MARCUS MORNING - Wednesday, 3 September

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Wall St returned from holiday and was looking ugly but rallied into the close. After hours, Alphabet and Apple have rallied 7.2% and 2.9% on a court ruling, temporarily halting the Big Tech slide. All that aside, the gold price is going parabolic as bond markets dive. Is the Big One coming? Central Banks seem to be worrying about it. Should we get fearful? Is it too early to position for it? Never a dull day. 

• SPI Futures down 37. Low volume session in the US overnight.
• NASDAQ down 0.82% (was down 1.96% at worst – rebounded). S&P 500 down 0.69%. Dow Jones down 249 points. STOXX 600 index down 1.50%.
• The VIX Volatility index popped and dropped overnight, hitting 19.38 from a low of 14 a few days ago. Not a great sign.
• Rescued after hours - Alphabet up 7.2% after hours on a Court ruling that it won’t have to sell Chrome. Apple up 2.9% - Alphabet allowed to pay them to use Google as the default search engine. NASDAQ Futures up 0.39%.
• Gold going parabolic – Up another $56 overnight. Really interesting (worrying). Read below for why it's going up and whether we should chase it.
• Bonds getting fearful – US 30Y bond yield hit 4.997% - getting back to 2006 levels (it peaked at 5.178% in Oct – topping that will really ring the alarm bells). The fear is that if tariffs are ruled illegal or even (worse) refunded, the US Government will lose revenue and be under pressure to issue more bonds to service its $37 trillion of debt.
• And its not only the US - 30Y UK bond yield at 5.96% (!) highest since 2006. German 30Y yield highest since 2011. French 30Y highest since 2009. Japanese 30Y highest since 2006.
• Ray Dalio in a Financial Times article – Warns about “The Big One” – “America risks a debt-induced heart attack within around 3 years due to overspending and Trump’s budget” - We talked about his book “How Countries go Broke” in this article -  CLICK HERE – No wonder the gold price is going up – Central Banks are switching from bonds to gold – hedging the possibility of Ray being right. See a summary of the article by clicking Read More.
• Oil price popping – Could the energy sector possibly come alive over the Russian Gazprom plans for a pipeline into China.
• All eyes on the US jobs number on Friday - the market is sensitive to news at the moment and liable to run off in one direction or another on the slightest excuse.
• Quarterly GDP number today – Look for +0.5% and +1.6%. A couple of brokers downgraded forecasts yesterday. Feeds into the RBA meeting on September 30.
• NAB at a 52 week high - CSL at 52 week low along with TLX and DMP.

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Wall Street recorded a negative session, the first since the US Court of Appeals ruled most of Trump’s tariffs as illegal, throwing them into doubt and adding to a sense of confusion. The levies will be maintained until October 14^th where the Supreme Court will make a ruling but the move risks the US having alienated trading partners without the compensatory benefit of generating greater tariff revenue. S&P 500 began September down 0.69%, while Nasdaq fell 0.82%. Dow recorded a volatile session, dropping at open, recovering, only to fall again and then steadily rise throughout the session. Closed at high, down 249 points.

Primarily negative sector performance. REITS dropped as 30Y yields rose to their highest level since mid-July. Utilities also struggled as yields rose while Cyclicals showed weakness too, with Amazon and Tesla both weighing on the sector, falling 1.6% and 1.4%. Energy followed oil up, benefitting from the US tightening sanctions on Iranian crude oil, while Healthcare recorded modest gains too.

In corporate news, Kraft Heinz fell 7% as it announced plans to split into two entities, one centred on groceries and the other on sauces and spreads, highlighting a messy strategic reset. Conversely, PepsiCo rose 1.1% after Elliott Management unveiled a $4Bn stake, setting the stage for an activist push to lift performance. Elsewhere, Microsoft fell 0.3%, fairing better than other Big Tech, as it agreed to give US agencies a discount on its cloud services, the latest concession by a major US company to pressure from the Trump administration.

Resources primarily up despite a strengthening dollar. Oil rose as the US imposed sanctions targeting Iranian oil revenues. Copper and zinc both rose by above 1.0%, while iron ore rose by a little less.

ASX to fall. SPI futures down 36 points (-0.41%).

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