Morning Wrap: ASX 200 to tick higher, US futures dip on Tesla, Alphabet earnings + Pilbara Minerals earnings

Major US benchmarks finished slightly lower overnight while small caps outperformed, Alphabet reported its earnings after the bell – shares down 1.6% in extended trading, oil prices hit a five-week low on easing Middle East tensions, Chinese lithium futures slump to near year-to-date lows again and Pilbara Minerals reports a massive beat in FY24 spodumene production.

Let's dive in.

S&P 500 SESSION CHART

S&P 500 ticks lower to finish near worst levels(Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks eased to finish near session lows overnight

• Small caps outperformed, with the Russell 2000 nearing last Tuesday’s record high

• A relatively quiet session on the macro front but several key earnings from names including UPS, General Electric, SAP and Lockheed Martin  

• Barclays raises 2024 year-end S&P 500 target from 5300 to 5600, with expectations that big tech earnings will continue to surprise to the upside

• Approximately 20% of the S&P 500 has reported Q2 results – so far, blended growth rate for Q2 earnings is up 10.1% vs. expectations of 8.9%, almost 81% have beaten EPS expectations and reporting earnings 5.5% above consensus

• Investors eye protection against violent stock market rotation amid concerns about tech valuation and US politics (Reuters)

• Anticipated small-caps rally is prompting record trading in options contracts (Reuters)

• China benchmarks slide as a lack of major policy support following the Third Plenum reinforced bearish sentiment (Bloomberg)

• Oil touches five-week lows amid low-volatility algorithmic selling and Gaza ceasefire expectations (Bloomberg)

STOCKS

• UPS (-12%) earnings missed amid jump in cheap deliveries (Investing.com)

• SAP (+7.1%) shares hit all-time highs after profits beat market expectations, cloud revenue up 25%, backlog steady (Reuters) 

• Lockheed Martin (+5.6%) beats earnings expectations, lifts 2024 sales target on fighter jet and missile demand (Reuters)

• General Electric (+5.6%) beat earnings expectations, raises 2024 outlook for a second time in four months (Reuters)

• Coca Cola (+0.2%) beat earnings expectations, raised full-year sales and profit forecasts on further price hikes and an advertising blitz (Reuters)

• Alphabet (-1.5% AH) beat revenue and profit estimates, driven by a rise in digital advertising sales and healthy demand for cloud computing services (Reuters)

• Tesla (-6.5% AH) missed EPS estimates, reported lowest profit margin in five years as the EV maker cut prices to revive demand (Reuters) 

• GM announces plans to again dial back its EV ambitions by delaying US electric truck plans (CNBC)

• Apple said to be working on fold-able iPhone with possible 2026 release date (The Verge)

• LVMH reports slower growth as luxury spending faces headwinds (Bloomberg)

• Google says it will no longer deprecate third-party cookies on Chrome (FT)

CENTRAL BANKS

• BOJ officials see weak consumption complicating decision to hike rates (Bloomberg)

• PBOC's decision to ease collateral requirements for MLF loans may increase bond supply (Reuters)

POLITICS & GEOPOLITICS

• Harris administration seen to likely advance Biden's tough financial rules on banks and crypto (Reuters)

• Pennsylvania governor Shapiro and Arizona senator Kelly emerge as favored VP selections for Harris (The Guardian)

• Harris has support of majority of delegates to win Democratic nomination (Bloomberg)

• Blinken, Austin to visit allies in Japan and the Philippines to keep up Biden agenda after his exit (Bloomberg)

ECONOMY

No major economic headlines.

ASX TODAY

• Mesoblast’s Biologics License Application for remestemcel-L accepted by FDA (MSB)

• Genesis Capital remains opposed to Crescent Capital’s bid for Pacific Smiles (AFR)

• Pilbara Minerals reports Q4 production and provides FY25 guidance (PLS)

• Flight Centre guides FY24 PBT of $316-324m vs. prior guidance of 300-340m (FLT)

• Telix Pharmaceuticals launches $600m convertible notes offering due Jul-2029, conversion premium 30-35% above the reference share price (TLX)

• West African Resources reports Q2 gold production, reaffirms full-year guidance (WAF)

• Wagners reports preliminary FY operating EBIT of $40m vs. prior guidance of $31-34m (WGN)

• Worley holder Samurai Investments seeking to sell 15.2m share block with a floor price of $14.90 vs. $15.19 last close (The Aus)

 WHAT TO WATCH TODAY

• Lithium: The VanEck Rare Earths and Strategic Metals ETF hit a new multi-year low, down 2.2% overnight to levels not seen since November 2020. This ETF has been a pretty useful barometer for the lithium sector as its top holdings include Pilbara Minerals (7.48% of net assets), Albemarle (7.3%) and SQM (6.9%). Chinese lithium carbonate futures were trading slightly positive when our market closed but finished the session 0.9% lower to near year-to-date lows of 87,900 yuan a tonne.

• Pilbara Minerals: Reports Q4 spodumene production of 226.2k vs. 184k consensus, realised price of $840 a tonne vs. $963 consensus so considerably lower-than-expected prices. Full year production volume of 725kt vs. 660-690kt guidance, a sizeable volume beat and unit operating cost of $654 a tonne in-line with $600-670 guidance. FY25 spodumene production guidance of 800-840k dmt, unit operating cost of $650-700 a tonne and total capex of $615-685m

• Day twos: It will be interesting to see how these stocks perform after yesterday's announcements/trading updates:

  • Lynas received a number of broker downgrades after its Q4

  • Polynovo provided an unaudited FY update at 11:55 am on Tuesday, with revenue of $104.8m vs. $103.6m consensus

BROKER MOVES

• Lynas downgraded to Hold from Outperform; target cut to $6.30 from $6.55 (CLSA)

• Lynas downgraded to Hold from Buy; target cut to $6.25 from $7 (Canaccord)

• Technology One upgraded to Buy (UBS)

• Transurban Group downgraded to Hold from Outperform; target cut to $13.40 from $14.10 (CLSA)

Companies trading ex-dividend: 

• Wed 24 July: Alternative Investment Trust (AIQ) – $0.039

• Thu 25 July: None

• Fri: 26 July: None

• Mon 29 July: None

• Tue 30 July: Mirrabooka Investments (MIR) – $0.09, 360 Capital Mortgage REIT (TCF) – $0.042

Other ASX corporate actions today: 

• Dividends paid: Premier Investments (PMV) – $0.63, Eildon Capital (EDC) – $0.04 

• Listing: Alcoa Corp (AAI) has acquired Alumina and its CDIs will list at 11:00 am  

• Earnings: Newmont (Q2), Pilbara Minerals (Q4), 29 Metals (Q2)

• AGMs: None 

Economic calendar (AEST):

• 9:00 am: Australia Manufacturing and Services PMI (Jul)

• 4:00 pm Germany Consumer Confidence (Aug)

• 11:45 pm: Canada Interest Rate Decision