Morning Wrap: Nasdaq leads Wall St lower, OPEC cuts oil demand outlook, ASX futures flat

Major US benchmarks eased after a euphoric rally last week, the Fed's Waller pushed back the idea of a pivot which sent bond yields and the dollar higher, Amazon plans to lay off 10,000 employees heading into Christmas, OPEC cut its oil demand outlook for 2022-23 and nickel prices are going for a run.

Let's dive in.

MARKETS

US stocks eased after the Fed’s Waller said there’s still ‘a ways to go’ before pausing interest rate hikes. The comments triggered a rebound in the US dollar and bond yields, both of which have sold off rather aggressively in the past week. European indices closed higher while Asian markets surged after China made adjustments to quarantine measures and issued a rescue package for its property sector. 

• Health Care headlined gains thanks to gains from vaccine makers Moderna and Pfizer

• Real Estate led to the downside as bond yields bounced back

• Consumer Discretionary was also under pressure as Amazon plans to lay off approximately 10,000 employees heading into Christmas

• Energy held up better-than-expected, down -0.52% after oil prices tumbling 3-4% as OPEC cut its 2022-23 demand outlook

• 47% of US stocks advanced

• 45% of US stocks trade below their 200-day moving average (44% on Monday, 54% a week ago)

STOCKS

• Moderna (+4.8%) said its new covid booster triggers five times more antibodies against omicron BA.5 and also triggered a robust immune response against omicron BQ.1.1, a new subvariant emerging in the US

• JD.com (+4.4%) and Baidu (+3.3%) shares rallied after the Hang Seng Index rose 1.7% after China eased quarantine restrictions and a sweeping 16-point plan to support its property sector  

• Amazon (-1.5%) plans to lay off approximately 10,000 employees as soon as this week, according to The New York Times. The cuts would primarily affect divisions including devices, retail and human resources

• BlackRock (-4.1%) postponed the launch of an ETF that invests in Chinese bonds due to growing tensions between the US and Beijing, the Financial Times reported 

WORLD NEWS 

• OPEC cuts oil demand outlook, curbs production (Bloomberg)

• Biden, Xi chart path to warmer ties (Bloomberg)

ECONOMY

Federal Reserve Governor Christopher Waller highlights from Sunday’s UBS economic conference:

• "We're at a point we can start thinking maybe of going to a slower pace … [but] we’re not softening.” 

• “Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there.”

• “We're going to need to see a continued run of this kind of behaviour and inflation slowly starting to come down before we really start thinking about taking our foot off the brakes.”

Federal Reserve Vice Chair Lael Brainard highlights from Bloomberg’s fireside chat event:

• “It will probably be appropriate soon to move to a slower pace of increases.”

• “By moving forward at a pace that’s more deliberate, we’ll be able to assess more data and be better able to adjust the path of rates to bring inflation down.”

• “I think the inflation data was reassuring, preliminary, just in terms of showing a slowing in categories that I had been anticipating.”

COMMODITIES

Iron ore futures rose 1.2% to US$92.65 a tonne.

• “China's daily crude steel output slipped at a faster pace to average 2.82 million tonnes/day over the first ten days of November, down 1.9% from that for late October and marking the lowest daily average since early September.” - Mysteel

• “The continuous fall indicated that more Chinese steel producers conducted maintenance on their steelmaking facilities or slowed their production pace in early November, given the losses they were suffering and the likelihood that demand among end-users will weaken with the coming winter season.” - Mysteel

Oil prices tumbled after OPEC revised down its world oil demand outlook for 2022-23 by 100,000 barrels a day due to uncertain economic conditions, pandemic restrictions and geopolitical developments.

• “Crude prices softened but didn’t break as energy traders await how supplies will be disrupted when the Russian crude price cap begins early next month.” - Oanda senior market analyst, Ed Moya

Gold reversed a -1% decline to finish the overnight session around breakeven.

• “Gold’s rally appears to be running out of steam. ​ The Fed remains the key driver for gold prices and this week could see a strong round of hawkish pushback from the policymakers.” - Moya

QUICK BITES

• State of the consumer: Several US retailers report quarterly results this week, including Walmart, Home Depot, Lowe's, Alibaba and Kohls. That'll give the market a pretty good gauge on the consumer. Keep an eye out for inventory levels. The housing downturn could also affect demand for home improvement

• Home buying conditions plummet: Worst home buying conditions in history

Source: Bloomberg, University of Michigan

• Rate cut expectations jump: "The Fed is expected to undo 165 bps worth of hikes by 2025, 51 bps more than was expected just a day before the CPI report. That's worth several P/E points for the market. The dollar has responded in force, following through on the juicy divergence that had been simmering." - Jurrien Timmer, Director of Global Macro at Fidelity

Source: Fidelity

Markets are now experiencing a little pullback as the Fed pivot narrative was met with pushback from the Fed's Waller.

A pullback is a good opportunity to observe whether or not the recent rally was genuine buying or just another 'bear market rally', fuelled by short covering.

Its worth noting that a lot of US junky, unprofitable and meme stocks surged last week, evidenced by Goldman Sachs' non-profitable tech index surging 25% late last week.

SPI futures are pointing towards a flat open. Commonwealth Bank released a trading update this morning, which could see some volatility at the index level.

Overall, we're in the midst of a potential pullback. Let's see how we hold up.

Sectors to watch

Our overnight ETF watchlist was a little choppy, with most names closing in negative territory. Most tech and resource-related ETFs are taking a breather after last week's rally, down 1-2%.

Nickel: The Bloomberg Nickel Subindex, a product that tracks an index of nickel futures, rallied 6.2% overnight. It's up 25.7% in the last six sessions.

Bloomberg Nickel Subindex weekly chart (Source: TradingView)

Stocks going ex-dividend over the next week:

• Tue: QV Equities (QVE), Plato Income Maximiser (PL8), Dicker Data (DDR), National Australia Bank (NAB)

• Wed: Challenger (CGF) 

• Thu: Wam Leaders (WLE), SSR Mining (SSR), Westpac (WBC)  

• Fri: Coronado Global (CRN), Washington H Soul Pattinson (SOL), Orica (ORI) 

• Mon: Macquarie Bank (MQG) 

ASX corporate actions occurring today:

• Dividends paid: Rand Mining (RND), Waypoint REIT (WPR), Tribune Resources (TBR), Autosports Group (ASG) 

•  Listing: None

Other things of interest (AEDT):

• 10:50 am: Japan Q3 GDP growth

• 11:30 am: RBA meeting minutes

• 1:00 pm: China industrial production

• 6:00 pm: UK unemployment rate

• 9:00 pm: US producer price index