ASX 200 to rise, S&P 500 holds steady + CBA reports $2.5bn first quarter profit

ASX 200 futures are trading 68 points higher, up 0.97% as of 8:25 am AEST.

S&P 500 SESSION CHART

MARKETS

• S&P 500 slight lower, finished off best levels, recovering from a 0.48% drop in early trade
• US bond yields and the US dollar both faded early strength to close slightly lower
• Bloomberg Pulse survey shows buying staples more appealing than shorting US tech and high yield popular option for 2024 (Bloomberg)
• Wall Street strategists say stabilisation of rates (2-year hovering around the ~5% level) and volatility (VIX holding lowest levels since September) as recent drivers of market upside (Wall Street Journal)
• Wall Street strategists are divided over how much the Fed will cut over the next two years, market currently pricing 55-101 bp of rate cuts next year (Bloomberg)
• US bond market won't see a sustained rally unless economy surprises (Bloomberg)
• Goldman says investors concerned with gloomy US earnings outlook (Bloomberg)
• Morgan Stanley sees bullish opportunities for US assets in 2024 (Bloomberg)
• China set to add more liquidity support amid cash squeeze (Bloomberg)

STOCKS

• European EV market expected to decelerate as customers await cheaper options (Reuters)
• Nvidia unveils newest chip for training AI models, the H200 (CNBC)
• Exxon signals plans to become top lithium producer for EVs (CNBC)
• Salesforce appoints executive Denise Dresser as new CEO of Slack (CNBC)
• Bain Capital exploring the sale or IPO of Varsity Brands (Reuters)
• Tesla reveals updated terms of its cybertruck order agreements which restricts resale for one year after purchase (CNBC)

CENTRAL BANKS

• Economists say Eurozone inflation will fall below 2% in early 2025 (Bloomberg)
• RBA official says returning inflation to target will be a drawn-out process (Reuters)

GEOPOLITICS

• Israel and Hamas at critical juncture in negotiations for hostage deal (Politico)
• Gaza war opens rift among US democrats (FT)
• Gaza's biggest hospital 'ceases to function' as Israel-Hezbollah exchange fire (FT)
• US Defense Secretary warns Israeli counterpart about escalating tensions along border with Hezbollah in Lebanon (Reuters)
• US continues to conduct airstrikes against Iran-backed groups in Syria (Politico)
• Resumption of military talks priority at Biden-Xi summit (Bloomberg)
• US, Japan and South Korea to start real-time data sharing scheme on North Korean missiles in December (Reuters)
• Military tensions to be priority of Biden-Xi summit (Bloomberg)

ECONOMY

• New York Fed Survey year-ahead inflation expectations in October dropped to 3.7% from 3.7% in September, five-year expectations down 2.7% from prior 2.8% (NY Fed)
• Japan's wholesale inflation slows sharply, as cost-push pressures fade (Reuters)
• China October new bank loans fall less than expected (Reuters)
• India’s inflation eases to 4.8% in October, a four month low (Reuters)

Commonwealth Bank's First Quarter Result

Commonwealth Bank (ASX: CBA) reported first quarter cash net profit of $2.5 billion, flat against the prior period. Given its a first quarter update, there aren't any consensus numbers going around. Here are the other key numbers to note:

• Operating income flat as volume growth offset lower net interest margins from competitive pressures
• Operating expenses up 3% due to wage inflation
• Portfolio credit quality remained sound and indicators remain near historic lows
• Business lending rose 11.2% year-on-year, above system
• Household deposits (+5.7%) and home lending (+3.1%) grew at a below system pace

The state of play for bank results:

• Westpac (ASX: WBC): FY23 results last week were largely in-line with analyst expectations (net profit up 26% to $7.2bn). Management warned that the second half was challenging and expect these trends to continue into 2024. Westpac shares rallied 1.95% on the day of the result but now down 5.1% in the last five sessions.
• ANZ Bank (ASX: ANZ): FY23 results were a little softer-than-expected with cash profits up 14% to $7.4bn, below the $7.46bn expected by analysts. ANZ shares tumbled 3.0% on the day of the result.
• In summary: There appears to be very little room for error. Even Westpac's strong result was met with selling in the days that followed the result.

Sectors to Watch: Uranium

Not the most exciting overnight session. Major US benchmarks were relatively muted in the face of tonight's all-important US inflation print.

Uranium was the only sector to stage a substantial move overnight, with the Global X Uranium ETF up 3.0% to a six week high. The move was underpinned by a rise in spot prices, up around 0.9% overnight to a fresh 15-year high of US$75 a pound. Let's see if this resonates with local names like Paladin Energy (ASX: PDN) and Boss Energy (ASX: BOE).

Another High Stakes Inflation Print

US inflation data will drop tomorrow morning at 12:30 am AEDT. Here’s what the market is expecting for October:

• Month-on-month inflation to tick 0.1% higher after a 0.4% spike in September, which was largely driven by higher energy prices
• Year-on-year inflation to ease down to 3.3% from 3.7% in September
• Month-on-month core inflation to rise 0.3%, level with September’s pace
• Year-on-year core inflation to remain steady at 4.1%

Interestingly, if we were to print a 0.1% month-on-month rise in CPI every month going forward, we'd get down to the Fed's year-on-year target of 2.0% by June 2024, according to Bespoke Investment Group.

Divided Market Strategists: 8 Fed Cuts?

Morgan Stanley's Mike Wilson is known for his bearish calls on the US equity markets - and has argued that rate cuts will likely come not because the Fed wants to but because it is forced to. But the firm's chief economist, Ellen Zentner, may have something to say about that.

“We initiated our soft landing call in March 2022, maintained that call for 2023, and are rolling it forward" for 2024, with the Fed cutting rates beginning in June.