Market Wraps

Morning wrap: ASX to plunge after US market fails to rebound

Fri 21 Jan 22, 8:32am (AEDT)

ASX Futures (SPI 200) imply the ASX will open 66 points lower, down -0.92%.

Much like yesterday, major US indices opened sharply higher before fading into close. The bearish reversal flags another challenging session for the local sharemarket.

Overnight Summary

Fri 21 Jan 22, 8:32am (AEDT)

Name Value Chg %
US Indices
S&P 500 4482.73 -1.10%
Dow Jones 34,715 -0.89%
NASDAQ 100 14,154 -1.30%
Russell 2000 2,024 -1.88%
Country Indices
Canada 21,058 -0.69%
China 3,523 -0.91%
Germany 15,912 +0.65%
Hong Kong 24,966 +0.05%
India 59,037 -0.72%
Japan 27,522 -0.90%
United Kingdom 7,585 -0.06%
Name Value Chg %
Commodities (USD)
Gold 1,839.20 -0.18%
Iron Ore 129.49 -
Copper 4.523 -1.31%
WTI Oil 86.90 0.00%
Currency
AUD/USD 0.7216 -0.12%
Cryptocurrency
Bitcoin 57,187 -1.86%
Ethereum 4,262 -1.98%
Miscellaneous
U.S. 10 Year Treasury 1.833 +0.33%
VIX 26 +7.30%

Key points

  • The Dow Jones (large cap), S&P 500 (blue-chip) and Nasdaq (tech) rallied at open, reaching intraday highs between 1.3% and 2.1%

  • The indices faded for a second consecutive session, again closing around -1% lower

  • The bearish price action suggests investors are selling into strength instead relief buying or 'buying the dip'   

  • US unemployment data suggests the surge in omicron cases could be hurting the economy. Jobless claims for the week ended 15 January hit near 3-month highs of 286,000. The figure exceeded Dow Jones estimates of 225,00


US Sectors

Fri 21 Jan 22, 8:32am (AEDT)

Sector Chg %
Communication Services 0.00
Consumer Discretionary 0.00
Consumer Staples 0.00
Energy 0.00
Financials 0.00
Health Care 0.00
Industrials 0.00
Information Technology 0.00
Materials 0.00
Real Estate 0.00
Utilities 0.00

The bearish reversal on Wall Street could flag a weak session for most ASX sectors.

▼ Energy

Oil prices have posted a remarkable run since the beginning of December, up almost 30%. Although oil prices have broadly topped out around the US$87 a barrel level. 

“While the fundamentals haven’t changed, it does appear that we’re finally starting to see momentum wane after a more than 30% rally from the omicron lows. That’s coming around US$90 where oil has peaked at a seven-year high, seemingly triggering some profit-taking,” said OANDA market analyst, Craig Erlam. 

“While I don’t think it’s done there, we could see a minor correction to take some of the frothiness out of the market. That said, I can’t imagine it will be too large unless we see a shift, either in OPEC+ production or slowing demand from a major consumer like China as a result of its zero-Covid policy.”

Fading oil prices and broader market weakness could put local energy stocks at risk on Friday.

▼ Technology

Tech weakness was led by chip makers including AMD (-4.3%) and Nvidia (-3.2%).

Mega cap names like Alphabet, Meta Platforms and Apple all fell around -1%. Amazon was the outlier, staging a sharp -2.96% decline.

With the Nasdaq continuing to falter below its 200-day moving average, ASX technology stocks might struggle to swim against the bearish tide.

▼ Materials

Commodity prices held up relatively well overnight. Iron ore continued its march north, up 2.6% to US$133.65 a tonne.

China continues to buoy the outlook for steel demand after its central bank cut one-year Loan Prime Rates by 10 basis points and the five-year by 5 basis points.

FastMarkets reported that market participants expect these rate cuts to act as tailwinds for China's economic development, especially in the infrastructure sector.

Even then, the US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) struggled to close in positive territory, down -0.7% and -2.3% respectively.

▼ Consumer discretionary 

There was broad-based weakness across US retailers with household names like Walmart down -1.9%, Home Depot -2.9% lower and Lowe's sliding -4.8%.

 

Industry ETFs

Fri 21 Jan 22, 8:32am (AEDT)

Description Last Chg %
Commodities
Aluminum 64.0055 +2.44%
Nickel 30.59 +2.32%
Silver 22.37 +1.12%
Gold 172.08 -0.23%
Lithium & Battery Tech 80.41 -0.31%
Strategic Metals 110.59 -0.58%
Copper Miners 40.79 -0.83%
Uranium 22.56 -1.91%
Steel 56.47 -2.59%
Industrials
Global Jets 21.49 -0.51%
Aerospace & Defense 105.3 -1.04%
Healthcare
Biotechnology 131.83 -0.90%
Cannabis 5.26 -2.09%
Description Last Chg %
Cryptocurrency
Bitcoin 26.2 +2.67%
Renewables
Hydrogen 16.73 +0.72%
CleanTech 15.35 +0.29%
Solar 66.94 +0.07%
Technology
E-commerce 25.11 +0.64%
Video Games/eSports 63.01 +0.63%
FinTech 34.39 +0.20%
Cybersecurity 28.64 +0.03%
Sports Betting/Gaming 22.14 -0.18%
Cloud Computing 23.37 -0.39%
Robotics & AI 30.8 -0.81%
Electric Vehicles 29.61 -1.79%
Semiconductor 496.2 -3.14%

ASX Morning Brief

#1 Aluminium 

Aluminium prices continue to soar towards October 2020 highs of around US$3,170/t.

2022-01-21 08 22 35-Aluminum 2022 Data 2023 Forecast 1989-2021 Historical Price Quote Ch

Source: TradingEconomics

Alcoa, the world’s sixth largest aluminium producer, topped fourth-quarter earnings expectations. The company’s revenue grew 36% to US$3.34bn. Alcoa expects earnings in the current quarter to be similar to the fourth quarter based on current pricing levels. 

#2 Nickel 

The Nickel Index is up almost 15.9% since 10 January as low inventories skyrocket spot prices to their highest levels since 2011

According to Reuters, nickel stockpiles in LME-registered warehouses are at their lowest levels since 2019. 

Local nickel stocks posted some outsized gains on Thursday, including: 

Bullish headlines and spot prices could continue to drive positive flow for the sector. 

#3 Uranium 

On Wednesday, the Uranium ETF closed below its 200-day moving average, with shorter moving averages like the 20 and 100 beginning to slope downwards, suggestive of a weakening trend. 

Ideally, the ETF needed to bounce off the 200-day to stay out of trouble. Overnight, the ETF briefly rallied 3.6% higher before closing sharply lower, below the 200 and close to a 5-month low.

ura

Global X Uranium ETF, TradingView

This could continue to weigh on local uranium stocks that have been trading sideways since September last year. 


Key Events

ASX corporate actions occurring today:

  • Ex-dividend: KAT

  • Dividends paid: CQE, VEU

  • IPOs: OXT

  • Issued shares: ABR, APT, ARR, BRN, FZO, GMD, GNM, HCH, HSN, INP, KAI, LIT, LOT, MFF, MRQ, NAB, NAC, NSC, OXT, PE1, PLG, PNC, PNN, PVS, RNT, SXY, VMY, WAM, WKT, WML, XTC, ZNC

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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