ASX 200 futures flat, Moody downgrades US banks + CBA's FY23 results
Get up to date on overnight market activity and the big events for the day.
ASX 200 futures are trading 5 points lower, down -0.07% as of 8:40 am AEST.
S&P 500 SESSION CHART
MARKETS
- S&P 500 -0.42%, Nasdaq -0.79%, Dow -0.45%, Russell 2000 -0.59%
- S&P 500 finished lower but off session lows of -1.2%
- Bond yields eased, with the US 10-year down 7 bps to 4.03%
- Copper down 1.8% to a near 1-month low of US$3.77/lb on weak China export data
- Market faced several headwinds today – Moody’s bank downgrades, global growth concerns after China’s weaker-than-expected trade data as well as upcoming Treasury market auctions and stretched long positioning
- Fed’s Harker believes the central bank is at a place where it can be patient and hold rates steady, doesn’t see any circumstance for immediate easing (CNBC)
- Moody's lowers credit ratings for 10 small and mid-sized US banks on higher funding costs, potential regulatory capital risks and CRE exposure (Bloomberg)
- Citi's Montagu says US stocks can rise as positioning risks drop, a good set-up to weather shocks in coming weeks (Bloomberg)
- Goldman and JPMorgan strategists say Treasury selloff overdone, see compelling reasons to add 30-year inflation-linked bonds (Bloomberg)
- Treasuries face test from US$103bn in auctions this week (Bloomberg)
STOCKS
- Meta disbands blue-sky research in favour of commercial AI projects (FT)
- Apple begins testing its highest-end next-gen laptop processor (Bloomberg)
- Paramount Global sells publisher Simon & Schuster to KKR for US$1.6bn (Deadline)
- Nvidia announces updated AI chip which will achieve faster processing (Bloomberg)
- Boeing aircraft deliveries decline in July, falling behind Airbus (CNBC)
- Eli Lilly hits record high as demand new diabetes drug Mounjaro surges ahead of decision on its use as a weight-loss treatment (Reuters)
EARNINGS
Palantir Technologies (-5.3%): Revenue and earnings in-line, management says they have “unprecedented” demand for their AI products, posted its third consecutive quarter of GAAP profitability.
Beyond Meat (-14.3%): The plant-based meat company posted a narrower-than-expected loss but revenue miss (down 30.5% year-on-year to US$102m).
“Ongoing category headwinds compressed net revenues, which in turn impacted product sales mix and gross margin, overshadowing significant strides in operational efficiency … we are reducing our full-year 2023 net revenues outlook.”
ECONOMY
- Total US household debt reaches record US$17tn in Q2 2023 while credit card debt tops US$1tn for the first time (NY Fed)
- China exports fall at fastest pace since Feb-2020 while imports slide as demand headwinds persist (Bloomberg)
- China deflation threat grows as companies cut prices to survive (Bloomberg)
-
Gas prices stabilise after 17-day rally that put prices at eight-month high (Bloomberg)
DEEPER DIVE
China's Depressing Trade Data
Here are the highlights from China's unexpectedly weak trade data:
- Trade surplus fell 21.5% year-on-year to US$80.6bn in July.
- Exports plunged 14.5% year-on-year in US dollar terms
- Imports fell 12.4%
- Exports to the US down 23.1%, to Europe down 20.6%
- Manufacturing flagged a fourth consecutive month of contraction
- Construction activity fell 4.5%
According to Bloomberg, this was the first time in about two decades that the US imported more from Mexico than from China.
The outlook isn't that bright either, with "most measures of export orders point to a much greater decline in foreign demand than so far reflected in the customs data," said Julian Evans-Pritchard, Head of China Economics at Capital Economics.
That's not a good look for the so-called 'commodity supercycle' that was supposed to eventuate from China's reopening.
On a separate matter, shares in Chinese property developer Country Garden fell more than 13% on Tuesday after it failed to make coupon payments on two US dollar bonds. This triggered a broad-based selloff for Chinese property peers, most of which fell 8-12%.
US Inflation Preview
US inflation data will drop tomorrow night at 10:30 pm AEST. Headline inflation is expected to reaccelerate to 3.3% in July from 3.0% in June as tailwinds such as base effects and weaker oil prices fade.
I explain what base effects are (as well as the outlook for inflation) here.
US Credit Card Debt: Welcome to the $1 trillion club
US credit card debt crossed above US$1 trillion for the first time, up 16% compared to last year. During this time, the average interest rate on credit card debt has gone from approximately 14% to more than 21%.
This could pose a problem as student loan repayments resume in October (Barclays estimates that this'll take out approximately US$15bn in spending power per month or approximately 8-9% of net income.
"With debt levels as high as they are, nobody can afford much higher rates. Eventually the Fed will have to step in to keep a lid on rates. Just not today," said Jurrien Timmer, Director of Global Macro at Fidelity.
CBA Earnings
Just a quick recap on CBA's FY23 results this morning:
- Net profit up 6% to $10.6bn (in-line with analyst expectations)
- Net interest margins up 17 bps to 2.07% (vs. 2.08% expected)
- To launch buy-back of up to A$1bn from 18 September 2023
- Final dividend of $2.40 per share
As for outlook:
- Risks are beginning to build as rising rates have a lagged impact on the economy
- Consumer demand is beginning to moderate, CBA is closely monitoring the impact on reduced discretionary spend (notably for small and medium sized business customers)
- The Australian banking system remains strong and able to navigate uncertain financial conditions through liquidity risk management and strong capital regulation
KEY EVENTS
ASX corporate actions occurring today:
- Trading ex-div: None
- Dividends paid:None
- Listing: None
Economic calendar (AEST):
- 11:30 am: China Inflation
-
11:30 am: China Producer Price Index
This Morning Wrap was first published for Market Index by Kerry Sun.
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Kerry Sun.
........
Livewire gives readers access to information and educational content provided by financial services professionals and companies (“Livewire Contributors”). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
1 contributor mentioned
Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Kerry Sun.
Expertise
Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Kerry Sun.
Expertise
Comments
Comments
Sign In or Join Free to comment