ASX 200 futures flat, Tesla beats earnings estimates + 'Confession' season

MARKETS

• S&P 500 higher but finished off session highs of 0.52%
• Real Estate the best performing sector, boosted by cooler-than-expected inflation prints from the US and UK – Which buoyed rate sensitive stocks
• Materials the worst performing sector as Rio Tinto said its second quarter shipments of iron ore fell 1.0% and the US Dollar Index reclaimed the key 100 level
• Lots of talk about overbought conditions – S&P 500 has closed at overbought levels (defined as one standard deviation above the 50-day moving average) every session 27 May
• S&P 500 up 7 of the last 8 and up 9.2% since the beginning of June
• S&P 500 has gone 37 days without a 1% decline. A streak of this magnitude was last seen during the November 2021 top
• Fed's July rate hike expected to be last of cycle (Reuters)

STOCKS

• AT&T pushes back against lead covered cable concerns, says less than 10% of network affected (Bloomberg)
• Bank earnings show encouraging signs around capital markets, IPOs and M&A businesses (Bloomberg)
• Apple testing generative AI tools in effort to challenge OpenAI, Alphabet (Bloomberg)
• Netflix removes lowest priced ad-free plan in push toward ad-supported option (CNBC)
• Oddity Tech IPOs with $2.8 billion market valuation (CNBC)
• Carvana shares surge 40% after reaching a deal that will reduce its total outstanding debt by more than US$1.2bn (CNBC)

EARNINGS

• “.. there are a number of structural catalysts that should lead to increased levels of activity and we're seeing it begin to pick-up in a few spots already, particularly equity capital markets and M&A dialogue.”

• “We expect revenue growth to accelerate in H2 ‘23 as we start to see the full benefits of paid sharing plus continued steady growth in our ad-supported plan.”
• “We generally haven’t had price increases in our largest revenue markets since the first half of last year (limited during paid sharing rollout). Revenue from advertising and our extra member feature are not yet material enough to offset these factors."

• "Q2-2023 was a record quarter on many levels with our best-ever production and deliveries...Our operating margin remained healthy at approximately 10%, even with price reductions in Q1 and early Q2.”

ECONOMY

• US housing starts drop but building permits hit a 12-month high (Reuters)
• Around 20% of 27m US student debt holders due to start repayments in September to pay more than US$500 a month (Bloomberg)
• Citi Economic Surprise Index at its highest point since early 2021 (Axios)
• UK inflation eases sharply, easing pressure on BoE (Bloomberg)
• New Zealand inflation slows by less than expected (Bloomberg)
• Japan manufacturer sentiment falls for first time in six months (Reuters)

DEEPER DIVE

ETF Table Update

• Added: Invesco DB Agriculture Fund
• Added: Invesco Building & Construction ETF
• Changed: Swapped Gold ETF for the VanEck Gold Miner ETF

• Agriculture: The ETF has exposure to a broad range of soft commodities including sugar, cattle and wheat. Its performance can impact local names like Australian Agricultural Co (ASX: AAC), Costa Group (ASX: CGC) and Elders (ASX: ELD)

• Building & Construction: Likewise, this can help with stocks like James Hardie (ASX: JHX) and Boral (ASX: BLD)

• Gold Miners: We already have gold spot price in the Overnight Summary table. This ETF reflects the performance of a portfolio of global miners. This is useful because there might be days where gold prices move lower but gold miners hold up relatively well (or vice versa)

Confession Season

• Lessen the share price move when actual results are released
• Spread catalysts across two events (e.g. revenue and profit figures in pre-released results but finer details during reporting season)
• Reset expectations before earnings season

Ansell (ASX: ANN) - Morgans - HOLD

Lendlease (ASX: LLC) - Morgan Stanley - EQUAL WEIGHT

"Lendlease has confirmed that press reports of further staff restructuring, involving 740 employees is true ... At this stage, information is scant, but we'd remind investors that whilst c.A$160 million was saved from its last cost-out program in 2022, only part of it was related to the 400 staff redundancies; the bulk were from overheads such as tenancies."

IGO (ASX: IGO) - Citi - NEUTRAL

"IGO has announced a non-cash impairment of A$880-980 million (pre-tax) for the WSA assets vs our modelled A$410 million. Its $1.26 billion deal (to buy Western Areas) is now worth $300-400 million. The key question we now have is just how bad is Cosmos [the project IGO took over following its acquisition of Western Areas]?"

Talking Technicals: The Dow

On Wednesday, I noted how the S&P Regional Bank ETF was breaking out of a rather picture perfect inverse head and shoulders set up. This has also seen a lot of strength for local regionals like Bendigo Bank (ASX: BEN) and Bank of Queensland (ASX: BOQ).

• Financials: 20.15%
• Healthcare: 18.76%
• Tech: 18.6%
• Industrials: 14.64%
• Discretionary: 13.64%: