Morning wrap: US inflation at unsurprising 40-year high of 7.9%, ASX set to fall

ASX Futures (SPI 200) imply the ASX will open 38 points lower, down -0.54%.

Wall Street struggled overnight as Russia-Ukraine peace talks failed to make any progress.

US inflation continued to climb in February, coming in at 7.9% on an annual basis, in-line with expectations.

Stocks

• US stocks cooled off from a massive rally on Thursday. The light selling was nothing alarming, with all three major indices closed well above session lows

• Ukraine-Russia negotiations for a 24-hour cease-fire did not make progress, with Russia demanding a surrender from Ukraine. Russian forces continued to siege Ukraine cities, including a horrifying attack on a maternity hospital in Mariupol

• 56% of US stocks fell, concentrated towards sectors like tech, consumer staples and financials 

• 65% of US stocks trade below their 200-day moving average (65% yesterday, 62% a week ago)

• Amazon rallied 5.5% after announcing plans for a 20-to-1 stock split. Amazon trades at around US$3,000 a share, so splitting its stock makes it more liquid and affordable for retail investors 

• Goldman Sachs eased -1.1% after announcing its exit from Russia, becoming the first major investment bank to do so  

Economy

• US Consumer Price Index, a key inflation gauge showed an annual 7.9% increase in goods and services in February. The largest on-the-month increases were:

  • Fuel oil +7.7%

  • Gasoline +6.7%

  • Transportation services +1.4%

  • Food at home +1.3%

• The recent spike in commodity prices is fueling fears that inflation will continue to push decade highs

• US unemployment claims rose 11,000 to 227,000 following unexpected layoffs in New York and California

Commodities 

• Iron ore prices continue to ease but remain above the symbolic US$150 a tonne level

• Oil prices fell back to US$110 a barrel. An OPEC ambassador from the UAE has called for higher output from OPEC+ to ease current supply conditions

• Gold is holding the US$2,000 level following a massive reversal on Wednesday. The unsuccessful peace talks and inflation data seems to be keeping prices well supported

#1 Tech

Tech stocks underperformed overnight as investors continued to exit out of the sectors most impacted by inflation and higher interest rates. Notable losers include: 

• Etsy -5.4%

• Zoom -5.3%

• Block -2.7%

• Tesla -2.4%

Local tech stocks experienced a massive rebound on Thursday, with names like Block (ASX: SQ2) and WiseTech (ASX: WTC) up 7.1% and 2.4% respectively.

The overnight pullback will likely see negative flow for the ASX tech sector.

#2 Steel

The VanEck Steel ETF continues to trend higher after a brief pullback earlier this week.

Source: TradingView

China has already started cutting interest rates, lifting infrastructure spending and tax cuts - all of which are expected to keep upward pressure on iron ore and steel demand.

The bounce back for the steel ETF could see positive flow for local names like BlueScope Steel (ASX: BSL) and Sims (ASX: SGM).

#3 Copper

Copper prices hit all-time highs of US$5.03/lb on Monday, before snapping back to lows of around US$4.5/lb.

Much like the bounce back for the Steel ETF, the Global X Copper Mines ETF is also pushing higher after a brief pullback.

Source: TradingView

Local copper stocks most likely won't get a move on until copper prices retest the US$5/lb level and/or a breakout to all-time highs for the Copper Mines ETF.

Nevertheless, it might be worth keeping an eye out for where copper goes from here.

See a list of ASX copper stocks here.

#4 Energy

"Oil edged lower after a wild session as energy traders became worried that inflationary pressures will only get worse as this war continues and that will lead to crude demand destruction," said Oanda senior market analyst, Ed Moya.

"Adding to the pressure on crude prices is the distant possibility that OPEC+ could be serious in their contemplation of boosting oil output."

It looks like economic growth concerns and OPEC+ could cap what was otherwise an extremely bullish narrative for oil.

That said, Energy was the best performing sector on Wall Street overnight, up 3.1%. This follows a sharp selloff on Thursday.

ASX corporate actions occurring today:

• Ex-dividend: BSE, DRR, DSK, GRR, KLS, NTD, WTC 

• Dividends paid: ARG, BBN, BLX, CCP, JBH, KKC, MAF, NGI, OZL, PAYS, SFC, TWD, VUK, WHC

• Listing: CSF

• Issued shares: AEI, AR3, BWF, CBR, CLA, CLB, CNU, CSF, ENT, FLT, FPC, FRB, GLN, IBG, JRV, MAF, MXI, NAB, NWH, OCL, PGD, PRU, QVE, REE, SHM, TMZ, XTC