ASX 200 to fall, led by miners + Fitch flags further downgrades to US banks

ASX 200 futures are trading 75 points lower, down -1.05% as of 8:20 am AEST.

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S&P 500 SESSION CHART

MARKETS

• Major US benchmarks lower and closed near worst levels
• Every sector was red, resources and financials led to the downside on weak Chinese economic data and cautious comments from ratings agency Fitch
• S&P 500 closed below its 50-day moving average for the first time since March 28
• Fitch ratings analysts says US banking industry at risk of sweeping rating downgrades due to higher-for-longer Fed and rising loan defaults (CNBC)
• BofA’s August Global Fund Manager Survey says respondents least bearish since February 2022, with cash allocations at a 21-month low and a majority looking for a soft-to-no landing scenario
• BofA’s private clients have been dumping growth stocks, financials and tech but buying investment grade bonds and Japanese equities
• Fed's Kashkari says inflation rate too high, questions whether more is needed to curb price growth (Bloomberg)
• Biggest Treasury ETF sees largest exodus since 2020 meltdown (Bloomberg)
• Zero-day options trading surges to record levels as traders favour bearish contracts (Bloomberg)

EARNINGS

• "While there was strength in categories associated with smaller projects, we did see continued pressure in certain big-ticket, discretionary categories.” – CEO Ted Decker
• "The near-term story in housing is that with so many people locked in to the incredibly low mortgage rates that there just isn't a lot of inventory available for sale. So transactions are at certainly near-term lows.”

CENTRAL BANKS

• Fed rate debate shifts to how long rates should stay high (Bloomberg)
• RBA sees a 'credible path' to inflation target at 4.1% rate (Bloomberg)
• Russia's central bank tries to stabilise currency with emergency 35 bp hike to 12% (Bloomberg)

CHINA

• PBOC unexpectedly cuts MLF rate by most since 2020 as economic activity weakened further in July (Bloomberg)
• China stops reporting youth unemployment (FT)
• China's $138bn shadow bank spirals at terrible time for Xi (Bloomberg)
• US hedge funds bailed out of Chinese stocks in Q2 (Reuters)

ECONOMY

• US retail sales rise more than expected in July, up 0.7% MoM (Reuters)
• US consumer more resilient than investors think, BofA says (Bloomberg)
• US homebuilder sentiment falls for the first time this year (Bloomberg)
• Canada inflation accelerates to 3.3% in July, above expectations (Reuters)
• UK wages grew much more than expected and at a record annual pace in the three months to June (FT)
• German investor ZEW survey shows unexpected jump in morale in August (Reuters)
• Japan GDP growth exceeds forecasts (FT)
  
  

Sectors to Watch

Today's session is expected to be a challenging one, with SPI futures currently down more than 1.0%. As for our overnight ETF watchlist, growth and resources led to the downside, especially those that are sensitive to China-related data. Notable losers include: Copper Miners (-3.5%), Rare Earths (-2.8%), Uranium (-2.65%) and Gold Miners (-2.56%).

Contrarian take on REITs

US real estate stocks are struggling amid fears of tighter lending standards and commercial real estate headwinds. But its positioning like this that creates a rather contrarian bullish thesis. (Unless things are worse this time)

In late July, BofA's Fund Manager Survey showed that investors were most Underweight commodities since May 2020 (this was when oil briefly hit negative prices).

 

What happened next? WTI crude rallied around 20% from July to early August.

KEY EVENTS

• Trading ex-div: Resmed (RMD) – $0.05, Dicker Data (DDR) – $0.10, Commonwealth Bank (CBA) – $2.40, Plato Income Maximiser (PL8) – $0.006
• Dividends paid: None
• Listing: None
  
  

• 4:00 pm: UK Inflation
• 10:30 pm: US Building Permits
• 4:00 am: FOMC Minutes