Morning wrap: ASX set to jump as US stocks rebound

ASX Futures (SPI 200) imply the ASX will open 63 points higher, up 0.85%.

The rebound in US stocks was led by energy and technology stocks.

Fed Chair Jerome Powell testified before a Senate committee overnight as part of his nomination to serve a second term. Investors paid close attention to his comments, looking for clues to the pace of future rate increases.

On Monday, the Nasdaq managed to reverse a -2.7% slide to close just above breakeven. According to MarketWatch, this represents the Nasdaq’s strongest intraday reversal since 28 February, 2020. 

Stocks continued to bounce overnight as Powell reaffirmed his views that inflationary pressures should ease in 2022 but won’t hesitate to hike rates further if inflation remains high.

The market was largely unphased by Powell's comments, as he did not appear to flag any signs of an accelerated change in policy. 

“It really is time for us to move away from those emergency policy settings to a more normal level. It really should not have negative effects on the labor market,” said Powell.

The US market appears to have found its footing after a choppy start to the new year. More growth oriented sectors and oil prices rallied, which should spell a positive session for local energy and technology shares.  

▲ Energy

Crude oil prices jumped more than 3% overnight to reclaim the US$80/b mark. 

“Oil prices seem poised to trade between $80 and $100 a barrel as the global demand outlook still looks upbeat as most major economies are getting closer to the other side of the omicron fence,” said OANDA senior market analyst, Ed Moya. 

“NY Gov Hochul said, COVID rates are plateauing in NYC, but that hospitals are still under much stress,” Moya said, adding that “WTI crude is poised to make a run towards last year’s highs if stockpiles continue to decline.”

▲ Technology 

Large cap tech stocks helped support the broader market, with names Meta Platforms, Amazon, Apple and Nvidia all closing 1% higher. 

▲ Materials 

Material stocks rose, supported by a broad uptick in commodity prices, notably copper and iron ore. 

According to FastMarkets, sentiment in the iron ore market improved in China after the world’s largest iron ore producer, Vale, was forced to halt some iron ore operations due to heavy rains. Despite the interruptions, the company said that it should not have an impact on its yearly output guidance. 

The US-listed counterparts of BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO) rallied strongly in overnight trade, up 2.1% and 2.4% respectively. 

ASX Sectors to watch

#1 Nickel

Nickel prices are breaking out amid strong demand from the electric vehicle industry and concerns about a shortfall in supply. Nickel stocks in LME warehouses have fallen by around 62% since April 2021, according to Reuters. 

Nickel ETF cracks all-time high, daily chart, TradingView

The overnight break to all-time highs for the Nickel index should provide tailwinds for ASX companies including:

• IGO (ASX: IGO), which is due to acquire Western Areas (ASX: WSA) 

• Mincor Resources (ASX: MCR) 

• Nickel Mines (ASX: NIC)

• Panoramic Resources (ASX: PAN) 

#2 Lithium and rare earths 

The Rare Earth & Strategic Metals ETF rallied 3.5% overnight as investors returned to higher risk pockets of the market.  

One of the ETF’s major holdings, Lithium Americas, rallied 14% in overnight trade as two separate Wall Street analysts rated the stock as a Buy. 

ASX lithium stocks retreated on Wednesday amid the broad-based selloff. The encouraging overnight session should drive positive flow for the sector. 

#3 FinTech 

The FinTech ETF bounced off 15-month lows following a rebound in technology stocks. The move was supported by US fintech names including Coinbase (5.4%), Square (2.7%) and Adyen (2.2%). 

Despite the bounce, the FinTech ETF is still sitting in no-man's land, down -29% from its November 2021 highs, -18% below its 200-day moving average and down 5% year-to-date. The ETF’s previous bounces have been short-lived. Perhaps more time is needed for the ETF to prove it can stabilise. 

Nevertheless, the bounce should help local technology names, notably Afterpay (ASX: APT). 

#4 Copper 

The Copper Miners ETF has largely been range bound since June last year. The ETF poked its head to 10-week highs overnight. 

Copper spot prices continue to trade around the US$4.4/lb range briefly hitting US$4.7/lb in May 2021.

Ratings agency Fitch Solutions is slightly bearish on copper prices for 2022, predicting that tightness in global copper inventories will ease slightly this year. 

Despite the expectations of weaker copper prices, the ETF’s push to near-term highs is encouraging. Stocks to watch include: 

• Oz Minerals (ASX: OZL) which is trading near all-time record highs and well outpacing copper’s recent gains 

• Copper Mountain Mining (ASX C6C) 

• Sandfire Resources (ASX: SFR)  

Today’s events 

ASX corporate actions occurring today:

• Ex-dividend: None today

• Dividends paid: None today

• Issued shares: 92E, APT, AVE, AVR, BEN, BRN, BYE, CAI, CNR, DRX, KAI, KP2, MAF, MCA, MGF, MOT, MQR, MXT, MZZ, PCI, POL

Other things of interest: 

• Job vacancies: the Australian Bureau of Statistics (ABS) will release November 2021 job vacancies data at 11:30 am AEDT

• Inflation rate (CN): China will release its December 2021 inflation figures at 12:30 pm. Economists are forecasting a year-on-year increase of 2%, according to TradingEconomics