Morning wrap: US bank stocks slump, oil prices jump, ASX to rise at open
ASX Futures (SPI 200) imply the ASX will open 28 points higher, up 0.38%.
Mentioned
ASX Futures (SPI 200) imply the ASX will open 28 points higher, up 0.38%.
Looming interest rate hikes continue to drive a bumpy rotation from fast growing technology stocks to cyclicals.
Except this time, US tech stocks rebounded while bank stocks underperformed amid weaker-than-expected earnings.
US stocks were mixed last Friday.
The Dow Jones (blue-chip) underperformed, but closed well above its intraday low of -1.3%.
The S&P 500 (large caps) eked out a small gain, bouncing from session lows of -0.95%.
The Nasdaq Composite (tech) outperformed and closed at session highs.
On the economic front, the US Department of Commerce reported a -1.9% decline in retail sales in December, well below the -0.1% decline forecasted by economists polled by The Wall Street Journal.
Furthermore, US consumer sentiment fell to 68.8 in January vs. 70.6 in the prior month.
This reading marks the second-lowest figure in a decade. Surging omicron cases and a sharp rise in inflation are likely drivers of the decline.
Benchmark US 10-year Treasury yields climbed 4.8% overnight to 1.79%. This represents the highest close since 21 January, 2020.
US 10-year Treasury yields, weekly chart, TradingView
Investors should note that the US market will be closed on Monday, 17 January in observance of Martin Luther King Jr. Day.
The ASX energy sector is expected to outperform on Monday following a jump in oil prices.
▲ Energy
Oil stocks are within an arm's reach of 8-year highs, with crude oil closing at US$84.4.
“Crude prices continue to rally on optimism that the oil market will remain tight as COVID pandemic starts to move into the endemic phase,” said OANDA senior market analyst, Ed Moya.
“Money managers are turning very bullish with Brent crude, sending bullish bets to an 11-week high. Today’s oil price rally is very impressive given how strong the [US] dollar is today,” he added.
▲ Technology
Mega cap technology stocks including Microsoft, Tesla and Meta Platforms all closed 1% higher.
Despite the overnight gain, the Nasdaq Composite is still down -1.2% for the week and down -4.8% year-to-date.
The ASX tech sector could be mixed on Monday, given the -2.7% decline in Block shares. This will see Afterpay (ASX: APT) weigh on the broader tech sector.
▼ Financials
US bank stocks closed mostly lower as quarterly results struggled to impress investors.
JPMorgan Chase topped revenue and profit estimates, but the company’s stock closed -6.2% lower. CFO Jeremy Barnum flagged that the bank would likely miss key profit targets in the next two years.
Similarly, Citigroup shares fell -1.3% amid a -26% decline in profits.
ASX Sectors to watch
#1 Hydrogen
The Hydrogen ETF closed at yet another all-time low amid a broader rotation away from risky investments.
The ETF is now down -12.5% year-to-date and down -37.7% from November 2021 all-time highs.
Hydrogen demand is expected to expand 44% by 2030, according to the International Energy Agency (IEA).
Its analysis of the current hydrogen pipeline suggests that only circa 18% of 2030 demand will be met.
The recent tech-driven selloff has weighed on speculative hydrogen stocks.
Notable names at risk include:
#2 Aluminium
Aluminium prices continued to push the US$2,900 level amid declining inventories and expectations of a large deficit.
Source: TradingEconomics
According to TradingEconomics, stocks of aluminium in LME approved warehouses fell more than 50% since March 2021.
Stocks that have rallied from the recent price surge include:
South 32 (ASX: S32), which closed at 2-year highs last Friday and up 4.3% year-to-date
Alumina (ASX: AWC), up 9.9% year-to-date
#3 FinTech
The FinTech ETF closed at fresh 18-month lows, weighed by a -2.7% decline from Block and -7.4% decline from payments company Adyen.
This will send mixed signals towards the local tech sector, as Afterpay is expected to open lower.
Today’s events
ASX corporate actions occurring today:
Ex-dividend: TRA
Dividends paid: FOR, KKC, QRI
IPOs: VTX
Issued shares: 92E, ACW, AIV, BRN, CAN, CDX, CXO, FDV, GMD, IRE, JRV, MCT, MGF, NOV, POL, RHY, RUL, STK, WAM, WC8
Other things of interest
Quarterly GDP growth (CN): China will release Q4 GDP growth figures at 1:00 PM AEDT
Industrial production (CN): China’s year-on-year industrial growth is forecast to come in at 3.7% according to TradingEconomics. Figures will be released at 1:00 PM AEDT
Retail sales (CN): China will release December retail figures at 1:00 PM AEDT
