ASX 200 Pre-market wrap: US stocks fall ahead of key inflation data

Before the bell

KEY POINTS

ASX SPI futures are currently pointing to a 16 point fall, down 0.2% to 7,362.  

Global stocks retreated on Thursday, as new restrictions across Europe weighed along with concerns about upcoming US inflation data. 

European equities closed the overnight session lower after the UK implemented its ‘Plan B Restrictions’ on Wednesday, including recommendations to work from home and mandatory mask-wearing for indoor venues. Other EU nations including Denmark, Germany, Italy and Poland have also tightened restrictions. 

Bitcoin fell sharply after executives from six of the largest cryptocurrency companies testified before the US Congress’ Financial Services Committee. Options about crypto seemed dividend among the members of Congress, who wanted to better understand digital assets and how current regulations might apply.  

The US will release important inflation data on Friday night which might reinforce the Federal Reserve’s view to accelerate its tapering and raise interest rates. Economists surveyed by the Dow Jones expect year-over-year inflation to be 6.7%.

US sector breakdown

KEY POINTS

Biggest losses came from consumer discretionary stocks. Tesla plunged 6%. Global online marketplace Etsy finished 4.6% lower. Casino and racetrack operator Penn National Gaming fell 3.5%. 

Tech stocks faltered despite mega cap names like Microsoft, Alphabet, Meta Platforms and Apple trading flat at close. Smaller names like Netflix (-2.4%), PayPal (-2.6%), Nvidia (-3.6%) and AMD (-4.8%) weighed. 

Energy stocks fell after crude oil snapped a three-day winning streak, down 3% to US$70.4 a barrel. A sharp rise in covid cases across Germany, France and UK weighed. The three countries are all registering more than 50,000 cases a day.

• "WTI crude did not know how to react to a mixed EIA report. A small [crude oil] draw was accompanied with slightly higher production, limited Omicron impact with gasoline consumption, but softer jet fuel demand and a decline with exports," said OANDA senior market analyst Edward Moya.

Healthcare was one of few bright spots following gains from Johnson & Johnson (+0.6%), Pfizer (+1.5%) and biopharmaceuticals company Abbvie (+1.9%).

ASX Sectors in play

ETF losers 

The Bitcoin ETF plunged 6.3% to all-time lows. Congress was divided about crypto with some members encouraging the growth and innovation it can provide, while others sought to better understand the potential for abuse within the system and lack of protections. 

• DigitalX (ASX: DCC) has closely tracked the performance of cryptocurrencies and may be at risk following the sharp selloff overnight 

• Betashares Crypto Innovations ETF (ASX: CRYP) is another candidate that’s at risk. The ETF, which listed on 4 November, is down almost 20% 

The Hydrogen ETF is back to square one after rallying 6.7% earlier this week. The risk-off attitude that’s taking place across the market is impacting the performance of speculative, loss-making stocks. The ETF’s major constituents Fuel Cell Energy, Ballard Power Systems and Plug Power fell between 6% and 8%. 

• This could point to negative flow for ASX players like Hazer Group (ASX: HZR), Pure Hydrogen (ASX: PH2) and Lio Energy (ASX: LIO) 

Similarly, the Lithium & Battery ETF gave back earlier gains, now flat for the week. The sub-sector faces similar headwinds as the Hydrogen ETF and is susceptible to capital outflows if investors pivot towards safe haven assets. That said, lithium prices continued to make headway in November, with spodumene prices climbing 17.3% on the month to US$1,525/t free-on-board, according to Benchmark Mineral Intelligence. 

• This might nullify the performance of ASX-listed players like Allkem (ASX: AKE), Pilbara Minerals (ASX: PLS) and Vulcan Energy (ASX: VUL) 

• Emerging players like Core Lithium (ASX: CXO), Liontown Resources (ASX: LTR) and Piedmont Lithium (ASX: PLL) could also face headwinds 

Both the Uranium ETF and Rare Earths/Strategic Metals ETF also displayed similar moves in giving up earlier gains. 

• This could drive negative flow for ASX uranium stocks like Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL). All three names rallied about 3% on Thursday 

• ASX names in the rare earth space like Lynas (ASX: LYC) and Australian Strategic Metals (ASM) could also be at risk 

Weakness in the Cloud Computing ETF could flag another weak session for ASX players like Xero (ASX: XRO), NextDC (ASX: NXT) and Altium (ASX: ALU).

• On Thursday, the cloud ETF bounced 1.6% but ASX players struggled to follow through. Xero lagged, down 3.2%

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