Market Wrap

ASX pre-market wrap: Wall Street rallies, US Fed signals three rate hikes in 2022

Thu 16 Dec 21, 9:47am (AEST)

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Before the bell

KEY POINTS

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ASX SPI futures are currently pointing to a 19 point gain, up 0.2% to 7,232.

The US Federal Reserve confirmed it will double the pace of reductions in its monthly asset purchases to US$30bn. The program is expected to end by mid-March, a few months sooner than previously planned. 

“We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support,” said Fed Chair Jerome Powell. 

The Fed’s interest rate timeline has also been moved forward, with policymakers expecting three rate hikes in 2022 and two more in 2023.

All three major US benchmarks bounced from negative to positive territory overnight. It appears investors are pleased that the Fed is taking inflation seriously. 

On the economic front, US November retail sales increased 0.3%, well below the 0.8% rise expected by economists polled by The Wall Street Journal. 


US Sector breakdown

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KEY POINTS

Technology stocks performed the best despite being the most sensitive to interest rate changes. Mega caps including Apple, Amazon, Facebook and Microsoft closed the session 2% to 2.8% higher. 

Real estate stocks tipped higher following positive data on the economic front. The National Association of Home Builders index increased in December for a fourth consecutive month to 84 from 83 a month ago. More builders view conditions as favourable than poor.

Energy stocks struggled after initial lab results showed that two doses of China’s Sinovac covid vaccine was ineffective in neutralising the omicron variant. That said, oil prices turned positive after the Fed meeting.


ASX Sectors in play

MAJOR ETFs

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ETF GAINERS 

The Uranium ETF bounced off its 200-day moving average in overnight trade. It was down almost 30% since its record high on 9 November. Uranium spot prices have retreated slightly in the past few weeks, trading at US$43.01/lb according to fuel brokers Numerco. 

  • The struggling ETF has weighed on ASX uranium stocks

  • The encouraging bounce overnight could see some positive flow come through for names like Paladin Energy (ASX: PDN), Boss Energy (ASX: BOE) and Deep Yellow (ASX: DYL)

The Cybersecurity ETF is another name bouncing off its 200-day moving average. The ETF’s major holdings including Zscaler, Fortinet, CrowdStrike and CyberArk Software all closed between 6% to 8% higher. 

  • Cybersecurity stocks on the ASX come few and far between

  • The two main pure play names include Tesserent (ASX: TNT) and Archtis (ASX: AR9). The two companies have a market cap of just $200m and $50m respectively 

The Semiconductor ETF rallied overnight, broadly in line with the Nasdaq. Big names including AMD and Nvidia jumped 8% and 7.5% respectively. 

  • Similar to cybersecurity, most ASX-listed semiconductor stocks are more speculative in nature and developing new, cutting edge technologies 

  • Nevertheless, this could see positive flow for players like Weebit Nano (ASX: WBT), Brainchip (ASX: BRN) and 4DS Memory (ASX: 4DS)

The Bitcoin ETF rose for a second consecutive day after hitting all-time lows on Monday. Most cryptocurrencies rallied after the Fed meeting. 

  • “The playbook for the next several months is that risk appetite could remain in place if the Fed only has to deliver only a few rate hikes next year, which would be great news for cryptos,” said OANDA senior market analyst Ed Moya. 

  • Betashares Crypto Innovators ETF (ASX: CRYP) and DigitalX (ASX: DCC) might benefit from the overnight comeback 

The Cloud Computing ETF and Fintech ETF have rolled over in December, both down about 6% to 6-month lows.

  • ASX BNPL stocks have been particularly hard-hit in recent weeks with names like Afterpay (ASX: APT), Zip Co (ASX: Z1P) and Sezzle (ASX: SZL) all down about 25% in the last month

  • WiseTech Global (ASX: WTC) is one of few large cap tech stocks has managed to ignore the noise and hold up relatively well

  • The overnight bounce for these ETFs and the Nasdaq could see some positive flow come through for struggling ASX tech stocks

ETF LOSERS 

The Nickel ETF fell amid a pullback in spot prices. Nickel prices have dipped to US$19,550/t, down from a November peak of US$21,000/t.

  • ASX nickel stocks including Western Areas (ASX: WSA) and Nickel Mines (ASX: NIC) have been relatively unchanged in the past few weeks despite the volatility in nickel prices


Upcoming events

CORPORATE CALENDAR

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ECONOMIC CALENDAR

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LISTINGS

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Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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