen from August highs of 11.4% to now 6.2%.

• Materials – China's Vice Minister of Finance said on Monday that China will step up counter-cyclical adjustments to bolster economic growth in the fourth quarter. Stimulus hopes helped push up local names like BHP (+1.3%), Rio Tinto (+1.7%) and Fortescue (+2.2%). Let's see if this momentum can continue.

• Financials – Financials was the best performing S&P 500 sector overnight. We've seen local banks V-shape their way back up to all-time highs after the sharp late-September pullback.

BROKER MOVES

• DroneShield upgraded to Buy from Hold; target price cut to $1.20 from $1.35 (BP)

• Goodman Group upgraded to Overweight from Underweight; target up to $40 from $32 (JPMorgan) 

• IGO downgraded to Hold from Outperform; target cut to $5.75 from $6 (CLSA)

• IGO downgraded to Neutral from Outperform; target remains $5.60 (MQG)

Stocks trading ex-dividend: 

• Tue 29 Oct: Waterco (WAT) – 1.36% 

• Wed 30 Oct: Hotel Property Investments (HPI) – 1.83%, Acrow  (ACF) – 2.68%

• Thu 31 Oct: Imperial Pacific (IPC) – 4.83%, London City Equities (LCE) – 1.91%, Autosports (ASG) – 3.28%

• Fri 1 Nov: Pengana Global Private Credit Trust (PCX) – 0.57%

Other ASX corporate actions today: 

• Dividends paid: None

• Listing: None

• AGMs: Ansell (ANN), Credit Corp (CCP), CSL (CSL), Kelsian Group (KLS), Vicinity Centres (VCX)

Economic calendar (AEDT):

• 5:00 pm: Germany Consumer Confidence (Nov)

• 12:00 am: US JOLTs Job Openings (Sep)