ASX Futures (SPI 200) imply the ASX will open 46 points lower, down -0.6%.
The ASX is expected to slide as global markets falter ahead of key US inflation data and more comments from the US Federal Reserve about interest rate hikes.
Globally, investors are repositioning their portfolios in anticipation of higher interest rates as soon as March.
Deutsche Bank has gone as far as saying there’s a possibility that the Fed needs to consider hiking interest rates at almost every meeting this year.
Tue 11 Jan 22, 8:36am (AEST)
U.S. 10 Year Treasury
The Dow Jones (blue-chip) dropped -0.5%. The S&P 500 (large-caps) fell for a fifth straight session, down 0.1%. The Nasdaq Composite (tech) managed to eke out a small gain of 0.05%.
The benchmark US 10-year Treasury yield is in breakout mode, closing at 2-year highs of 1.76% after starting the year at just 1.51%.
Yields are rallying with the expectation that the Fed will get aggressive with rate hikes this year in an attempt to curb inflation.
The only piece of encouraging news was that all three major US indices managed to close well above session lows. The Nasdaq was selling off as much as -2.7% within the first hour of trade. This could help cushion the losses expected for the ASX.
Tuesday, 11 January 2022
Broad-based selling across the US market is expected to drive weakness across most ASX-sectors.
Vaccine makers Pfizer, Modern and BioNTech buoyed the healthcare sector after rallying between +1% and +9.3%.
Omicron cases continue to push all-time highs globally, with recent headlines including China testing more than 14 million citizens to curb omicron. As well as reports from Cyprus that a new strain of covid has emerged, which combines the delta and omicron variant.
According to Bloomberg, Leondios Kostrikis, professor of biological sciences at the University of Cyprus, called the strain “deltacron,” because of its omicron-like genetic signatures within the delta genomes.
Fast growing and richly valued technology stocks have struggled as yields jumped. The Nasdaq is now down more than -5% this year.
Material stocks fell amid broad-based weakness across commodity prices.
In terms of the all-important iron ore price, traders told Fastmarkets that emerging covid cases in north China, combined with the upcoming Chinese Lunar New Year and Winter Olympics, could lead to some bearishness in the iron ore market.
Tuesday, 11 January 2022
|Lithium & Battery Tech||79.74||+2.56%|
|Aerospace & Defense||105.42||+1.16%|
|Robotics & AI||33.43||+0.60%|
Aluminium was flagged as a potential sector to watch last week amid tightness in the European market. Aluminium prices have continued to march higher, closing above US$2,900/t as expectations of large deficits set in.
South32 (ASX: S32) briefly hit 3-year highs last week, with its eyes set on another crack at multi-year highs after rallying +3.6% on Monday
Alumina (ASX: AWC) has lagged behind recent aluminium tailwinds and has largely been trading sideways since early November 2021
Looking over at losing sectors, the Hydrogen ETF hit yet another all-time low (listed on 14 July 2021).
The prospect of rising interest rates and a broad pivot away from risky sectors has likely weighed on speculative, loss making hydrogen companies.
There is a long-term bull case for the hydrogen industry, with the International Energy Agency forecasting that current hydrogen pipeline can only meet circa 18% of 2030 demand.
Unfortunately, the current market appears more fixated on what will happen in the near term with interest rates, less stimulus and inflation.
The ETF's weakness could pressure local names like:
The Uranium ETF has experienced a lot of volatility in recent days amid civil unrest in the world's largest uranium producing country, Kazakhstan.
There has been mixed updates from Kazakhstan's Kazatomprom, the world's largest uranium producer responsible for 22% of global supply in 2020, according to the World Nuclear Association.
On Friday 7 January, Kazatomprom's CEO said "we are fulfilling all our obligations easily, there are no problems with uranium shipments and we will meet all delivery deadlines," according to Bloomberg.
The next day, a Kazatomprom spokesman said "of course there's going to be an impact when you have cities and towns in lockdowns, limited telecommunications, and a financial system temporarily shut down."
The situation is rapidly evolving and investors should expect choppy trading for ASX companies like:
The FinTech ETF hit a fresh 15-month low amid a global rotation out of technology stocks. Encouragingly, the ETF bounced off session lows of -5.4% to close just -1.8% lower. The strong rebound could help cushion the fall for local ASX tech companies.
Afterpay (ASX: APT) is expected to open in the green after Block closed 2.1% higher
The Lithium ETF is coming under pressure, briefly touching its 200-day moving average for the first time since May 2020.
The Australian Government's commodity forecaster, the Office of the Chief Economist, expects spodumene prices to rise to an average US$1,185/t in 2022 from an estimated US$720/t in 2021.
Despite the continued tailwinds for lithium demand and prices, the sector could come under pressure from recent interest rate fears.
Investors should keep an eye out for whether or not the ETF can hold the all-important 200-day moving average.
ASX corporate actions occurring today:
Ex-dividend: No companies going ex-div
Dividends paid: MOT, MXT, PCI
Issued shares: ADO, AGY, AMC, AN1, AVH, BNZ, BRK, BUD, CRO, EFE, FZO, GLN, IBX, LKE, MCA, MGF, MXR, NAB, NWE, NXG, PDI, PNM, RMD, RMS, TRT, TYR
Other things of interest:
Balance of Trade: Trade figures will be released at 11:30 am AEDT with expectations of a $10.5bn surplus, according to TradingEconomics
Retail Trade: the Australian Bureau of Statistics (ABS) will release November 2021 retail sales figures at 11:30 am AEDT
Finance Writer & Social Media
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