ASX 200 Pre-market wrap: US stock shrug off surging inflation, tech stocks jump

Before the bell

KEY POINTS

ASX SPI futures are currently pointing to a 13 point increase, up 0.2% to 7,366.  

Wall Street rallied on Friday with the S&P 500 closing at a fresh all-time high. Mega-cap tech shares did the heavy lifting. 

The US Labor Department said that inflation surged 6.8% year-over-year in November to the highest rate since 1982. The figure came in slightly higher than the 6.7% Dow Jones estimate. 

The consumer price index, which measures the price change of a wide-range of goods and services, rose 0.8% on the month. 

Core CPI, which excludes volatile items like food and energy, rose 0.5% on the month and up 4.9% from a year ago, in line with estimates.

The US Federal Reserve will hold its two-day meeting on Wednesday. The central bank is expected to discuss the acceleration of its bond taper. If the Fed ends its bond buying program more quickly, this could bring forward the timeline for interest rate hikes.  

US Sector breakdown

KEY POINTS

Tech stocks topped the leaderboards thanks to gains from Microsoft (2.8%) and Apple (2.8%), Tesla (1.3%). Shares in software firm Oracle jumped 15.6% after an upbeat third-quarter outlook. 

On the smaller end of town, tech gains were mixed. Shares like Twitter fell 1.9%, Square tanked 2.9%, Coinbase gave back 3.1% and Etsy finished the session 3.9% lower. 

Consumer staples pulled ahead after Costco topped first quarter earnings expectations, its stock closed 6.6% higher. Costco said it was able to largely mitigate higher costs and supply chain issues. 

Energy stocks posted a small gain, broadly in-line with the increase in oil prices. There were concerns that higher-than-expected inflation figures could prompt the Fed to accelerate its bond-taper program, which could bump up the US dollar and weigh on oil prices. 

ASX Sectors in play

MAJOR ETFS

ETF GAINERS

The Rare Earths/Strategic Metals ETF rallied on Friday. The ETF has exposure to a number of ASX companies including Lynas Rare Earths (ASX: LYC), Liontown Resources (ASX: LTR), Allkem (ASX: AKE) and Pilbara Minerals (ASX: PLS). The four stocks make up approximately 20% of its net assets. 

• Despite the strong face value move overnight, the ETF has remained range bound since late September 

• This could still point to positive flow for ASX names like the ones mentioned above

The Bitcoin ETF staged a small bounce after a risk-on attitude returned to the markets. There is an emerging view that cryptocurrencies can act as a hedge against rising prices and currency devaluation. In the case of Bitcoin, only 21 million coins will be put into circulation, a figure that isn’t expected to be reached for several decades. 

• ASX names that might benefit from the overnight gain include DigitalX (ASX: DCC) and Betashares Crypto Innovators (ASX: CRYP) 

The Lithium & Battery ETF posted a slight move up following a volatile past two weeks. Big names like Albemarle and China’s Ganfeng both gained more than 2%. 

China’s Association of Automobile Manufacturers reported that new energy vehicle sales jumped to all-time highs of 450,000 units in November, up 121% year-on-year and 17% on the month. 

ETF LOSERS

The Cloud Computing ETF underperformed the tech-heavy Nasdaq, down 2.3% and close to 6-month lows. This reiterates the narrative that Nasdaq gains have been heavily concentrated around mega cap names. 

• Nasdaq gains but weakness in cloud names could flag a mixed session for names like Xero (ASX: XRO), WiseTech Global (ASX: WTC) and NextDC (ASX: NXT) 

The Airline ETF fell sharply despite US airport traffic holding up reasonably well. The Transport Security Commission (TSA) reported that recent traffic figures have been sitting around 85% of pre-COVID peaks in late 2019. 

• The outbreak of the new omicron variant has made it a challenging and volatile past 2-3 weeks for airline and travel-related stocks

• ASX players like Qantas (ASX: QAN), Flight Centre (ASX: FLT) and Webjet (ASX: WEB), Corporate Travel (ASX: CTD) are all trading 10% to 25% below recent highs

The Uranium ETF continued to stumble, trading near 3-month lows. 

• The weak sentiment within the sector has weighed on prospective ASX names like Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL)

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