Market Wrap

Morning Wrap: Oil tumbles below US$100, RBA expected to hike rates by 50 bps, ASX to fall

Tue 02 Aug 22, 8:34am (AEST)

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ASX Futures (SPI 200) imply the ASX 200 will open 21 points lower, down -0.31%.

Wall Street's rally takes a breather, US House Speaker Nancy Pelosi is expected to visit Taiwan despite China's warnings, Eurozone manufacturing data plummets into contraction and the US economy is projected to grow 1.3% in the third quarter.

Let’s dive in.

Overnight summary

Tue 02 Aug 22, 8:34am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,119 -0.28%
Dow Jones 32,798 -0.14%
NASDAQ Comp 12,369 -0.18%
Russell 2000 1,883 -0.10%
Country Indices
Canada 19,693 +1.21%
China 3,260 +0.21%
Germany 13,480 -0.03%
Hong Kong 20,166 +0.05%
India 58,116 +0.95%
Japan 27,993 +0.69%
United Kingdom 7,413 -0.13%
Name Value Chg %
Commodities (USD)
Gold 1,788.90 +0.07%
Iron Ore 114.35 -
Copper 3.536 -0.20%
WTI Oil 93.95 +0.06%
AUD/USD 0.7027 +0.20%
Bitcoin (AUD) 32,715 -2.90%
Ethereum (AUD) 2,303 -5.43%
US 10 Yr T-bond 2.606 -1.36%
VIX 23 +7.08%


Major US indices pulled back slightly after a wrath of underwhelming manufacturing PMIs - reminding investors that the global economy is slowing down and recession risks continue to grow. 

US House of Representatives Speaker Nancy Pelosi plans to visit Taiwan despite repeated warnings from China. Chinese foreign ministry spokesperson Zhao Lijian said “we are fully prepared for any eventuality. The People’s Liberation Army will never sit by idly. China will take strong and resolute measures to safeguard its sovereignty and territorial integrity.” 

  • 7 out of 11 US sectors declined

  • Defensives including Staples, Industrials and Utilities outperformed

  • Discretionary outperformed benchmarks, up 0.5%

  • Energy fell an outsized -2.2% as oil prices tumbled

  • 49% of US stocks advanced

  • 57% of US stocks trade below their 200-day moving day average (57% on Monday, 68% a week ago) 


  • Boeing (+6.1%) shares rallied after CNBC reported the Federal Aviation Administration approved revisions to allow the jet maker to resume deliveries of its 787 Dreamliner

  • Pinterest (+2.7%, after hours: +21.6%) shares rallied on better-than-feared user numbers, even as earnings missed analyst expectations

    • Global monthly active users fell -5% to 433m versus 431m expected

    • The result comes as no surprise given the gloomy results from social media names like Facebook parent Meta, Twitter and Snapchat

    • “The macroeconomic environment has created meaningful uncertainty for our advertiser partners,” the company warned 

  • Activision Blizzard (+0.2%, after hours: +0.6%) reported quarterly revenues of US$1.64bn, down -28.7% compared to a year ago. The company is still waiting for its US$69bn Microsoft takeover to close 


According to Bank of America, 279 S&P 500 companies comprising 71% of the index earnings have reported. 67% beat earnings per share (EPS) and 62% beat revenue expectations.

EPS growth was 5.7%, but excluding the energy sector, EPS growth was -4.2%.

US corporate earnings we’re watching next week:

  • Tuesday: Caterpillar, Advanced Micro Devices, Airbnb, PayPal, Starbucks, Uber

  • Wednesday: Moderna

  • Thursday: Alibaba, Block, Beyond Meat, Virgin Galactic 

  • Friday: Allianz


  • China manufacturing PMI unexpectedly fell to 50.4 in July from 51.7 in June

    • Consensus expected a reading of 51.5

    • The 50 pt level separates contraction from expansion

    • “The weaker-than-expected July PMI data confirmed our concerns on persistent headwinds facing the Chinese economy, even though the worst shocks from COVID-19 are already behind us,” said Bank of America, the AFR reported

  • German retail sales plummeted -8.8% year-on-year in June, down from 1.1% in May

    • Biggest year-on-year slump since 1980 as consumers cut back on non-essential goods such as furniture and clothing 

  • German manufacturing PMI fell to 49.3 in July from 52 in June

    • "Goods producers' expectations turned negative back in March and have deteriorated in almost every month since as downside risks to the sector's outlook continue to build," noted S&P Global

    • "The potential for a shortage in gas supplies has German manufacturers seriously worried about the outlook for production in the coming year,"

  • Eurozone manufacturing PMI fell to 49.8 in July from 52.1 in June

    • First decline below the crucial 50 point mark since May 2020

    • “Eurozone manufacturing is sinking into an increasingly steep downturn, adding to the region’s recession risks,” said Chris Williamson, Chief Business Economist at S&P Global 

