S&P 500 falls as yields soar + ASX 200 performance during geopolitical events

ASX 200 futures are trading 83 points lower, down -1.18% as of 8:20 am AEST.

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S&P 500 SESSION CHART

MARKETS

• Major US benchmarks finished lower, near worst levels, now all down for the week
• Treasury yields continue to push multi-decade highs, with the 10-year up another 8 bps to levels not seen since August 2007
• Positioning in S&P 500 futures came into the week net short US$27bn compared to a week earlier vs. the US$75bn net long at the end of July, says Citi
• Lots of moving pieces overnight including growing Middle East tensions, the rising bond yield backdrop, higher oil prices, concerns about Q4 earnings and the lagged effects of the aggressive tightening cycle
• Hedge funds are still selling stocks at an aggressive clip but one-week change in JPMorgan's Tactical Positioning Monitor was neutral
• Oil prices briefly rallied 2.3% after Iran’s foreign minister called for an oil embargo against Israel (Reuters)
• Middle East conflict and rising oil prices weigh on market sentiment (Bloomberg)
• Value of distressed US CRE near $80bn in Q3, highest in a decade (Bloomberg)
• US chip stocks shed US$73bn after US bans export of more AI chips (Bloomberg)

STOCKS

• Nvidia warns of product snags from tightening of US export rules (Reuters)
• ASML warns of flat 2024 sales as chipmakers slow orders (Reuters)
• Microsoft to add Amazon as 365 Cloud customer in US$1B deal (Business Insider)
• X to test a $1 per year subscription to reduce spam and bot accounts (Bloomberg)
• Scotiabank to lay off 3% of global workforce (Reuters)

EARNINGS

• A slowdown is taking place: "As expected, we did see some moderation in orders this quarter as the industry is working through a cycle, customers remain cautious in the current environment managing cash flows & delaying purchase orders. In addition, there were no high North American orders this quarter.”

CENTRAL BANKS

• BoJ steps into debt market to slow rising bond yields (Bloomberg)
• ECB's Stournaras says Middle East conflict casts shadow over ECB meeting (FT)
• ECB's Holzmann says not out of the woods yet on inflation (Bloomberg)
• RBA Bullock worried ongoing geopolitical shocks will entrench inflation (ABC)

GEOPOLITICS

• Biden lands in Israel as chaos rises across Middle East (Bloomberg)
• Biden vows aid for Gaza, Israel as protests rock Middle East (Reuters)

ECONOMY

• China's growth beats forecasts as consumer spending improves (Bloomberg)
• UK inflation higher than expected at 6.7% in Sept after oil price jump (Bloomberg)
• Average 30-year US mortgage rate hits 8% for first time since 2000 (CNBC)
  
  

ASX 200 Performance During Rising Geopolitical Tensions

Sectors to Watch: Brace for Pain

Markets are struggling against the rising bond yield and geopolitical tensions backdrop.

Lithium: Rare Earths & Strategic Metals ETF down 4.7% and Albemarle down 9.8% overnight. Bank of America downgraded the lithium producer to an Underperform rating, citing a challenged outlook for the lithium market and concerns of weaker prices into 2025. Tesla also missed earnings expectations, with a notably 16 days of inventory left (aka expect more price cuts).

Travel: US Global Jets ETF down 4.4% to a fresh 12-month low. The poor guidance from United Airlines flagged some industry wide cost pressures surrounding labour, maintenance and landing fees. This could see some negative for Qantas (ASX: QAN).

Materials: Materials was the worst performing sector overnight, down 2.6%. US-listed BHP and Rio Tinto also finished the session down 2.1% and 3.0% respectively.