ASX 200 Set to Decline as S&P 500 Logs Worst Session of the Year

Highlights: 

• US markets declined sharply amid weaker-than-expected PMI data, dragging commodities and mining stocks lower. 
• ASX earnings reports highlight mixed performances, with NextDC (ASX:NXT) reporting a substantial loss and Reece (ASX:REH) forecasting challenging conditions ahead. 
• Federal Reserve and Bank of Japan signal cautious monetary policies, influencing global market sentiment. 

ASX 200 futures indicate a decline of 64 points (-0.78%) as of 8:30 am AEDT, reflecting overnight weakness in global markets. US equities ended the session at their worst levels, with the S&P 500 experiencing its sharpest single-day decline in 2025. 

US markets reacted negatively to flash Purchasing Managers’ Index (PMI) data, which fell short of expectations. The services sector dipped into contraction for the first time in two years, sparking concerns about slowing economic momentum. The disappointing economic data weighed on commodity prices, leading to declines of 3-4% in mining stocks. 

Overnight Market Performance 

The S&P 500 dropped 1.66%, with broader indices also experiencing notable losses. The Nasdaq Composite fell 2.51%, while the Dow Jones Industrial Average declined by 2.51%. Small-cap stocks saw significant selling pressure, with the Russell 2000 shedding 3.71%. The downturn reflected a shift toward defensive sectors, while high-growth technology stocks suffered. Key names like Meta (NASDAQ:META) fell 7.2%, Amazon (NASDAQ:AMZN) lost 5.3%, and Tesla (NASDAQ:TSLA) declined by 5.1%. 

Amid the volatility, global equity funds continued to experience strong inflows, with the majority directed toward European markets. Goldman Sachs cautioned that weak capital flows could lead to a near-term market correction. 

Corporate Developments 

Berkshire Hathaway (NYSE:BRK.A) posted a 71% year-on-year surge in Q4 operating income, reaching $14.5 billion, driven by insurance underwriting and investment income. Despite amassing a record $334 billion cash reserve, Warren Buffett reiterated the company's preference for equities. 

Meta Platforms (NASDAQ:META) announced a 10% reduction in annual employee stock option distributions, impacting thousands of workers. Rivian (NASDAQ:RIVN) lowered its EV delivery projections but expects profitability through cost reductions in raw materials. Alibaba (NYSE:BABA) shares surged following commitments to aggressive investments in artificial intelligence. 

Central Bank Policy Updates 

Federal Reserve Governor Adriana Kugler emphasized that achieving the 2% inflation target remains a challenge. Atlanta Fed President Raphael Bostic projected two interest rate cuts in 2025 but noted uncertainty surrounding the economic outlook. 

Bank of Japan Governor Kazuo Ueda stated that the central bank remains prepared to increase Japanese government bond purchases to counter rising yields. The Reserve Bank of Australia remains cautious about further monetary easing, while the People's Bank of China injected additional short-term liquidity to address funding constraints. 

Geopolitical and Trade Developments 

The US government offered Ukraine an improved draft for a minerals agreement after the initial proposal was rejected. Meanwhile, Washington objected to a UN resolution supporting Ukraine’s territorial integrity due to concerns over language critical of Russia. European defense spending is projected to increase by €250 billion annually to offset potential US withdrawals. 

The Trump administration is considering tariffs on digital services taxes imposed by foreign governments on US tech companies. Additionally, China’s export controls on gallium could disrupt global electronics supply chains, affecting companies like Tesla and Apple (NASDAQ:AAPL). 

Economic Indicators 

US flash PMIs for February dropped to 50.4, the lowest level in 17 months, with services activity contracting for the first time in over two years. The Eurozone’s PMI data indicated stagnant economic growth, while UK retail sales surged in January, driven by increased food spending. Japan's core inflation reached its highest level since mid-2023, reinforcing expectations of a more restrictive monetary policy stance. 

ASX Earnings Updates 

• Aussie Broadband (ASX:ABB) reported a 7.5% rise in 1H25 EBITDA to $217.6 million. A special dividend of 2.4 cents per share (cps) was declared alongside an interim dividend of 1.2 cps. Full-year EBITDA guidance was upgraded to $133-138 million from the previous $125-135 million. 

• Lovisa (ASX:LOV) reported 1H25 NPAT of $56.9 million, missing consensus expectations by 9.7%. Despite the earnings miss, the interim dividend remained at 50 cps, with total sales rising 12.9% in the first seven weeks of 2H25. 

• Michael Hill (ASX:MHJ) posted 1H25 revenue of $360.2 million, aligning with previous guidance, while its gross margin reached 61.3%. 

• oOh!Media (ASX:OML) saw FY24 NPAT rise 2.4% to $56.3 million, exceeding consensus estimates by 6.1%. The final dividend remained at 5.3 cps, ahead of forecasts. 

• NextDC (ASX:NXT) recorded a 3% increase in 1H25 underlying EBITDA to $105.4 million, while contracted utilization rose 18% to 176MW. However, a net loss of $42.7 million was reported, reflecting a growing debt position. Full-year EBITDA guidance of $210-220 million was reaffirmed. 

• Perenti (ASX:PRN) posted 1H25 NPATA of $82 million, missing consensus by 11.5%, but reaffirmed full-year guidance. 

• Perseus Mining (ASX:PRU) reported a 22% increase in 1H25 NPAT to $201.1 million and doubled its interim dividend to 2.5 cps. 

• Reece (ASX:REH) recorded a 19% decline in 1H25 NPAT to $181 million, missing consensus expectations by 5%. The company expects soft trading conditions to persist, while Executive Director Alan Wilson announced plans to step down. 

Market Watch for Today 

• Block Inc. (NYSE:SQ): Shares fell 5.8% after Q4 gross profit missed expectations. NYSE-listed shares plunged 17.7% overnight, signaling further downside risk. 

• Commodities: Weakness in commodity markets persisted, with ETFs tracking uranium, copper, nickel, and gold miners declining by 3-4%. 

• Earnings Reports: Key results to watch include Lovisa’s trading update, oOh!Media’s earnings performance, and Reece’s guidance amid ongoing market volatility. 

ASX futures suggest continued selling pressure as global economic concerns and weak earnings results weigh on investor sentiment.