42% of S&P 500 market cap reports this week, lithium stocks tumble, ASX 200 to fall

Major US benchmarks edge higher in another choppy yet uneventful session, lithium heavyweights SQM and Albemarle tumble on Chile's plans for state control, 42% of the S&P 500 market cap is expected to release first quarter earnings this week and Eurozone PMIs hit 11-month high amid a rebound in services. Also, markets are closed on Tuesday for Anzac Day (and no Morning Wrap).

Let's dive in.

S&P 500 SESSION CHART

MARKETS

• S&P 500 closes slightly higher from session lows of -0.40%
• Another choppy and directionless session – Feels like it's been a while since we’ve had such a quiet and range-bound period for markets
• Gold tumbled 1.1%, back below US$2,000 an ounce
• Money market funds saw outflows of US$67.4bn for the week ended 19 April, the third largest on record, according to Lipper
• Better-than-feared earnings make analyst rethink low expectations (Bloomberg)
• Bond traders wait for calm to shatter with Fed 'breaking stuff' (Bloomberg)
• Central banks load up on gold in response to rising geopolitical tensions (FT)
• Fed emergency loans to banks post first rise in five weeks (Bloomberg)
• Fed Harker sees more central bank action to quash inflation pressures (Reuters)
• Fed Bostic says still one and done on rate hikes (Bloomberg)

STOCKS

• SQM and Albemarle shares slide on Chile lithium nationalisation plan (Reuters)
• Bed Bath & Beyond files Chapter 11 (CNBC)
• GM recalling 40,000 Silverado pickups due to fire risk (Fox Business)
• Porsche, Mercedes and GM are betting on silicon-anode batteries (CNBC)
• Tesla hikes US prices days after sixth price cut this year (Reuters)

EARNINGS

Procter & Gamble (+3.5%): EPS and revenue beat, delivered organic sales growth of 7% year-on-year, and raised full-year organic sales outlook. Interesting to note that product pricing rose 10% but volumes fell 3% (stagflation much).

• "Our strong results over the first 3 quarters have enabled us to raise our organic sales outlook and confirm our guidance ranges on EPS and cash. We are increasing our guidance for organic sales growth from a range of 4% to 5% to approximately 6% for the fiscal year." – CEO Jon Moeller

CSX (+3.3%): The retail transportation and real estate company beat EPS and revenue expectations.

• "We're also off to a strong start to the year for coal, and we expect continued benefit from healthy export demand, both thermal and met."

42% of the S&P 500 market capitalisation is expected to release earnings this week. Tonight we will see results from names including Coca-Cola, Philips, Credit Suisse, First Republic and Whirlpool.

Of the 18% of S&P 500 companies that have reported first-quarter earnings, the blended earnings growth rate for EPS is -6.2% compared to analyst expectations of -6.7%. In aggregate, 76% have beaten EPS expectations, 63% topped revenue expectations and the average earnings beat is 5.8% above expectations.

ECONOMY

• Eurozone PMIs hits 11-month high amid services rebound (Bloomberg)
• UK retail sales drop after two months of gains (Bloomberg)
• UK consumer confidence rises to the highest level since Ukraine invasion (FT)
• Japan CPI steady as expected, underlying pressures continue to build (Reuters)
• South Korea March producer inflation eases to weakest in 25 months (Reuters)
• US banks increasingly concerned about falling commercial property valuations (FT)
• China central bank hints it will dial bank pandemic stimulus (Bloomberg)
  
  

Deeper Dive

Lithium: Chile's plans to nationalise the industry

We can't afford to waste it," Boric said in an address televised nationwide, Reuters reported.

This is crushed lithium heavyweights SQM (-18.6%) and Albemarle (-10%) last Friday. Both shares are down more than 20% year-to-date, trading at levels not seen since March 2022.

Chile is the world's second-largest producer of lithium with the world's largest reserves. 

Back at home, there aren't too many ASX-listed lithium names with Chile exposure. The main one is Lithium Power International (ASX: LPI) and its 100% owned Maricunga Project. The stock tumbled 17.7% last Friday.

• Compensation: The government may offer compensation to overseas companies for the nationalised assets.
• Joint ventures: The government may allow overseas companies to continue operating in the nationalised industry through joint ventures with state-owned enterprises. The overseas companies maintain a presence in the industry but likely shares control with the government, on less favourable terms.

• A shift away from Chile (and potentially Argentina) based assets
• A shift towards other jurisdictions such as Canada, US and Australia

• Pilbara Minerals (ASX: PLS)  rallied 3.3% last Friday, with most of the gains taking place in the afternoon, when the lithium news broke out

Sectors to Watch

Today's Events

• Trading ex-div: None
• Dividends paid: Latitude (LFS)
• Listing: None

• 6:00 pm: German IFO Business Confidence

This Morning Wrap was first published for Market Index by Kerry Sun. The Morning Wrap is off tomorrow for ANZAC Day and will return on Wednesday.