Morning wrap: ASX to rise as US Santa rally loses momentum

ASX Futures (SPI 200) imply the ASX have a flat open. That said, the Dow Jones and S&P 500 have both rallied more than 1% since the ASX's last trading session on 24 December.

Major US indices were mixed overnight after a four-day Santa rally. The S&P 500 rose 1.38% the trading session after Christmas - the 5th best day after Christmas performance since at least 1945.

Investors are betting that the rapid spread of omicron won’t compromise economic growth as the S&P 500 and Dow Jones rallied to fresh all-time highs.

A new study from South Africa’s National Institute of Communicable Diseases suggests that the omicron strain has a lower risk of hospitalisation compared to other covid variants. In the two months to November, the data showed that individuals with omicron were 70% less likely to experience more severe infections than delta. 

China’s heavily indebted real-estate developer Evergrande rallied 10% on Tuesday, with shares in its New Energy Vehicle subsidiary up 10% and Property Services up 5%. The company said it had made initial progress in resuming construction work. 

Oil prices have staged a strong rebound from its late November rout, with crude oil prices almost 10% in the last 5 sessions to US$76.12/bb. 

Bitcoin fell -5.3% to US$47,996, with crypto trading platform Coinglass flagging that more than 165,000 traders had their accounts liquidated in the last 24 hours, equal to US$524m of digital assets. 

Cyclical and value pockets of the US markets rose, while richly valued technology and healthcare stocks fell. 

Material stocks rose despite slightly weaker commodity prices including gold, copper and iron ore. The US-listed counterparts of BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO) both fell -0.9% and -0.5% respectively.

Real estate stocks amid economic data showing that housing prices have been accelerating at a slower pace. The S&P CoreLogic Case-Shiller 20-city price index revealed an 18.4% year-over-year increase in October, down from 19.1% in September. 

Technology stocks lagged as most mega cap names like Facebook, Tesla, Microsoft, Apple and Alphabet fell less than -1%. Fintech names like Affirm and Square fell sharply, down -3.8% and -2.6% respectively.  

ASX Sectors in play

ETF GAINERS

The Lithium ETF eked out a small gain following its recent selloff. The ETF is down -12.8% since its 9 November all-time high. The positive close was supported by gains from Chinese names like Ganfeng and Yunnan Energy rose 5.5% and 3.3% respectively

• Most ASX lithium stocks continue to consolidate after a powerful run-up this year. Names like Allkem (ASX: AKE), Lake Resources (ASX: LKE) and FireFinch (ASX: FFX) have mostly trade sideways since September 

• Pilbara Minerals (ASX: PLS) is perhaps an outlier, having cracked a fresh all-time high on 24 December 

Airlines and travel stocks could be a point of interest given the news flow in the past few days. In the US, hundreds of flights have been cancelled over staff shortages as airline employees are forced to isolate due to covid infections. 

A similar narrative is taking place back at home. A Sydney Airport spokesperson told the Guardian Australia that 80 out of 500 domestic flights scheduled to arrive and depart last Friday had been cancelled. Some airlines cited staff shortages, while others flagged lower-than-expected demand during the Christmas period. 

The Jets ETF threatened 13-month lows on 20 December and has since bounced 10% off those levels. It appears that despite the staffing mayhem, investors doubt that it will have a lasting impact on overall demand. 

ETF LOSERS

The Bitcoin ETF plunged -6.9%, broadly in-line with the cryptocurrency selloff. Investors seem to have retreated from more risky assets as of late, triggered by the easing of central bank stimulus and prospect of rising interest rates. 

• Betashares Crypto Innovators ETF (ASX: CRYP) could see some negative flow after a positive 6.7% session on 24 December 

• DigitalX (ASX: DCC) could be another culprit from the crypto selloff 

The Uranium ETF sold off after a sharp 11% rally between 20 to 27 December. The ETF has traded mostly sideways in December. Uranium spot prices have remained relatively muted, sitting at US$42.25/lb according to fuel brokers EvoMarkets. 

• ASX uranium stocks continue to consolidate around more long-term moving averages like the 100 or 200

The Hydrogen ETF retreated after a brief Christmas rally. The ETF is down -29.2% since its 9 November all-time high. Its major constituents Fuel Cell Energy tanked -6.8% to a 3 month low, Plug Power fell -4.2% and Bloom Energy closed -2.5% lower. 

• This could take some heat out of rebounding ASX hydrogen stocks like Hazer Group (ASX: HZR) and Lion Energy (ASX: LIO) 

• Hazer bounced off its 200-day moving average on 24 December, closing 6.8% higher 

• Similarly, Lion Energy bounced off its 100-day moving average, closing 8.2% higher on the same day 

The FinTech ETF continues to set lower highs and lower lows as investors pivot away from richly valued technology stocks. 

• Afterpay (ASX: APT) shares are poised to open lower after Block (formerly Square) shares declined -2.8%. Major US-listed BNPL rival Affirm also fell 3.8% 

• The weakness across BNPL names could keep local names like Zip Co (ASX: Z1P) and Sezzle (ASX: SZL) at bay 

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