Morning Wrap: ASX 200 to tumble, S&P 500 and Nasdaq drop the most since April, US-China trade tensions surge

ASX 200 futures are down 84 pts (-0.94%) as of 8:30 am AEDT.

 In a nutshell:

• Major US benchmarks recorded worst session since April Liberation Day selloff

• Commodities, tech and growth-y pockets of the market smashed, while defensives outperformed

• RPM enters scheme implementation deed with Caterpillar, Fletcher Building expects challenging conditions to persist

Let's dive in.

S&P 500 SESSION CHART

S&P 500 smashed (Source: TradingView)

OVERNIGHT MARKETS

• Major US benchmarks sharply lower, closed at session lows

• S&P 500 logged its worst session since the early April “Liberation Day” selloff, all major benchmarks erased weekly gains

• Commodities smashed, with copper and oil both down 4-5%

• Broad selloff amid sudden hike in tensions between US and China, Trump’s Truth Social post said China is becoming very hostile and considering massive increase in tariffs, blamed China’s recent ramp in rare earth export controls and fees on US cargo ships 

• US weekly recap: S&P 500 (-2.43%), Nasdaq (-2.53%), Dow (-2.73%), Russell 2000 (-3.29%)

• Sharp selloff places more scrutiny on potential market overhangs including valuations, shutdown, questions around AI and crypto (BBG)

• Analysts say market rally needs to broaden for bull market to continue (BBG)

• Bar high into earnings season, investors looking for reassurance around durability of AI spending and tariff margin pressures (BBG)

• Global investors rotating out of US amid rebalancing considerations, stretched valuations, dovish monetary policy overseas (RT)

• Investors shift from Dollar, Euro, and Yen to Bitcoin and gold amid rising global uncertainty (BBG)

STOCKS

• China launches antitrust investigation into Qualcomm's acquisition of Autotalks (BBG)

• Microsoft's data center crunch to persist amid ongoing shortages of physical space (BBG)

• China intensifies enforcement of controls on chip imports with stringent border checks targeting Nvidia AI chips (FT)

TARIFFS

• Trump said he will impose additional 100% tariffs on China, threatened to cancel summit with China's Xi (FT)

• Beijing slams Trump's plan to impose additional 100% tariffs on Chinese exports, but stops short of imposing new levies on US products (RT)

• Pentagon seeking to procure up to $1bn of critical minerals for stockpile to counter Chinese dominance (FT)

• Taiwan's chip sector sees no significant impact from China's new rare earth export controls (RT)

• China to impose additional port fees on US-owned or flagged vessels as a countermeasure to US fees on Chinese ships (FT)

• US and Japan pledge to implement trade deal ahead of Trump's expected visit to Tokyo (BBG)

• US and Saudi Arabia making progress on chip export agreement, deal could be finalised soon (RT)

CENTRAL BANKS

• Fed Waller says he still sees the need to cut rates, noting that 25 bps in both October and December are consistent with latest SEP (CNBC)

• SF Fed's Daly says labor market could become more worrisome if Fed doesn't manage that risk (RT)

• RBA Governor Bullock says economy in good spot with inflation inside band and labor market a little tight (AFR)

US SHUTDOWN

• Senators discuss healthcare funding solutions to end the shutdown, considering temporary ACA subsidy extensions for lower-income families (WSJ)

• Senate passes defense policy bill during shutdown as negotiations between the House and Senate are forthcoming (POL)

ECONOMY

• BLS recalls staff for preparation and release of September CPI report by end of October (BBG)

• Japan's GDP grows 0.7% in August from July on travel-related spending (NK)

• France's GDP grows steadily despite political uncertainty (BBG)

ASX TODAY

• Caterpillar to acquire RPMGlobal for $5.00 cash per share (RUL)

• FleetPartners Group circled by PE firms (The Aus)

• Fletcher Building provides Q1 update, anticipates market conditions to remain challenging for thresher of the year, segments including light building products and heavy building materials  both seeing volume contractions (FBU)

• Iress in stand off with potential suitor Blackstone, not interest in current offer price (The Aus)

• Qantas customer data hacked in July has been released by cyber criminals (QAN)

• Ventia Services awarded ~$935m Australian Defence Force contract, initial seven terms with options to extend up to further 13 years (VNT)

WHAT TO WATCH TODAY

• A sea of red: Markets smashed overnight, with VIX making first meaningful move above 20 for the first time since early April. Growth-y and tech sectors down the most, while Staples (+0.25%) and Utilities (-0.44%) outperformed on a relative basis. BHP ADRs down 4.3% as commodities (copper, oil etc.) rattled on economic growth concerns. Worth noting that during the April 4 selloff, stocks like Gold (Capricorn, Northern Star up 5% and 2.1% respectively), Staples (Coles and Woolworths up 4.1% and 3.3% respectively) and Rare Earths (Lynas up 3.3%) managed to outperform. While ASX 200 stocks smashed the most include Zip (-13.7%), Karoon (-12.2%), Breville (-12.0%) and Corporate Travel (-12.0%).

• What's next: To be fair, this has induced a much needed pullback as the market hasn't really seen much of a pullback. Wonder if Trump will chicken out again/a trade agreement will be reached soon.

BROKER MOVES

• Newmont upgraded to Buy from Neutral; target up to $161.30 from $119.80 (NEM)

• Netwealth Group upgraded to Buy from Neutral but target down to $35 from $35.50 (CITI)

• Qube Holdings upgraded to Overweight from Equal-weight; target up to $4.50 from $4.40 (MS)

• Regis Resources upgraded to Neutral from Sell; target up to $6.50 from $5.00 (GS)

• Sandfire downgraded to Sell from Neutral but target up to $14.50 from $13.10 (UBS)

Stocks trading ex-dividend: 

• Mon 13 Oct: Civmec (CVL) – $0.035, Shriro Holdings (SHM) – $0.03, Turners Automotive Group (TRA) – $0.062

• Tue 14 Oct: Sandon Capital Investments (SNC) – $0.005, Star Combo Pharma (S66) – $0.004, Wam Income Maximiser (WMX) – $0.003

• Wed 15 Oct: Cadence Capital (CDM) – $0.03, Cadence Opportunities Fund (CDO) – $0.07, Horizon Oil (HZN) – $0.015, Perenti (PRN) – $0.043, United Overseas Australia (UOS) – $0.005, Wam Research (WAX) – $0.05

• Thu 16 Oct: Gowing Bros (GOW) – $0.03, K & S Corporation (KSC) – $0.08, Latitude Group Holdings (LFSPA) – $2.107, Wam Microcap (WMI) – $0.053

• Fri 17 Oct: FFI Holdings (FFI) – $0.125

Other ASX corporate actions today:       

• Dividends paid: Car Group (CAR), Cochlear (COH), Ramelius Resources (RMS)

• Earnings: None

• IPOs: None

• AGMs: None

Economic calendar (AEST):

• 1:00 pm: China Balance of Trade (Sep)