ASX 200 to rise, S&P 500 and Nasdaq hit third straight record close as CPI cools

ASX 200 futures are trading 52 points higher, up 0.67% as of 8:30 am AEST.

S&P 500 SESSION CHART

OVERNIGHT MARKETS

• Major US benchmarks mixed, with the S&P 500 and Nasdaq scoring a third-straight session of record highs while the Dow and equal-weight S&P lagged
• S&P 500 rallied as much as 1.34% on the cooler-than-expected inflation print, sold off after the release of FOMC projections
• Market breadth not looking great – E.g. only 8 of the 30 Dow stocks finished green
• Oracle (+13.3%), Nvidia (+3.5%) and Apple (+2.8%) were the key runners
• Bond yields lower but off session lows – the US 2-year yield fell as much as 17 bps to 4.67% but recouped half the decline after FOMC
• Apple passes Microsoft to reclaims title as most valuable company (Reuters)
• Traders push up odds of September rate cut following May CPI report (Bloomberg)
• Citi forecasts oil to decline to US$60s by 2025 amid supply surplus (Oilprice)

STOCKS

• Oracle earnings come in below expectations but shares jump on AI deals (CNBC)
• Apple-ChatGPT deal strengthens OpenAI's position, raises questions about Microsoft deal and is a setback for Google (WSJ)
• Amazon Web Services to invest billions to launch an AWS infrastructure region in Taiwan by early 2025 (WSJ)
• Caterpillar raises buybacks authorisation by US$20bn, boosts dividend (Reuters)
• FedEx to lay off ~2,000 back-office positions in Europe due to weak demand (Reuters)

US CPI

• May core CPI up 0.2% month-on-month, the lowest since Aug-21 and below consensus
• Annualised core of 3.4% was below consensus 3.5% and prior month’s 3.6%
• May headline CPI was flat month-on-month vs. expectations of a 0.1% increase
• Annualised headline of 3.3% was below the 3.4% expected
• Energy was a key driver of deflation, down 2.0% month-on-month
• Shelter up 0.4% month-on-month, marking the fourth consecutive month of 0.4% increases – shelter accounts for approximately two thirds of annual core CPI
• Motor vehicle insurance declined and decelerated from the prior month for the first time in almost three years
• Analysts flagged the CPI print as artificially cool as declines in airline fares and car insurance are not sustainable

FED DECISION

• Fed left rates unchanged, in-line with market expectations
• Updated dot-plot shows just one rate cut in 2024, down from three in March forecast
• 4 officials forecast zero cuts, 7 see a single cut and 8 are projecting two cuts
• Core PCE forecast up to 2.8% from 2.6% in March – this implies no more progress in 2024. Most officials had the opportunity to revise projections after today’s CPI but did not elect to do so
• Labour conditions mirror pre-pandemic conditions – “relatively tight. Not overheated.” – unemployment to remain 4.0% in 2024, 4.2% by 2025 (4.1% previously)

GEOPOLITICS

• US mulling additional curbs on China's access to latest AI technology (Bloomberg)
• European Commission to apply 25% tariff to China EV imports (Bloomberg)
• Israeli strike kills senior Hezbollah field commander, Hezbollah retaliates (Reuters)
• US to broaden scope of Russia sanctions, likely to include China sellers (FT)

ECONOMY

• China CPI rose less than expected in May and factory prices dropped for 20th month in a row (Bloomberg)
• German CPI up 2.8% in May, above expectations, due to higher services prices (Reuters)
• Japan producer prices reach nine-month high, fourth consecutive month of gains (Bloomberg)
• UK GDP growth flat in April vs. 0.4% acceleration in March (Bloomberg)
  
  

ASX TODAY

• ASX 200 set to rise following encouraging US inflation data, lower yields and a (volatile) uptick in commodity prices
• While major US benchmarks ticked higher, the gains were highly concentrated. The hawkish Fed projections and pullback in commodity prices could take some heat out of the session
• Gold rallied as much as 1.1% after the inflation report but finished the overnight session up just 0.36% – this price action was reflected in the VanEck Gold Miners ETF which finished 0.7% higher from session highs of 3.1% – commodities including nickel, copper and palladium experienced similar price action
• Uranium equities bounced overnight, with the Global X Uranium ETF up 3.1% (down as much as 10% in the previous seven sessions) – this could point to some relief for local names
• Carnarvon Energy’s future at the mercy of joint-venture partner Santos (The Aus)
• Qantas to purchase remaining 49% of TripADeal for $211m, also reaffirmed FY24 and FY25 guidance (QAN)

BROKER MOVES

• Codan initiated Buy with $13.10 target (UBS)
• Lovisa downgraded to Hold from Buy; target cut to $35 from $39 (Jefferies)
• Seek upgraded to Overweight from Neutral; target up to $26.50 from $25.30 (JPMorgan)

KEY EVENTS

• Thu 13 June: Champion Iron (CIA) – $0.11, Plato Income Maximiser (PL8) – $0.006, Incitec Pivot (IPL) – $0.043
• Fri 14 June: None
• Mon 17 June: None
• Tue 18 June: Premier Investments (PMV) – $0.63
• Wed 19 June: Afp Pharmaceuticals (AFP) – $).01

• Dividends paid: Hancock and Gore (HNG) – $0.01, Resmed (RMD) – $0.048, Dalrymple Bay Infrastructure (DBI) – $0.053
• Listing: None

• 10:30 am: Australia Consumer Confidence
• 11:30 am: Australia Unemployment (May)
• 10:30 pm: US PPI (May)

This Morning Wrap was written by Kerry Sun.