ASX 200 to fall + Goldman Sachs drops coverage of these 3 small caps

Get up to date on overnight market activity and the big events for the day.
The Morning Wrap

Livewire Markets

ASX 200 futures are trading 31 points lower, down -0.43% as of 8:20 am AEDT.

Overnight Summary

Modified overnight summary (Source: Market Index)


Another heavy session, S&P 500 lower and closing near session lows (Source: TradingView)


Before we dive in – The data in our tables continue to see some issues. While we address these bugs, we're switching to a modified version for the next week or so. 

  • S&P 500 extends recent weakness, down 2% in the last four sessions
  • US 2-year yield up almost 50 bps since 11 May
  • Still no debt ceiling deal, with Republicans flagging a “significant gap” in negotiations
  • Fed Governor Waller says he could support another rate hike, does not back the pause narrative, expressed concern that inflation is not coming down fast enough (Fed)
  • Fed rate cut odds fade as policymakers stress higher-for-longer message (FT)
  • Yields on T-bills maturing in June surge above 7% amid debt ceiling fears (Bloomberg)
  • JPMorgan analysts see 25% chance of US hitting the X-date (Bloomberg)
  • BofA strategist plays down concerns around narrow market breadth (Bloomberg)
  • China's benchmark stock index has erased all its gains for the year (Bloomberg)
  • US companies remain aggressive on share buybacks (link)


  • PacWest reaches deal to sell real-estate lending division (WSJ)
  • Google to experiment with ads within search results powered by generative AI (Reuters)
  • Citi announced plans to spin off its Mexico business (CNBC)
  • Tesla shares fall on disappointing rival Xpeng results (CNBC)


Toll Brothers (+2.1%): Double beat, said homebuyer appetites improving and lifted its full-year deliveries view.

  • "As mortgage rates have stabilised and buyer confidence has improved, the increase in demand that began in January has continued through our second fiscal quarter and into the start of our Q3.” – CEO Douglas Yearly
  • "... approximately 35% of homes currently for sale are new construction, compared to the historical norm of between 10% and 15%. This phenomenon has become a boon for homebuilders."

Nvidia (-0.5%, after hours +25.4%): Double beat, 1Q24 revenues fell 13% year-on-year to US$7.2bn but above consensus expectations of US$6.5bn,

  • "Data Center revenue was a record, up 14% from a year ago & up 18% sequentially, led by growing demand for generative AI and large language models using GPUs based on our NVIDIA Hopper and Ampere architectures.” – CFO Colette Kress
  • "Generative AI is driving exponential growth in compute requirements and a fast transition to NVIDIA Accelerated Computing, which is the most versatile, most energy efficient, and the lowest TCO approach to train and deploy AI.”
  • "The computer industry is going through 2 simultaneous transitions — accelerated computing & generative AI. A trillion dollars of installed global data centre infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service & business process.”


  • White House struggles to make progress towards debt ceiling deal (Bloomberg)
  • UK inflation falls to 8.7% in April, but still hotter than expected, which has economists expecting further interest rate rise (London Times)
  • New Zealand retail sales unexpectedly shrink (NZ Herald)
  • RBNZ hikes by 25 bp, expects rates on hold from here (Bloomberg)
  • Japan manufacturer sentiment turns positive for first time in 2023 (Reuters)

Overnight Sector ETFs 

Deeper Dive

RBNZ Decision: First In, First Out?

The Kiwis were one of the first major central banks to start hiking rates in the current cycle and now, they become one of the first major central banks to telegraph when rate cuts might be coming.

Hiking interest rates by 25 basis points to 5.5% yesterday at noon is news on its own. There was a 33% chance in rates markets that they might hike by 50 basis points - after all, the RBNZ is famous for not towing the market line. But then, this line was casually dropped in:

"The committee discussed the suitability of keeping the OCR on hold at 5.25% or increasing it to 5.5%."

And if that wasn't enough, cash rate cuts are now firmly penciled in for the second half of next year. Forget the wild west, the wild action is happening in Wellington!

US Debt Ceiling: It's Crunch Time

Treasury Secretary Janet Yellen reiterated on Monday that the US could be unable to pay its bills as soon as June 1.

In 2011, the S&P 500 started to freak out over the same kind of overhang. It sold off as much as 17% between 25 July and 8 August. The selloff was also likely exacerbated by the Eurozone debt crisis, which saw more than half of its 17 member governments collapse or change hands.

Bank of America: Bullish on the S&P 500

BofA's Head of US Equities Savita Subramanian is creating waves after hiking her end of year forecast for the S&P 500 from 4000 to 4300. It's a big break away from a pack of sell-side analysts that has been clustered at the 4,000 level since the beginning of the year. But it's what she says about Treasuries in a Bloomberg interview that actually gets my attention.

"The riskiest asset class in the world right now is the risk-free rate, so basically Treasuries ... That's the epicentre of the bubble."

The latest BofA fund manager survey revealed that investors are still overweight bonds, cash, and defensive stocks. Can you tell sentiment is still sour?

Goldmans drops several ASX stocks from coverage

With small and mid-cap analyst Michael Peet leaving the firm, coverage of several stocks is being shifted while two stocks are being dropped entirely. The affected stocks are Elders (ASX: ELD) and Costa Group (ASX: CGC). The firm also dropped its coverage of Redbubble (ASX: RBL) but did leave a final note for management in doing so:

"We believe the market will need to see greater clarity on RBL’s strategy to scale the business under the new cost base, as well as a stabilisation of near term revenue growth trends to garner a re-rate. We believe the current valuation adequately reflects the risk/reward profile of the business."

Goldmans finishes up its coverage of the company with a NEUTRAL rating and a $0.59 price target. As recently as last August, the company's share price was $1.50. Ouch.

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: Aristocrat Leisure (ALL) – $0.30, Orica (ORI) – $0.18, Nufarm (NUF) – $0.05
  • Dividends paid: None
  • Listing: Augustus Minerals (AUG)

Economic calendar (AEST):

  • 11:00 am: Korea Interest Rate Decision
  • 4:00 pm: Germany Consumer Confidence
  • 10:30 pm: US Initial Jobless Claims 

This Morning Wrap was first published for Market Index by Kerry Sun and Hans Lee.

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The Morning Wrap
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Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Chris Conway, Kerry Sun, and Hans Lee.

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