Morning Wrap: ASX 200 to soar, S&P 500 nears breakeven for the year, Nasdaq surges on US-China trade deal

ASX 200 futures are up 97pts (+1.17%) as of 8:30 am AEST.

In a nutshell:

• US stocks surged after a major de-escalation of US-China trade tensions

• For the next 90 days, US tariffs on Chinese goods will come down to 30% (from 145%), while China tariffs will come down to 10% (from 125%)

• Gold prices tumbled, driving the gold miners ETF down more than 7% overnight

Let's dive in.

S&P 500 SESSION CHART

S&P 500 opened sharply higher and finished near best levels (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks gapped up and trended higher to close near best levels

• S&P 500 is now almost flat year-to-date and 5% away from its record February close

• Nasdaq 100 made a decisive move above its 200-day moving average for the first time in two months

• Big risk-on session after major de-escalation in US-China trade tensions, with Tech and Discretionary sectors up more than 4.5% while defensives like Staples, Real Estate and Utilities closed around breakeven

• US inflation report out tonight – April annual core expected to hold at 2.8%, the lowest since Mar-21, print expected to show some tariff pressure on the goods side

• US-based hedge funds lift bullish bets on Chinese stocks, anticipating progress in US-China trade talks (RT)

STOCKS

• Tesla, which has recorded consecutive quarters of declining China sales, soared 6.7% on the news

• Apple, which makes a majority of its iPhones in China, gained 6.3%

• Amazon (+8.0%), Meta (+7.9%), Nvidia (+5.3%) and Alphabet (+3.3%) also rose

• Retailers sensitive to tariffs on Chinese imports sharply higher, notably Lululemon (+8.7%), Nike (+7.3%) and Estee Lauder (+7.1%)

CENTRAL BANKS

• ECB council divided as doves push for further cuts while hawks cautious on rate path (BBG)

• Traders cut their forecasts for Fed rate cuts this year to two after US-China trade deal (BBG)

TARIFFS

• US and China will significantly reduce tariffs on each other (BBG) 

  • US lowering tariffs on Chinese goods to 30% from 145% for 90 days 

  • China will reduce tariffs on US goods to 10% from 125% also for 90 days

  • New duties reverse reciprocal and retaliatory tariffs imposed from 2-Apr, while the US keeps in place its 20% fentanyl tariff

• Chinese companies moving to reduce dependence on foreign components in their supply chains (FT)

• Trump to sign executive order aiming to lower drug prices by 30-80%, US to pay the same price as the lowest price anywhere in the world (BBG)

• Trump says "EU is nastier than China" regarding trade negotiations (POLT)

• Treasury Department recorded US$16bn in customs-duties revenue for April, up 130% year-on-year (RT)

ECONOMY

• China April inflation down 0.1% year-on-year, marking a third consecutive month of deflation and 31st month of price deflation (BBG)

ASX TODAY

• Humm Group issues Q3 update, assets under management up 10% to $5.3bn, net interest margins at 5.5% (HUM)

• Life360 reports Q1 revenue up 32% to $103.6m vs. $101.4m consensus (2.1% beat), adjusted EBITDA up 270% to $15.9m vs. $8.7m consensus (82% beat), total MAUs up 26% to 83.7m (360)

• Meridian Energy enters into agreement with Ampol's Z Energy to acquire customer contracts and related hedge book for NZ$70m (MEZ)

• Webjet holders disclose stake – Helloworld Travel (5%), Ariande and Weiss (10.8%) and BGH Capital (10.8%) (WJL)

WHAT TO WATCH TODAY

• Mind the gap: The S&P/ASX 200 is set to open sharply higher. Will this gap up fuel further gains, or will the market trade sideways for most of the session (since everything gets priced in right from the get go)?

• Tech, Discretionary: Big risk-on session, with tech and discretionary stocks leading the charge. Expect a solid session for local heavyweights like Xero, Pro Medicus, WiseTech, and Technology One etc.

• Goodbye gold: Gold prices dropped 2.7% overnight to US$3,230, the lowest since April 15. This triggered a 7.4% selloff in the Gold Miners ETF (GDX), likely pressuring local gold names to open significantly lower.

• Yields: One of Trump's biggest headaches (even as trade deals are announced) is yields. The US 10-year gained 9 bps overnight to 4.47%, the highest since 11-Apr and not far from a three-month high. Trump wants lower rates, but they keep rising.

BROKER MOVES

• Catapult Group initiated Buy with $5.00 target (UBS)

• Perpetual upgraded to Overweight from Neutral; target up to $19.50 from $17 (JPM)

Stocks trading ex-dividend: 

• Tue 13 May: ANZ (ANZ) – $0.83

• Wed 14 May: None

• Thu 15 May: Autosports Group (ASG) – $0.035, Wam Alternative Assets (WMA) – $0.027, United Overseas Australia (UOS) – $0.02, Tamawood (TWD) – $0.11, Plato Income Maximiser (PL8) – $0.006

• Fri 16 May: Clime Investment Management (CIW) – $0.003, EZZ Life Science Holdings Ltd (EZZ) – $0.02

Other ASX corporate actions today: 

• Dividends paid: Fitzroy River Corp (FZR)

• Earnings: Life360 (360)

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 10:30 am: Westpac Consumer Confidence (May)

• 11:30 am: NAB Business Confidence (Apr)

• 4:00 pm: UK Unemployment Rate (Mar)

• 7:00 pm: Germany Economic Sentiment Index (May)

• 10:30 pm: US Inflation (Apr)