Morning wrap: US stocks fall as oil prices spike, inflation woes return, ASX set to slide

ASX Futures (SPI 200) imply the ASX will open 54 points lower, down -0.7%. 

US stocks sold off as oil prices jumped, the Fed’s idea of a ‘soft landing’ seems unlikely, President Joe Biden set to arrive in Europe to discuss the crisis with allies and Tesla opens its first European factory in Germany.

Let’s dive in.

Stocks

• US stocks struggled as the recent bounce-back euphoria dies down and uncertainty sets in. The US Federal Reserve faces a difficult challenge in raising interest rates as geopolitical risks continue to put upward pressure on commodity prices

• 66% of US stocks declined 

• 62% of US stocks trade below their 200-day moving average (59% yesterday, 63% a week ago)

• Financials, healthcare and tech stocks underperformed

• Only energy and utilities sectors closed in green

• GameStop +15.5% after Chairman Ryan Cohan bought 100,000 more shares. The meme stock is up 50% in the last two sessions

• Adobe -9.3% after revenues rose 9% to a record US$4.3bn. Its shares might be selling off due to a conservative outlook

• Moderna -4.3% as the company seeks for emergency use authorisation from regulators for its vaccine for kids under 6 years old

Economy

• UK inflation hit 6.2% in February, the highest level in three decades and well above economists expectations of 5.9% reading

  • The Bank of England expects inflation to hit 8% by April, with the risk of a double-digit figure if there is another share spike in energy prices

• US new-home sales fell -2% to an annual rate of 772,000 in February. Economists polled by MarketWatch were expected a figure of 805,00

Commodities 

• Iron ore prices were largely unchanged

• Oil prices spiked after Russia confirmed that oil exports via the Caspian Pipeline Consortium (CPC) will fall by around 1m barrels a day due to storm damage

• Gold prices pushed higher as a slight risk-off attitude returned and bond yields eased

US markets pulled back after a massive bounce back. US trader Mark Minervini said that "the market was down big today but many breakout stocks held up relatively well. Backing and filling is normal as long as we don't see renewed distribution and a proliferation of pivot and base failures."

#1 Energy

Oil prices spiked after oil exports via the CPC will fall by around 1m barrels a day for up to two months due to storm damage.

The pipeline exports around 1.2m barrels per day, or 1.2% of global demand, according to Reuters. This comes at time in which oil markets are extremely tight and stockpiles continue to decline.

Gas prices also spiked after President Vladimir Putin insisted that hostile nations pay for Russian gas in rubles.

#2 Tech

Brace yourself for a poem - in recent weeks, when the market rallies, tech stocks lead, but when the market falls, tech stocks bleed.

Notable overnight loser include: 

• Block -4.5%

• Etsy -3.9%

• PayPal -2.7%

• Zoom -2.5% 

This means local Block (ASX: SQ2) shares will likely open sharply lower. The underperformance of US tech stocks overnight could lead to negative flows for local names.

#3 Gold

Gold prices rallied as bond yields eased. Surging yields and rising stocks did not provide investors with a good reason to buy or hold gold. 

“The yellow metal is very much struggling for direction faced with high inflation but much more aggressive tightening and substantial uncertainty but improved sentiment,” said Oanda senior market analyst, Ed Moya. 

“It may remain well supported given the sheer level of uncertainty but upside may face more resistance than we saw last month, for example, unless we see a significant escalation in Ukraine.”

Nevertheless, the bounce in gold prices overnight could give local gold names a kick.

#4 Banks

US Financials was the worst performing sector overnight, down -1.84%.

This is more of a 'good to know' as opposed to a factor that might impact local banks and financials.

The severe depreciation of Russian assets could take a toll on first-quarter earnings at major US banks.

Reuters reported comments by markets chief JPMorgan who said quarterly revenue had become unpredictable due to significant counterparty risk and a lot of clients being under extreme stress, particularly from commodities trades.

ASX corporate actions occurring today:

• Ex-dividend: API, BIS, CCV, CII, COG, HLS, LAU, MGH, PPC, SPK

• Dividends paid: AFG, BGA, DOW, HLA, IAG, IMD, INA, KME, MPL, NWL, OML, RMC, STO, VEA

• Listing: None today

• Issued shares: AGE, AW1, BOE, BSX, BTR, CAR, CLZ, CNU, E2M, FBU, FNT, GNX, HLF, K2F, LOT, MCT, MGH, NAB, NWC, OEX, PEK, PGD, SNZ, STN, SXY, UWL, WCG