  • US manufacturing PMI was steady at 52.2 in July from 52.7 in June

    • Still the lowest PMI reading since June 2020

    • "The U.S. manufacturing sector continues expanding — though slightly less so in July — as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels,” said Timothy Fiore, Chair of the Institute for Supply Management 

  • US Atlanta Fed GDPNow model estimates real GDP growth of 1.3% in the third quarter, down from 2.1% a week ago


  • Iron ore futures fell -0.54% to US$114.35. The rally from US$100 is taking a breather after a meeting with China’s top leaders did not announce any new stimulus measures and only pointed to broader directions to stabilise the property market

  • Oil tumbled after most European manufacturing PMIs came in well-below expectations and in contraction territory

  • Gold continues to climb higher now that Treasury yields have peaked and the US dollar is trending lower, on a five-day losing streak


US Sectors

Tuesday, 02 August 2022

Sector Chg %
Communication Services -0.42%
Consumer Discretionary +0.51%
Consumer Staples +1.21%
Energy -2.18%
Financials -0.89%
Health Care -0.73%
Sector Chg %
Industrials +0.13%
Information Technology -0.20%
Materials -0.81%
Real Estate -0.89%
Utilities +0.10%

Industry ETFs

Tuesday, 02 August 2022

Description Last Chg %
Aluminum 51.315 -1.24%
Copper Miners 30.49 -2.20%
Gold 164.1 +0.57%
Lithium & Battery Tech 74.39 +1.45%
Nickel 31.67 +2.08%
Strategic Metals 92.5 +0.62%
Steel 53.97 -1.11%
Silver 18.7 +0.48%
Uranium 21.58 -2.41%
Aerospace & Defense 103.8 +0.75%
Global Jets 17.7 +1.07%
Biotechnology 124.08 -1.46%
Cannabis 17.0927 -0.25%
Description Last Chg %
Bitcoin 14.83 -4.18%
CleanTech 16.17 -1.67%
Hydrogen 14.51 -1.93%
Solar 85.57 -2.59%
Cloud Computing 17.38 +0.86%
Cybersecurity 25.74 +0.35%
E-commerce 17.72 +0.28%
Electric Vehicles 24.08 +0.37%
FinTech 24.37 +0.04%
Robotics & AI 22.52 +1.11%
Semiconductor 407.33 +0.39%
Sports Betting/Gaming 15.66 -1.28%
Video Games/eSports 50.01 +0.68%

ASX Sectors to watch

Major US benchmarks inched lower overnight after a massive outperformance in July. If this is the beginning of a pullback, it'll be interesting to see what kind we get - a constructive pullback that further validates a bottom or was July just another 'bear market rally'.

The RBA is expected to hike interest rates by 50 bps at 2:30 pm AEST which could cause some fireworks for the local sharemarket.

The ASX 200 during previous hikes:

  • 3 May -0.42%

    • 25 bps hike versus 15 bps expected

  • 7 June -1.53%

    • 50 bps hike versus 25 bps expected

  • 5 Jul +0.25%

    • 50 bps in-line with expectations

With the lack of overnight catalysts, aren't that many interesting sectors to watch.

#1 Lithium

The Lithium & Battery Tech ETF has been grinding higher, closing above the 200-day moving average and having a crack at the trendline.

Interesting quote from Fortune 500 US manufacturer Stanley Black & Decker CEO, "we have seen commodities pull back significantly, except for lithium ... because there is still a high demand for batteries across many industries. But a lot of those spot prices have dropped back to levels that are closer to where they were at the beginning of the year."

lithium and battery tech ETF
Lithium & Battery Tech ETF (Source: TradingView | Annotations by Market Index)

#2 Energy

Oil prices pulled back sharply with Brent Crude back below US$100 and WTI at US$93.

Investors have shifted their focus from tight supply to deteriorating short-term demand amid the wrath of poor manufacturing data from Europe and China.

Production increase announcements from Devon Energy, Exxon and Chevron added further insult to injury.

#3 Travel

There's something about the shape of the US Jets ETF chart I can't quite put my finger on.

US Jets ETF chart
US Jets ETF (Source: TradingView)

It's interesting because travel agencies like Flight Centre (ASX: FLT) and Webjet (ASX: WEB) charts are rather weak (struggling to close above the 20-day, moving averages are still downward trending, trading at the lower bound of recent ranges).

But a carrier like Qantas (ASX: QAN) is trying to break out.

Qantas share price chart
Qantas share price chart (Source: TradingView | Annotations by Market Index)


Today's events

ASX corporate actions occurring today:

  • Ex-dividend: None

  • Dividends paid: None

  • Listing: None


Other things of interest (AEST): 

  • Australia Building Permits (June) at 11:30 am

  • Australia Home Loans (June) at 11:30 am

  • RBA Interest Rate Decision at 2:30 pm


Written By

Kerry Sun

Finance Writer & Social Media

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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