Morning Wrap: ASX 200 to rise, S&P 500 rallies on soft PPI data + CBA, Pro Medicus results

Major US benchmarks rallied as better-than-expected producer inflation data reinforced rate cut expectations, Bank of America's latest fund manager survey shows a slight pullback in optimism but soft landing expectations intact and reporting season continues to heat up with results from names including Commonwealth Bank, AGL Energy and Pro Medicus.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 gaps up, rallies intraday to close at best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks rallied and finished near best levels on cooler-than-expected US producer inflation data

• S&P 500 above 5400 for the first time since 1-Aug and now up 5% since last Monday’s selloff

• Today’s big story – Cooler July PPI a tailwind for several themes like disinflation momentum and the likelihood of upcoming Fed rate cuts  

• Latest BofA Global Fund Manager Survey showed cash levels up 0.2 bps month-on-month to 4.3%, investors overweight stocks down 20 bps to 31%, global growth expectations fell 20 bps to net 47% but soft landing expectations up from 68% to 76% as 93% expect lower short-term rates in 12 months 

• Panic fading in US stock markets but volatility is back, analysts believe markets could be jittery for months (link, Reuters)

• Recession fears drive more than US$66bn into fixed income funds (FT)

• Japan's Nikkei index recovers to levels before 5-Aug selloff (Bloomberg)

• IEA says global oil markets poised to swing from a deficit to surplus next quarter should OPEC+ proceed supply boost (Bloomberg)

STOCKS

• Home Depot Q2 EPS beat analyst expectations but comparable sales down 3.3%, more than 100 bps worse than expected on higher rates, macro uncertainty (Reuters) 

• General Motors looking to restructure operations in China, with sources eyeing production capacity cuts (Bloomberg)

• Paramount to lay off 15% of workforce in effort to reduce costs (Reuters)

POLITICS & GEOPOLITICS

• Trump lashes out at "inside" enemies in X interview with Musk (FT)

• Iran officials say Gaza truce progress will delay or prevent Iranian retaliation against Israel (Reuters)

• Ukraine's incursion into Russia centered on gaining negotiating power, throwing Russia off-balance (CNBC)

• US and China financial leaders to meet to discuss financial stability, PBOC swap lines (Bloomberg)

ECONOMY

• US producer price index up 0.1% month-on-month vs. 0.2% consensus, core PPI was unchanged vs. consensus for a 0.2% rise (Reuters)

• Japan PPI inflation rises for sixth straight month (Bloomberg)

• Australian wage inflation remains elevated but markets still expects an RBA rate cut (Bloomberg)

• Australian consumer confidence recovers as tax cuts begin to flow through and business confidence ticks higher (Reuters)

ASX TODAY

• Amotiv (formerly GUD Holdings) FY24 results announcement (AOV)

• BHP’s Escondida Mine employees begin strike after ending labour talks (Bloomberg)

• BWP Trust full-year results to 30 June 2024 (BWP)

• Commonwealth Bank 2024 full year results announcement (CBA)

• Evolution Mining record FY24 profit and high margin cash flow into FY25 (EVN)

• Healius diagnostic imaging bidders getting toward the end of the sale process (The Aus)

• Lifestyle Communities reports FY24 results (LIC)

• Orora fessed up to $3.3bn bid from US buyout fund Lone Star (AFR)

• Seven Group full-year results announcement (SVW)

 WHAT TO WATCH TODAY

ASX 200 expected to rally this morning after a strong lead from Wall Street and the cooler-than-expected US PPI data. CBA's full-year result looks to be slightly ahead of analyst estimates, so let's see if this can drive some more positive flow into the index.

Today's reporters vs. analyst expectations:

• AGL Energy: Consensus is looking for FY24 revenue of $12.7bn and NPAT of $795.5m (AGL previously guided to $760-810m)

• Commonwealth Bank: The street is expecting FY cash NPAT of $9.82bn, net interest margin of 1.98% and a full-year dividend of $4.57

• Evolution Mining: Reported FY24 NPAT of $482m vs. $417.5m consensus, full-year dividend of 7 cents per share falls a little short of analyst expectations (ests vary between 8-10 cps)

• Seven Group: The street is expect full-year revenue of $10.75bn and NPAT of $812m. It's worth noting that Seven Group has guided to FY25 EBIT growth in the high single-digits

BROKER MOVES

• Beach Energy downgraded to Underweight from Equal-weight; target cut to $1.18 from $1.45 (Morgan Stanley)

• Challenger upgraded to Buy from Neutral; target increased to $8.30 from $6.95 (Citi)

• Computershare downgraded to Hold from Outperform but target up to $28.60 from $27.50 (CLSA)

• Netwealth Group downgraded to Market-weight from Overweight; target cut to $21.04 from $23.52 (Wilsons) 

• Netwealth upgraded to Neutral from Underperform; target up to $21 from $16.75 (Macquarie)

• Seek upgraded to Outperform from Neutral; target remains $23 (Macquarie)

Stocks trading ex-dividend: 

• Wed 14 Aug: Australian Foundation Investment Co (AFI) – $0.145, Resmed (RMD) – $0.057

• Thu 15 Aug: Kovest (KOV) – $0.40, Reckon (RKN) – $0.025, Pacific Smiles (PSQ) – $0.07, Rio  Tinto (RIO) – $2.70, Scentre Group (SCG) – $0.08, Dicker Data (DDR) – $0.11

• Fri 16 Aug: Argo Investments (ARG) – $0.18, QBE Insurance (QBE) – $0.24

• Mon 19 Aug: Seven Group (SVW) – $0.30, Ryder Capital (RYD) – $0.05, Euroz Hartleys (EZL) – $0.03

• Tue 20 Aug: None

Other ASX corporate actions today: 

• Dividends paid: Charter Hall Long WALE REIT (CLW) – $0.065

• Listing: None  

• Earnings: AGL Energy (AGL), Amotiv (AOV), Bravura Solutions (BVS), BWP Trust (BWP), Commonwealth Bank (CBA), Centuria Capital (CNI), Deterra Royalties (DRR), Evolution Mining (EVN), HomeCo Daily Needs (HDN), Maas Group (MGH), Orora (ORA), Pro Medicus (PME), Seven Group (SVW)

• AGMs: None

Economic calendar (AEST):

• 4:00 pm: UK Inflation (Jul)

• 10:30 pm: US Inflation (Jul)