Morning Wrap: ASX 200 to rise, S&P 500 slips from record highs, Defensives and Small caps on the rise

ASX 200 futures are up 18pts (+0.21%) as of 8:30 am AEST.

In a nutshell:

• S&P 500 and Nasdaq slipped after setting several consecutive record highs in the past couple of days

• A rotation is taking place, as the Equal-weight S&P 500 outperformed the official benchmark by a wide margin, while the Dow and Russell 2000 finished higher overnight

• Trump's $3.3 trillion "Big, Beautiful" passes the senate, US trade talks progressing with India

Let's dive in.

S&P 500 SESSION CHART

S&P 500 higher but well off opening levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks mixed, with a clear rotation into value, defensives and small caps

• Equal-weight S&P 500 rallied 1.17%, closed at highest level since December 2024 and outperformed the official benchmark by 128 bps 

• S&P 500 rally to continue briefly on improving liquidity, collapsing volatility and fading recession fears, then fade around August, says Goldman Sachs (BBG)

• Investors flock to risky US stocks, leading to concerns about market rebound sustainability (BBG)

• BofA recommended major client groups to reduce US equity exposure last week, clients withdrew funds from US equities at the fastest pace in ten weeks (BBG)

• US dollar slides, marking worst start to a year since 1973 despite easing trade tensions (NYT)

STOCKS

• Apple eyes Anthropic or OpenAI to revamp Siri (BBG)

• Amazon nears robot majority, deploys over one million machines in warehouses (WSJ)

• Tesla's Q2 vehicle sales expected to decline 12%year-on-year, analysts project further drop in 2025 deliveries (BBG)

• Ford EV sales tumble 31% while hybrids rise (TC)

• Chinese automakers achieve record hybrid sales, gain market share in EU electric vehicle market (BBG)

• Hershey to remove synthetic dyes from snacks amid state regulations, health concerns (BBG)

• Middle East oil giants Saudi Aramco, Adnoc scale back acquisitions amid revenue drop (FT)

CENTRAL BANKS

• Trump pressures Powell to drastically cut rates, accuses him of costing the US a fortune (AX)

• Goldman Sachs forecasts three Fed interest rate cuts this year, citing labor weakness (RT)

TARIFFS 

• US officials scale back trade deal ambitions, willing to accept phased deals and agreements in principle as 9-Jul deadline bears down  (FT)

• US trade deal with India is very close, says Bessent (RT)

• EU seeks tariff relief in US trade deal, expects asymmetry despite Trump's demands (RT)

• Trump threatens Japan tariffs amid rice export dispute, US seeks trade deals post-holiday (BBG)

• Japan says won't sacrifice farm sector for tariff deal, despite Trump rice complaints (RT)

BIG BEAUTIFUL BILL 

• President Trump's $3.3 trillion "Big, Beautiful" tax and spending cut bill passed the Senate after Republican leaders successfully persuaded enough remaining holdouts (BBG)

• Trump calls for review of Elon Musk's subsidies amid feud over US spending bill (FT)

• Senate Republicans seek to ease wind and solar subsidy phaseout (BBG)

ECONOMY

• US June ISM Manufacturing was 49.0 vs. 49.1 consensus and up from 48.5 in May, new orders index fell for a fifth straight month while prices paid index remained in expansion territory (BBG)

• US May JOLTS job openings up 374,000 to 7.77m vs. 7.3m consensus, the highest since last November (BBG)

• China June manufacturing PMI returns to growth in June, Caixin PMI up to 50.4 from 48.3 in May (BBG)

• Eurozone manufacturing shows signs of recovery as new orders stop declining after three years (RT)

• Eurozone inflation expectations below 3%, reaching ECB's target amid rate cut expectations (BBG)

• UK manufacturing shows signs of recovery, PMI printed 47.7 in June, declined at slowest pace since January (BBG)

ASX TODAY

Check out our Live Blog for the latest coverage and analysis for company announcements, market movements and economic updates.

• Alcoa Corp completes sale of its full ownership interest in the Ma’aden JV, expects to record a gain of $780m in 3Q25 (AAI)

• James Hardie completes acquisition of Azek for $8.75bn in mixed consideration, Azek shareholders own ~26% of the company (JHX)

• The Reject Shop suspended from quotation from Tuesday close (TRS)

WHAT TO WATCH TODAY

• Breadth to broaden: The Equal-weight S&P 500 massively outperformed the official benchmark overnight, while the Dow and Russell 2000 finished higher. Back at home, the ASX 200 managed to close flat on Tuesday, despite weakness from heavyweights CBA (-1.1%) and BHP (-0.5%). This could see the rally broaden from previous winners to other pockets of the market such as value, defensive, small caps etc.

BROKER MOVES

• Medibank Private downgraded to Neutral from Buy; but target up to $5.45 from $5.10 (UBS)

• Platinum Asset Management upgraded to Neutral from Sell; but target down to $0.47 from $0.50 (UBS)

• Perpetual upgraded to Buy from Neutral; target up to $22.50 from $18.50 (UBS)

• QBE Insurance Group downgraded to Neutral from Outperform; target remains $23.00 (MQG)

Stocks trading ex-dividend: 

• Wed 2 Jul: Graincorp Ltd (GNC) – $0.24

• Thu 3 Jul: Als (ALQ) – $0.197, Clime Capital (CAM) – $0.014

• Fri 4 Jul: The Reject Shop (TRS) – $0.77

• Mon 7 Jul: Collins Foods (CKF) – $0.15

• Tue 8 Jul: None

• Wed 9 Jul: None

Other ASX corporate actions today: 

• Dividends paid: Infratil (IFT), Macquarie Group (MQG), NAB (NAB), Orica (ORI)

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 9:00 am: Australia Ai Group Industry Index (Jun) 

• 11:30 am: Australia Building Permits (May)

• 11:30 am: Australia Retail Sales (May)