ASX 200 to cross 8,000 for the first time, Dow tops 40,000, Investors pile into small caps

ASX 200 futures are trading 51 points higher, up 0.64% as of 8:30 am AEST.

S&P 500 SESSION CHART

OVERNIGHT MARKETS

• Major US benchmarks finished higher but off best levels amid a last-hour selldown
• Dow narrowly missed the all-time high it set on 17 May
• Big tech names were mixed with Tesla up 3.0% but Meta down 2.7%
• Market continued to rotate into cyclicals like small-caps, heavily shorted stocks, retailers, yield-sensitive sectors and commodities
• When the market experiences a significant one-day rotation from large to small caps, this trend tends to persist for the following four weeks, according to UBS
• Weekly benchmark recap: Russell 2000 (+6.0%), Dow (+1.59%), S&P 500 (+0.87%) and Nasdaq (+0.25%)
• Earnings expected to grow at fastest rate since Q4-21, sets up high bar this earnings season (Bloomberg)
• Analysts see safe havens, groups leveraged to Trump victory as likely gainers following assassination attempt (Bloomberg)
• Broadening market could be painful for passive investors as performance could come at expense of big tech (Bloomberg)
• Bitcoin ETF inflows jump after recent Mt. Gox driven selloff (Bloomberg)

STOCKS

• Wells Fargo shares tumble 6% after Q2 net interest income falls short of estimates, guidance for 2024 to come in at the low end of prior outlook (CNBC)
• Citi shares ease 2% but net interest income, margins and EPS all topped analyst expectations amid surge in investment banking activities (Reuters)
• JPMorgan shares ease 1% despite largely in-line results and unchanged net interest income and expense guidance, investment banking highlighted as a standout (CNBC)
• Pepsi warns consumers becoming more price conscious after years of price hikes (link)
• Delta earnings reflect industry profit headwinds after years of capacity growth (link)
• Tesla launches new Model 3 long-range variant at US$42,490 or US$5,000 lower than the all-wheel drive version (Reuters)

CENTRAL BANKS

• ECB may signal another rate cut in September at this week's meeting (Bloomberg)
• Fed officials increasingly suggesting they are preparing for a rate cut (FT)
• Chicago Fed's Goolsbee says CPI gives him confidence inflation tracking to 2% (Bloomberg)
• Fed's Daly, Musalem see recent inflation data as encouraging (Bloomberg)

POLITICS & GEOPOLITICS

• Former President Trump injured but safe after assassination attempt at Pennsylvania rally, suspect killed (NY Times)
• Trump confirms he will be at RNC next week after assassination attempt (Bloomberg)
• Biden warns European allies ready to cut investment in China over its support for Russia (Bloomberg)
• Gaza truce talks making progress though lingering differences remain (Reuters)

ECONOMY

• US producer prices rise slightly more than forecast, up 2.6% in June vs. 2.3% consensus – this marks the largest advance in March 2023 (Bloomberg)
• China export growth tops forecasts as imports unexpectedly shrink amid weak economy (Bloomberg)
• China GDP growth to slow in Q2 sluggish domestic demand (Bloomberg)
  
  

ASX TODAY

• ASX 200 to open at another record high and above 8,000 for the first time on record
• ASX 200 changes effective prior to open on 22-Jul: Zip in, Altium out
• Altium holders vote in favour of proposal acquisition by Renesas (ALU)
• BHP approached by Lundin about JV bid for copper miner Filo Corp (Bloomberg)
• Champion Iron temporarily closes Bloom Lake mine due to forest fires (CIA)
• Genesis Capital to vote its 19.9% stake against Crescent Capital $1.90 per share proposal for Pacific Smiles (AFR)
• Rio Tinto considering offering more than US$30bn for Teck Resources (Sky News)

WHAT TO WATCH TODAY

• Rotation debate: Small caps and rate-sensitive pockets of the market continued to rally overnight while growth and momentum stocks eased. The UBS comment about how the occurrence of a significant one-day rotation from large to small caps tends to persist for four weeks could set the local market for a very strong month. Last week, the top performing ASX 200 sectors include Discretionary (+3.8%), Real Estate (+3.2%), Telcos (+2.9%) and Financials (+2.7%)

BROKER MOVES

• AGL Energy initiated Neutral with $10.35 target (Goldman Sachs)
• Ebos Group initiated Buy with $33.50 target (Ord Minnett)
• Origin Energy initiated Buy with $11.35 target (Goldman Sachs)
• Paragon Care initiated Accumulate with $0.46 target (Ord Minnett)
• Sigma Healthcare initiated Accumulate with $1.35 target (Ord Minnett)
  
  

KEY EVENTS

• Mon 15 July: None
• Tue 16 July: Metcash (MTS) – $0.085
• Wed 17 July: Turners Automotive (TRA) – $0.069
• Thu 18 July: None
• Fri 19 July: None

• Dividends paid: None
• Listing: Piche Resources (PR2) at 12:00 pm
• Earnings: None
• AGMs: None

• 12:00 pm: China GDP Growth Rate (Q2)
• 12:00 pm: China Industrial Production (Jun)
• 12:00 pm: China Retail Sales (Jun)
• 12:00 pm: China Fixed Asset Investment (Jun)
• 2:30 am: Fed Chair Powell Speech 

This Morning Wrap was written by Kerry Sun.