Market Wrap

Morning Wrap: Wall St bounces on solid retail sales and China reopening, ASX poised to rally

Wed 18 May 22, 8:38am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 70 points higher, up 0.98%.

Wall St rebounded as investors digest a stream of positive news across the world. China is taking its first steps to bring Shanghai out of lockdown, US retail sales data was solid, the Chinese government is showing support for its tech sector and Warren Buffet bought the dip.

Let’s dive in.

Overnight summary

Wed 18 May 22, 8:38am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,089 +2.02%
Dow Jones 32,655 +1.34%
NASDAQ Comp 11,985 +2.76%
Russell 2000 1,840 +3.19%
Country Indices
Canada 20,491 +1.41%
China 3,094 +0.65%
Germany 14,186 +1.59%
Hong Kong 20,603 +3.27%
India 54,318 +2.54%
Japan 26,660 +0.42%
United Kingdom 7,518 +0.72%
Name Value Chg %
Commodities (USD)
Gold 1,813.30 -0.31%
Iron Ore 132.61 -
Copper 4.231 -0.19%
WTI Oil 113.81 +1.25%
Currency
AUD/USD 0.7027 -0.01%
Cryptocurrency
Bitcoin (AUD) 43,427 +0.65%
Ethereum (AUD) 2,972 +1.57%
Miscellaneous
US 10 Yr T-bond 2.968 +3.16%
VIX 26 -4.99%

Stocks

  • Major US indices are trying to bottom after an abysmal start to the year. In the last three days:

    • Dow Jones +2.9%

    • S&P 500 +4.1% 

    • Nasdaq +5.5%

  • Chinese Vice-Premier Liu He said the government supports the development of digital platform companies and their public listings

    • Large cap tech names like Alibaba and Tencent rallied more than 5% on Tuesday

    • JP Morgan raised ratings for 7 Chinese tech stocks, after calling the region “uninvestable” a few months ago

  • Bank of America’s monthly fund manager survey reported that investors have increased their cash holdings to the highest level in two decades

    • Hawkish central banks (31%) and global recession (27%) are considered to be the “two biggest tail risks among investors”

    • Commodities, healthcare and consumer staples were the top picks

    • Technology, Europe and emerging markets were shunned

  • 10 out of 11 US sectors were green

  • Tech, materials, financials and discretionary outperformed

  • Consumer staples was the only red sector

  • 79% of US stocks advanced

  • 70% of US stocks trade below their 200-day moving average (73% on Tuesday, 75% a week ago)

  • Home Depot (+1.7%) beat first quarter earnings expectations, with surprise growth in same-store sales, up 2.2%

  • Warren Buffett is buying the dip as Berkshire Hathaway added:

    • US$2.9bn in Citigroup (+7.5%)

    • US$2.6bn in Paramount (+15.4%)

Economy

  • US retail sales rose 0.9% in April

    • Economists surveyed by The Wall Street Journal expected a 1.0% gain

    • Most major retail categories posted gains

  • US industrial production rose 1.1% in April

    • Beat expectations of a 0.5% gain

    • Capacity utilisation rose to 79% in April from 78.2% in March

  • India wholesale inflation rose to 15.08% in April

    • Led by higher energy, oil and food prices

    • Headline CPI hit 7.8%, the highest level since May 2014

Commodities

  • Iron ore prices eased slightly, holding above US$130 a tonne

    • Seaborne cargo demand has been steadily improving in the last two weeks, with more inquiries from Chinese steelmakers, industry sources told Fastmarkets 

  • Oil initially rallied as China’s fight against covid appears to be taking a step in the right directions and US officials signalled a potential switch from a Russian oil embargo to tariffs

  • Gold remains muted, hovering US$1,800

 

