Morning Wrap: US futures slide, Biden-Putin summit in the works, ASX set to fall

ASX Futures (SPI 200) imply the ASX will open 72 points lower, down -1.0%. 

Wall Street was closed on Monday for the Presidents Day holiday. European markets tumbled overnight on doubts over US-Russian diplomatic efforts. While there’s still hope for diplomacy, investors are bracing for an invasion at any moment.

Stocks 

• US futures are lower in after hours trade

  • Dow Jones (blue chip) -0.9%

  • S&P 500 (large cap) -1.2%

  • Nasdaq (tech) -1.9% 

• European equity markets faltered after Moscow said no concrete discussions have been planned between President Joe Biden and Russian President Vladimir Putin

• Biden has expressed his willingness in principle to meet Putin on the condition that the Russians don't invade

Economy

• Purchasing managers’ index (PMI) figures in the Eurozone rose to a 5-month high of 55.8 in February, well above consensus expectations of 52. The reading is viewed as a reliable gauge of overall economic health

• UK’s PMI reading came in at an 8-month high of 60.2 in February, up from 54.2 in January and also topping forecasts 

Commodities 

• Nickel prices continue to climb 11-year highs, spurred by the possibility of sanctions on Russia if it invades Ukraine

• Aluminium prices are also pushing all-time highs amid potential Russian supply disruptions

• Iron ore prices jumped after Chinese policymakers lowered mortgage rates and loosened property policies 

• Oil prices climbed as the possibility of a Biden-Putin meeting remains on edge

• Gold remains chopping around the US$1,900 level, any ugly headlines should buoy gold prices 

#1 Iron Ore

Major state-owned Chinese banks began lowering first-home owner mortgage rates on Monday. In some provinces, mortgage rates fell from 5.6% to 5.4%. 

This buoys the outlook for China’s all-important real estate and construction industries, which typically account for 50-60% of domestic steel consumption, according to the Office of the Chief Economist. 

See a list of iron ore stocks here. 

#2 Energy

Crude oil prices climbed 2.1% overnight to US$93.9 a barrel. Brent crude prices rallied 3.3% to US$96.7 a barrel.

“This is despite a nuclear deal between the US and Iran seemingly being close which could bring 1.3 million barrels per day back into the markets, alleviating some of those pressures we’re currently seeing,” said Oanda senior market analyst, Craig Erlam.

“OPEC+ is continuing to struggle to hit its quotas which has largely created the imbalance we’re seeing, with the group’s compliance hitting 129% last month, up from 122% in November.”

The positive session could bolster local energy stocks, notably:

• Woodside (ASX: WPL)

• Beach Energy (ASX: BPT)

#3 Gold

Gold has managed to hold above the psychological US$1,900 level. 

“While there is still hope for diplomacy, which would reduce gold’s safe-haven appeal, there’s certainly reason to believe an invasion could happen at any moment,” Erlam said.

“That will continue to see gold well supported and, in the absence of serious progress on Thursday when Blinkin meets Lavrov, a break may not be far away.”

See a list of gold stocks here.

#4 Nickel

Nickel prices have climbed to US$24,600 a tonne, the highest since June 2011. 

"There will be a risk premium for nickel given the potential for disruptions from Russia, and inventories are low,” ING analyst Wenyu Yao told Reuters. 

Despite higher prices, nickel stocks have struggled for upside amid the gloomy risk-off attitude towards equity markets. Local nickel stocks are typically more speculative in nature and vulnerable to broader market weakness.

See a list of nickel stocks here.

ASX corporate actions occurring today:

• Ex-dividend: AMC, IPH, MAF, RKN, TAH, WES

• Dividends paid: TCL

• Issued shares: AGY, AIV, AVL, BGT, CIA, DOU, DRR, DUB, EBO, ECX, EEG, GOR, HCH, HLF, KTG, LGP, LPE, MAN, MRD, MZZ, NAB, NAC, NAN, ORR, PDL, PGC, PRM, RF1, VAL