Morning Wrap: ASX 200 to rise, S&P 500 falls ahead of big tech earnings + Rio Tinto results

The S&P 500 and Nasdaq lost ground ahead of big tech earnings, investors continued to rotate into small caps and value overnight, Rio Tinto reports its first-half FY24 results today, Credit Corp shares whipsaw on a mixed set of numbers on Tuesday and Aussie inflation figures are due at 11:30 am.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 eased as midday weakness erased early gains (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks finished mixed overnight, but above worst levels

• Investors continued to rotate into small caps and defensives, with the Equal Weight S&P 500 outperforming the official benchmark by 98 bps

• US 2-and-10 year yields lower, closing at the lowest level since February 2024

• Oil prices settled 0.7% lower, down for a seventh session of the past nine 

• Path of least resistance for markets has shifted to lower, with analysts noting historical weak seasonality in August and September, rising VIX ahead of November election and weakening earnings revisions

• Goldman Sachs says S&P 500 companies have so far authorised just over US$772bn in year-to-date buybacks, up 11% year-on-year

• Global earnings see many companies cut FY sales and profit guidance as higher rates and weak China weigh (Reuters)

• Global M&A deal activity currently tracking 10-15% above 2023 levels (Axios)

• China M&A nearly halves in first half, contrasting with growth in global deals (Nikkei)

• Nvidia shares have shed more than $750bn in market cap across recent selloff (FT)

• European earnings on track for positive growth, but guidance cuts increase (Bloomberg)

• Commodities erase year-to-date gains on China worries, selloff in US natural gas and losses in foodstuffs (Bloomberg)

• Surge in gold demand in Q2 driven by family offices and rich individuals (FT)

STOCKS

• Delta Airlines reportedly hired attorney to seek damages from CrowdStrike (Bloomberg)

• US oil and gas M&A continued at fast pace in Q2, topping US$30bn in deals (Reuters)

• Airbus Q2 earnings shows slump in profits and slower plane deliveries (Bloomberg)

• L'Oréal says conditions in China remain challenging (FT)

• McDonald's suffers first global drop in sales since 2020, as consumers around the world rein in spending (FT)

• BP lifts its dividend after surpassing Q2 expectations and accelerated debt reduction (FT)

• BHP and Canada's Lundin agree to acquire South American copper miner Filo in a US$3bn deal (FT)

CENTRAL BANKS

• Fed to hold rates and open door to a September cut (Reuters)

• Minutes show BoK board split on rate cut timing amid hot housing market (Reuters)

POLITICS & GEOPOLITICS

• Trump says he'll probably end up debating Harris (Bloomberg)

• Israel Netanyahu vows "harsh" response but officials want to avoid all-out war (Reuters)

ECONOMY

• China official manufacturing PMI seen edging further into contraction (Reuters)

• Eurozone Q2 GDP lifts 0.3% as resilient expansion in key countries offsets weakness in Germany (Bloomberg)

• South Korea's exports in July set for fastest pace in 26 months (Reuters)

• France GDP up 0.3% quarter-on-quarter, above 0.2% consensus (Reuters)

• German GDP drops 0.1% quarter-on-quarter, below 0% consensus, casts shadow over Eurozone growth (Bloomberg)

• German inflation unexpectedly ticks higher, up 2.3% vs. 2.2% consensus (Bloomberg)

ASX TODAY

• Champion Iron reports Q1 EPS of C$0.16 vs. C$0.15 consensus (CIA)

• Red 5 reports Q4 production (RED)

• Regional Express major lender PAG likely to convert debt to equity to gain huge influence over airline (AFR)

• Rio Tinto reports first-half FY24 results (RIO)

• SiteMinder reports preliminary FY24 results (SDR)

 WHAT TO WATCH TODAY

• Aussie inflation figures: Monthly CPI data due at 11:30 am. The market is expecting inflation to fall from 4.0% in May to 3.8% in June.

• Rio Tinto half-year earnings: Consensus numbers include revenue of US$26.6bn, underlying EBITDA of $12.2bn and underlying earnings of US$5.8bn. Macquarie is expecting an interim dividend of 188 US cents per share.

• Credit Corp day two: Credit Corp reported a mixed result on Wednesday, with FY24 statutory NPAT down 44% to $50.7 million, yet surpassing the guidance range of $35-45 million. The company's full-year dividend of 38 cents per share fell short of Macquarie's expectations of 51 cents, largely due to a lower final dividend payout ratio of 51% compared to Macquarie's assumed 95%. While FY24 performance was solid, most of the company's FY25 guidance came in 6-8% below Macquarie's projections. This mixed outcome was mirrored in the stock's volatile price action. After opening 4.9% higher, it quickly retreated to -5.3% in early trade, before gradually recovering throughout the day to close up 13.95%. Macquarie has downgraded the stock today (and also cut its FY25-26 EPS assumptions by 7.3% and 6.2% respectively).

BROKER MOVES

• Credit Corp downgraded to Neutral from Outperform; target cut to $18.01 from $18.32 (Macquarie)

• Fortescue upgraded to Add from Hold; target remains $23 (Morgans)

• Fortescue upgraded to Overweight from Neutral; target price remains $23 (JPMorgan)

• Technology One upgraded to Outperform from Sector Perform; target up to $24 from $20 (RBC Capital)

Companies trading ex-dividend: 

• Wed 31 July: Several ETFs trade ex-dividend over the next two days. See a full list here 

• Thu 1 Aug: None

• Fri 2 Aug: None

• Mon 5 Aug: PRL Global (PRG) – $0.05, Perpetual Credit Income Trust (PCI) – $0.007

• Tue 6 Aug: BKI Investment Company (BKI) – $0.04

Other ASX corporate actions today: 

• Dividends paid: Rural Funds (RFF) – $0.02

• Listing: None  

• Earnings: Rio Tinto (RIO), Champion Iron (CIA)

• Quarterlies: Gold Road (GOR), Red 5 (RED), Westgold (WGX)

• AGMs: ALS (ALQ)

Economic calendar (AEST):

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

• 11:30 am: China NBS Manufacturing and Services PMI (Jul)

• 2:00 pm: BoJ Interest Rate Decision

• 4:45 pm: France Inflation Rate (Jul)

• 7:00 pm Eurozone Inflation Rate (Jul)

• 4:00 am: Fed Interest Rate Decision