Morning Wrap: ASX 200 to soar, S&P 500 logs best day since November, US core CPI slows

ASX 200 futures are up 104pts (+1.26%) as of 8:30 am AEDT.

In a nutshell:

• US core inflation was slightly cooler-than-expected

• Several major US banks smashed earnings expectations (earnings, margins and EPS beats across the board) and rallied 2-6%

• Major US benchmarks soared on the inflation report

Let's dive in.

S&P 500 SESSION CHART

S&P 500 soared and finished near best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks rallied, with the S&P 500, Nasdaq and Russell 2000 logging their best sessions since the day after Trump's election last November

• Today’s big drivers– Cooler-than-expected US core inflation sent bond yields lower and stocks soaring, strength was further supported by better-than-expected earnings from JPMorgan, Citi, Wells Fargo etc. with NII, NIM and EPS beats across the board

• US 10-year yield logged its largest one-day decline since 2 August 2024, but only scratching a one-week low

• Fed rate cut expectations for January remain relatively unchanged (97.3% likelihood of a hold vs. 97.9% yesterday) but outlook for the rest of the year ticked higher (e.g. May hold likelihood now 54.7% vs. 63.4% yesterday)

• Investors pour billions into S&P equal weight fund on growing concerns over Mag 7's dominance of US market (FT)

• US midcap stocks are attractive right now on cheaper valuation vs larger peers, says Goldman Sachs (BBG)

• Global oil markets face smaller surplus this year amid stronger demand, new supply risks, says IEA (BBG)

US INFLATION

• December core CPI up 0.2% MoM, slightly below consensus 0.3%

• Annualised core was  3.2% vs. 3.3% consensus

• Headline CPI up 0.4% MoM, slightly ahead of 0.3% consensus

• Annualised headline at 2.9% vs. 2.8% consensus

• Energy and food contributed the bulk of the upside, with energy index up 2.6% and accounting for 40% of all-items increase

• Food rose 0.3% MoM, decelerating from 0.4% increase in the previous month

• Shelter index up 0.3% MoM, same as last month

• Car insurance and airfares both reaccelerated

STOCKS

• Nvidia's stellar $3tn rally on edge as chipmaker's sales growth is slowing and competition is rising (BBG)

• BlackRock shares added 5.1% after the world’s largest asset manager posted a Q4 earnings beat, with assets soaring to US$11.6tn (RT) 

• Citi gained 6.4% after Q4 earnings topped Wall Street expectations, with adjusted EPS 9.8% ahead of consensus (CNBC)

• Goldman Sachs rallied 6% on Q4 earnings beat, with quarterly EPS 45% ahead of analyst expectations (CNBC)

• JPMorgan shares tick 2% higher on stronger-than-expected Q4 earnings, led by fixed income and investment banking segments (CNBC)

• Wells Fargo shares soar 6.6% on better-than-expected earnings and guidance (CNBC)

CENTRAL BANKS

• PBOC makes second-largest net liquidity injection via 7D reverse repos on record (BBG)

• BoE easing bets pick up after softer UK inflation with money markets fully pricing two quarter-point cuts for 2025 (BBG)

• BOK expected to cut rates by 25 bp Thursday amid growing concerns over economy (BBG)

• Fed Williams says economy is in good shape, disinflationary trends remain but process has been choppy (FED)

POLITICS & GEOPOLITICS

• Israel and Hamas agree to ceasefire, Israel to exchange Palestinian prisoners for hostages held by Hamas (RT)

• US to tighten restrictions on sales of advanced chips to China produced by firms like TSMC, Samsung (BBG)

• EU weighing new curbs on imports of Russian aluminum and LNG, banning more banks from SWIFT (BBG)

ECONOMY

• US imports from China finished 2024 strong after some companies stockpiled shipments ahead of Trump 2.0 (RT)

• UK inflation unexpectedly slows to 2.5% in December, paving way for BoE easing (FT)

• UK business confidence dips to two-year low after Labour's budget (RT)

• German GDP posts second consecutive year of contraction, down 0.2% last year vs. 0.3% decline in the previous year (FT)

ASX TODAY

• Genesis Minerals reports Q2 gold production of 57,055 oz, on-track to meet FY25 guidance of 190-210,000 oz (GMD)

• Rio Tinto reports Q4 Pilbara iron ore production (100% basis) of 86.5Mt, in-line with market expectations, however, FY24 iron ore costs expected to be in the upper half of $21.75-23.50 per tonne guidance (RIO)

WHAT TO WATCH TODAY

• Big Risk On: Discretionary and Tech were among the best performing S&P 500 sectors overnight. The S&P/ASX 200 Info Tech sector is currently on a six-day losing streak, down 6.4%. Will local tech stocks experience a sharp rebound on Thursday?

• Financials: A clean sweep of better-than-expected earnings from US banks. While they are fundamentally very different businesses, the biggest bright spot was the better-than-expected 2025 net interest income guidance as well as net interest margin beats and in-line expense guidances. Could this provide a positive lead in for local financials?

BROKER MOVES

• AUB Group initiated Hold with $32.80 target (CSLA)

• Baby Bunting upgraded to Buy from Neutral; target is $2.01 (CITI)

• Beach Energy downgraded to Sell from Neutral but target up to $1.30 from $1.20 (CITI)

• Computershare downgraded to Neutral from Buy but target up to $35.50 from $31 (GS)

• DigiCo Infrastructure REIT initiated Buy with $5.80 target (GS)

• Origin Energy downgraded to Neutral from Buy but target up to $10.40 (GS)

• Steadfast Group initiated Outperform with $6.60 target (CSLA)

Stocks trading ex-dividend: 

• Thu 16: None

• Fri 17 Jan: None

Other ASX corporate actions today: 

• Dividends paid: Garda Property Group (GDF)

• Listing: Southern Cross Gold Consolidated (SX2)

• Earnings: None

• AGMs: None

Economic calendar (AEDT):

• 10:30 am: Australia Unemployment Rate (Dec)

• 5:00 pm: UK GDP (Nov)

• 11:30 pm: US Retail Sales (Dec)