US Sectors

Wednesday, 18 May 2022

Sector Chg %
Communication Services +1.82%
Consumer Discretionary +2.68%
Consumer Staples -1.15%
Energy +1.14%
Financials +2.69%
Health Care +1.38%
Sector Chg %
Industrials +2.28%
Information Technology +2.91%
Materials +2.86%
Real Estate +1.05%
Utilities +1.03%

Industry ETFs

Wednesday, 18 May 2022

Description Last Chg %
Commodities
Aluminum 59.6311 +2.06%
Copper Miners 36.1 +4.74%
Gold 170.4 -0.63%
Lithium & Battery Tech 66.65 +5.54%
Nickel 35.78 -2.29%
Strategic Metals 91.33 +5.93%
Steel 57.16 +3.52%
Silver 19.93 -0.05%
Uranium 20.48 +4.39%
Industrials
Aerospace & Defense 98.56 +2.36%
Global Jets 19.11 +5.70%
Healthcare
Biotechnology 113.29 +2.85%
Cannabis 3.79 +2.90%
Description Last Chg %
Cryptocurrency
Bitcoin 18.32 +1.91%
Renewables
CleanTech 12.83 +4.44%
Hydrogen 12.76 +4.23%
Solar 60.74 +5.35%
Technology
Cloud Computing 17.11 +1.11%
Cybersecurity 25.18 +0.87%
E-commerce 17.14 +3.50%
Electric Vehicles 22.98 +4.05%
FinTech 23.25 +3.74%
Robotics & AI 22.29 +3.19%
Semiconductor 401.3 +4.86%
Sports Betting/Gaming 16.12 +2.48%
Video Games/eSports 48.5 +4.49%

ASX Sectors to watch

It feels odd to see such strength come back into the market after a prolonged period of underperformance and pessimism.

It's encouraging to see broad-based buying across US sectors as well as slightly better market breadth (70% of stocks below 200-day vs. >70% in the past week).

Its important that indices and individual stocks hold their gains over the next few days - otherwise things might look a little more like a suckers rally.

Most ETFs were up 2-5%, but the gains are rather inconsequential relative to the recent selloff - more is needed and the gains need to hold up. Some notable movers include:

  • Jets (Airlines) +5.7%

  • Copper Miners +4.7%

  • Uranium +4.4%

#1 Tech

The past three trading sessions has been an absolute rollercoaster for tech. We're finally seeing some strength came through for mega cap names including:

  • Tesla +5.1%

  • Amazon +4.1%

  • Apple +2.5%

  • Microsoft +2.0%

  • Alphabet +1.8%

The Global X FinTech and Cloud ETFs rallied 3.7% and 3.5% respectively. The Cloud ETF lagged, up just 1.1%.

On the BNPL front, Affirm rallied 10% and Block closed 6.4% higher.

#2 Lithium

The Rare Earth/Strategic Metals ETF topped the leaderboards overnight, up 5.9%.

Several lithium-related companies in China rallied strongly on Tuesday, with Ganfeng Lithium up 9% and Zhejiang Huayou Cobalt up 4.8%.

Tesla's Shanghai factory is back up producing EVs. Though, the factory is only running at approximately 45% capacity, according to the South China Morning Post.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: None 

  • Dividends paid: None

  • Listing: 1AE

  • Issued shares: 1AE, AUB, AUK, BCN, CXO, EBO, FBU, GL1, GMR, HCD, LCL, LRS, MCM, MGF, NAB, PGO, PHO, QRI, SLS, TMZ, TPD, UWL, VRC, WAA

Other things of interest (AEST):

  • Japan GDP Growth Rate (Q1) at 9:50 am

  • UK Inflation Rate (April) at 10:30 pm

  • Canada Inflation Rate (April) at 10:30 pm

  • US Housing Starts (April) at 10:30 pm

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University and was Vice President of the University Network for Investing and Trading (UNIT). He is an avid swing trader, and drawn to breakouts and technical set ups. Outside of writing and trading, Kerry is a huge UFC fan, loves poker and bouldering.

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