Morning wrap: US bans Russian oil, Wall Street fades, ASX to open flat

ASX Futures (SPI 200) imply the ASX will open 5 points higher, up 0.07%.

Major US indices tried to rebound in early trade but failed to hold onto gains.

Stocks that sold off the most on Tuesday held up better than most, notably those from energy and technology sectors.

Stocks

• Its not a good look when all three major US indices sold off after a strong open. This indicates that sellers are in control and a lack of buying interest. Intraday highs include:

  • Dow Jones (blue chip): 1.78%

  • S&P 500 (large cap): 1.81%

  • Nasdaq (tech): 2.56%

• A death cross for all three major indices is nearing. This is when the 50-day moving average crosses the 200-day, an indication that momentum is headed downward 

• Investors continue to assess the growing concern that surging commodity prices will fuel inflation and weigh on global economic growth

• Energy was the only sector to close well within positive territory

• The Consumer Discretionary sector also eked out a slight gain

• 52% of US stocks advanced

• 68% of US stocks trade below their 200-day moving average (68% yesterday, 66% a week ago)

Economy

• The US trade deficit climbed to a record US$89.7bn in January, propped up purchases of oil, autos and other goods

Commodities 

• Iron ore remained stable after a 7% spike on Tuesday

• Oil prices gathered momentum after President Joe Biden announced a US ban on Russian oil imports. Russia accounted for circa 8% of all US petroleum exports in 2021

• Gold came within an inch of all-time highs, briefly hitting US$2,070

• Nickel prices hit US$100,000 a tonne after one of China’s largest banks was given extra time by the London Metals Exchange to pay hundreds of millions of dollars of margin calls for shorting the metal

The market is in an extremely vulnerable state.

#1 Renewables 

The Global X Hydrogen, CleanTech and Solar ETFs rallied more than 8.4% overnight. 

All three ETFs experienced a correction of at least -40% between last November and early February. The recent price action indicates that a near-term bottom is in. 

The Global X Hydrogen ETF rallies on 2.5 times average volume (Source: TradingView)

The Russian invasion of Ukraine will likely accelerate Europe’s push towards green energy.

Unfortunately, the ASX doesn’t exactly have many options when it comes to large cap stocks in the hydrogen, solar and the renewable space.

#2 Travel

The US Global Jets ETF was down almost -30% in the past three weeks. 

Most US airline stocks rallied between 3-5% overnight.

This could see positive flow for local airlines and travel stocks.

Investors should watch out for today's consumer confidence data, a severe decline in confidence could be another factor weighing on the industry.

Qantas (ASX: QAN) is said to be protected from surging oil prices thanks to its hedging program through to the end of June. This will likely translate to an increase in airfares in the second-half of the year.

#3 Uranium

The Global X Uranium ETF has recovered from last week’s nuclear incident concerns. The ETF looks encouraging because:

• Took 2 days to shrug off last week's selloff

• Holding above the 200-day

• Coming back up to 3-month highs

• Uranium hit a fresh 10-year high of US$52.5/lb

• The US and EU rely on enriched Russian uranium to power circa 20% of their reactors

Source: TradingView

See a list of ASX uranium stocks here.

#4 Gold

Gold briefly touched US$2,070 in overnight trade, just a fraction away from August 2020 record highs of US$2,075.

“Gold’s rally has been relentless, gaining more than 16% in a little over a month and it’s hard to know when it will stop,” said Oanda senior market analyst, Craig Erlam.

“In the absence of a ceasefire in Ukraine and withdrawal of Russian troops, the uncertainty around commodity prices and sanctions could see money continue to pile into it.”

This should continue to feed into a comeback story for local gold miners, that have underperformed the market for almost two years.

See a list of ASX gold stocks here.

#5 Energy

The US energy sector was the only sector to close at least 1% higher.

"All the headlines suggest oil prices will continue to go higher.  Global energy supplies will continue to get tighter now that both the US and UK will ban Russian oil," said Oanda senior market analyst, Ed Moya.

"The crude supply outlook will struggle to make up for Russian supplies over the next few months, so whatever pricing dips occur could be short-lived."

See a list of ASX energy stocks here.

ASX corporate actions occurring today:

• Ex-dividend: AVJ, AX1, BXB, CGC, EQT, IMD, JYC, KME, SNZ, SRG, SXL

• Dividends paid: ANN, NBI, RCT

• Listing: none today

Other things of interest: 

• Australian Consumer Confidence (March) at 10:30 am AEDT