Morning wrap: hot inflation data triggers selloff on Wall Street, ASX set to plunge
ASX Futures (SPI 200) imply the ASX will open 55 points lower, down -0.8%.
Mentioned
ASX Futures (SPI 200) imply the ASX will open 55 points lower, down -0.8%.
Wall Street snapped a two-day win streak after US consumer prices rose faster-than-expected in January. Investors are now concerned that the Federal Reserve might get even more aggressive with raising interest rates.
Stocks
70% of US stocks fell overnight, with 62% trading below their 200-day moving average, flagging that most trends are weak or neutral at best
Disney shares rallied 3.4% after reporting record revenues and more than US$1bn in profit, smashing analyst expectations. Growth in streaming subscribers and a bounce back in theme-park profits helped boost earnings
Uber briefly rose 5.9% after its earnings beat profit and sales expectations. The stock faded sharply, closing -6.1% lower
Affirm accidentally tweeted its quarterly earnings ahead of schedule. The company’s stock was trading 11% higher, before closing -21.2% lower
Economy
Inflation is going berserk with the US consumer price index (CPI) gaining 0.6% on-the-month and up 7.5% compared to last year, the biggest year-on-year increase since 1982
The key drivers of inflation was once again fuel oil, up 9.5% on-the-month
The CPI report has brought about more uncertainty with how aggressive the Fed will get with raising interest rates
After the CPI report, the Fed funds futures is now pricing in an 89% probability of a 50 basis point rate hike in March, up from 24% yesterday
US treasury yields surged with the 10-year marking a 2 ½ year high of 2.04%.
The US 2-year Treasury yield- used to reflect short-term interest rate expectations, spiked 16.5% to 1.58%, the highest since January 2020
Commodities
Iron ore prices rose 4.8% to US$153.75 a tonne
China-based analyst told FastMarkets they expect steel mills to resume production after the Winter Olympics, this helped market sentiment towards iron ore prices turn positive
Volatile session for oil amid the Russia-Ukraine conflict and Iran nuclear talks
“Oil market fundamentals, however, remain very tight and no immediate changes to that outlook, crude prices seem poised to go higher,” said Oanda senior market analyst, Ed Moya
ASX Morning Brief
Investors should brace for a challenging session where tech stocks will likely bear the brunt of selling.
#1 BNPL
US-listed BNPL rival Affirm reported December quarter revenue growth of 77% and increased active customers by 150%. Despite the figures appearing solid at face value, the stock plunged -22.7%.
Block also fell sharply, down -4.5%.
This flags a likely painful session for local BNPL stocks.
#2 Materials & Financials
US Materials and Financials sectors held up better than most, down -0.6% and -0.9% respectively.
Encouragingly, the US-listed counterparts for BHP (ASX: BHP) and Rio Tinto (ASX: RIO) closed up 1.5% and 0.8% respectively.
Banks are also viewed as a major benefactor of higher interest rates. With markets now expecting central banks to get more hawkish on rates, net interest margin expansion could soon be on the horizon.
#3 Uranium
On Thursday, the Global X Uranium ETF rallied 7% into its 200-day moving average. We said that the ETF needed to follow through with another positive session to close above the 200-day, to truly rid of its recent bearish mood.
The sharp turnaround for the broader market has pulled the ETF back below the 200. This means that uranium bulls might need to wait a bit longer for price-action to turn into their favour.
#4 Copper
The Global X Copper Miners ETF was one of few ETFs to finish higher. Copper prices were up 0.2% to US$4.61/lb.
While the Wall Street selloff might drag local copper stocks lower, the overall sector and spot prices are holding up relatively well.
Key Events
ASX corporate actions occurring today:
Ex-dividend: BKI, JHG, PL8
Dividends paid: NPR
Listing: MRI, S3N
Issued shares: A1G, ACU, AHK, AVA, CCR, CGB, EMP, EQE, ESR, HNG, HOR, IMS, LDX, LMG, LRV, MFF, MGF, MRI, NUH, RNE, RUL, S3N, SIX, STG, STK, WAM, WCN
