Market Wrap

Morning Wrap: Wall St bounces, BHP and Rio Tinto set to rally, ASX to rise

Fri 03 Jun 22, 8:32am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 77 points higher, up 1.07%.

Wall Street continues to dip one day and rally then next, Microsoft downgraded its earnings, iron ore rallies past US$140 and oil surges after a modest OPEC+ boost. 

Let’s dive in.

Overnight summary

Fri 03 Jun 22, 8:32am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,177 +1.84%
Dow Jones 33,248 +1.33%
NASDAQ Comp 12,317 +2.69%
Russell 2000 1,898 +2.31%
Country Indices
Canada 21,032 +1.54%
China 3,195 +0.42%
Germany 14,485 +1.01%
Hong Kong 21,082 -1.00%
India 55,818 +0.79%
Japan 27,414 -0.16%
United Kingdom 7,533 -0.98%
Name Value Chg %
Commodities (USD)
Gold 1,872.70 +0.07%
Iron Ore 142.35 -
Copper 4.561 +0.19%
WTI Oil 117.56 +0.59%
Currency
AUD/USD 0.7266 +0.02%
Cryptocurrency
Bitcoin (AUD) 42,105 +2.86%
Ethereum (AUD) 2,539 +2.06%
Miscellaneous
US 10 Yr T-bond 2.913 -0.61%
VIX 25 -3.78%

Markets

  • It was a broad-based rally for Wall Street as investors remain divided between recession calls and aggressive interest rate hikes, and hopes that inflation has peaked and a possible soft landing for the economy

  • 10 out of 11 US sectors advanced

  • Discretionary, materials and tech outperformed 

  • Energy and utilities were the worst performing sectors

    • They also happen to be the only two sectors that are up year-to-date

  • 76% of US stocks advanced

  • 67% of US stocks trade below their 200-day moving average (69% on Thursday, 70% a week ago) 

Stocks

  • 97% of S&P 500 companies have reported first quarter earnings

    • Earnings per share growth is down -14% compared to the fourth quarter of 2021 and down -0.4% year-on-year

  • GameStop (+10.4%) delivered its March quarter earnings, with revenue slightly up compared to a year ago. The meme stock posted a quarterly loss of -US$158m, up from -US$66 a year ago

  • Microsoft (+0.8%) shares bounced off session lows of -4% after downgrading its earnings guidance, blaming unfavourable foreign exchange rates (surging US dollar is bad for earnings)

  • Hewlett Packard (-5.2%) after missing analyst earnings expectations

    • Margins have been under pressure due to higher freight costs and component pricing

    • A strong US dollar is also taking a toll on profits 

Economy

  • Australian retail sales rose 0.9% on-the-month in April 

    • In-line with expectations

    • Cafes, restaurants and takeaway segment rose the most, up 3.3%

    • Department stores and household goods retailing segments dipped around -2.6% 

  • US private-sector payrolls rose by 128,000 in May

    • Economists polled by The Wall Street Journal had forecast a gain of 299,00

  • US first-time jobless claims fell 11,000 to 200,000

    • Applications for unemployment benefits are falling again after reaching a 4-month high in early May 

Commodities

  • Iron ore rallied past US$140/t on hopes of a recovery in demand after Shanghai reopened from covid lockdowns and the government rolled out a series of measures to drive economic growth

  • Oil rallied, trying to reclaim US$120 after a larger-than-expected draw from the US Energy Information Draw

    • OPEC+ plans to increase production from 430,000 bpd to 648,000 bpd to meet demand

  • Gold is pushing a 1-month high as investors begin to shift towards safe-havens amid ongoing inflation fears and economic growth concerns 

 

US Sectors

Friday, 03 June 2022

Sector Chg %
Communication Services +2.58%
Consumer Discretionary +3.03%
Consumer Staples +1.37%
Energy -0.30%
Financials +1.41%
Health Care +0.78%
Sector Chg %
Industrials +1.89%
Information Technology +2.44%
Materials +2.68%
Real Estate +1.47%
Utilities +0.60%

Industry ETFs

Friday, 03 June 2022

Description Last Chg %
Commodities
Aluminum 57.2099 +3.19%
Copper Miners 39.52 +4.63%
Gold 172.23 +1.23%
Lithium & Battery Tech 71.92 +4.39%
Nickel 37.57 +5.03%
Strategic Metals 94.91 +5.12%
Steel 62.81 +2.44%
Silver 20.13 +2.29%
Uranium 21.54 +5.34%
Industrials
Aerospace & Defense 102.06 +1.98%
Global Jets 19.85 +1.56%
Healthcare
Biotechnology 115.44 +0.80%
Cannabis 3.3 +1.97%
Description Last Chg %
Cryptocurrency
Bitcoin 18.65 +0.86%
Renewables
CleanTech 14.56 +3.78%
Hydrogen 14.02 +4.71%
Solar 70.22 +5.48%
Technology
Cloud Computing 17.78 +4.44%
Cybersecurity 26.24 +3.93%
E-commerce 17.98 +4.67%
Electric Vehicles 24.41 +3.77%
FinTech 24.68 +3.69%
Robotics & AI 23.44 +4.14%
Semiconductor 419.38 +3.48%
Sports Betting/Gaming 16.53 +3.63%
Video Games/eSports 51.88 +3.45%

ASX Sectors to watch

#1 Iron Ore

US-listed BHP and Rio Tinto rallied 5.6% and 3.5% respectively amid higher iron ore prices and optimism surrounding Chinese stimulus.

Its worth noting that local BHP (ASX: BHP) and Rio Tinto (ASX: RIO) were -0.1% and -1.7% respectively on Thursday.

#2 Uranium

Uranium spot prices have reclaimed US$50/lb, compared to:

  • April 14: US$64/lb

  • May 23: US$47/lb

The Global X Uranium ETF rallied 5.3% thanks to firmer spot prices and the broader risk-on attitude for equities. The overnight moves could send some positive flows for local uranium names, especially after a rather challenging past two days.

#3 Lithium

The VanEck Rare Earth/Strategic Metals ETF rallied 5.1%, but still down -2% since the string of bad news on Wednesday.

REMX 2022-06-03 08-02-39
Rare Earth/Strategic Metals ETF (Source: TradingView)

The chart looks rather intact compared to most ASX lithium companies, many of which experienced a demoralising 10-20% selloff on Wednesday and failed to bounce on Thursday.

The magnitude of the selloff (in terms of % decline and relative volume) for a name like Pilbara Minerals (ASX: PLS) is quite damaging for the stock. To remain bullish, the stock needs to, at the very least, stabilise around Wednesday (close) levels.

#4 Copper

Copper prices rallied 5.2% overnight to US$4.55.

Copper prices have been trading sideways for more than a year. The overnight rally brings copper back to the mid-point of its longstanding trading range.

The price surge was again bolstered by China's reopening and stimulus optimism, and shortage concerns.

2022-06-03 08 08 07-HG1! 2022-06-03 08-07-53.png ‎- Photos
Copper spot price (Source: TradingView)

#5 Tech

The usual US tech suspects topped the leaderboards, including:

  • Affirm +8.6%

  • PayPal +7.1%

  • Nvidia +7%

  • Block +6.8%

  • Tesla +4.7%

The S&P/ASX 200 Info Tech is on a 3-day losing streak, down -5.8%. The rebound for US tech names and positive SPI futures will look to turn things around for local tech names.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: PPK

  • Dividends paid: QVE, UOS

  • Listing: None

  • Issued shares: AHX, AKO, ASP, BIO, BTH, DAF, GRL, GSM, IR1, JHG, KNI, LAM, LIT, LPD, MQG, MTB, NBI, NXS, OEX, OIL, OPY, PNT, PPC, PXX

Other things of interest: 

  • Aus Home Loans (April) at 11:30 am

  • EU Retail Sales (April) at 7:00 pm

  • US Unemployment Rate (May) at 10:30 pm

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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