ASX Futures (SPI 200) imply the ASX will open 55 points lower, down -0.77%.
Wall Street sold off as growth, inflation and interest rates worries returned, the Fed has begun shrinking its US$8.9tn balance sheet, the Bank of Canada is aggressively hiking interest rates and Apple moves iPad production out of China for the first time ever.
Let’s dive in.
Thu 02 Jun 22, 8:28am (AEST)
|US 10 Yr T-bond||2.931||+3.06%|
Major US indices failed to hold onto early gains as higher oil and gas prices spark concerns that inflation has yet to top and blurs the outlook for Fed interest rate hikes
St Louis Fed President James Bullard spooked the markets by saying:
The Fed is in danger of losing control of inflation
It’s too early to say if we’ve seen a peak in inflation, will need more than a few tenths to make a judgement
Sometimes relatively stable longer-term inflation expectations is taken as a sign that the Fed doesn’t have to do much. I don’t take them that way
The Fed has kicked off Quantitative Tightening (QT), allowing US$47.5bn worth of bonds to roll-over (expire without reinvestment) a month
This will increase to US$95bn three months later
Targeting a US$7.6tn balance sheet by 2023
10 out of 11 US sectors declined
Energy was the only green sector
Financials, healthcare, staples, real estate and material stocks underperformed
58% of US stocks declined
69% of US stocks trade below their 200-day moving average (68% on Wednesday, 72% a week ago)
Salesforce (+9.9%) beat first quarter earnings expectations and upgraded its full-year outlook
HP (+3.9%) delivered a strong quarter of computer sales and raised its full-year earnings guidance
Meta Platforms’ (-2.6%) longtime chief operating officer Sheryl Sandberg steps down after 14 years at the company. Her departure comes amid a slowdown in ad revenue and increased competition from rivals such as TikTok
Delta Air Lines (-5.2%) shares dipped even after the airline raised its June quarter guidance
The airline expects sales in the June quarter to return to prepandemic levels
Australia’s GDP growth rate was 3.3% in the March quarter
Consensus was expecting a 2.9% gain
Households contributed roughly 0.8 percentage points to GDP
The Bank of Canada raised interest rates by 50 bps to 1.5%
This was in-line with expectations
"Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target,” said the bank
50 bps hikes are expected in July and September, with interest rates forecast to hit around 3.5% in early 2023
Iron ore prices were stable, little was changed in downstream demand and buyers were mostly in wait-and-see positions, sources told Fastmarkets
Oil rallied and then gave back gains
OPEC+ is planning to suspend Russia from its quota system due the EU embargo and sanctions
Gold is holding up pretty well even as the US dollar and Treasury yields rebound
Thursday, 02 June 2022
Thursday, 02 June 2022
|Lithium & Battery Tech||73.61||-2.30%|
|Aerospace & Defense||102.18||-0.12%|
|Robotics & AI||23.85||-1.72%|
What a rough day it was for lithium and the green metals cohort.
It's crazy how 3-4 headlines was enough to kill sentiment for one of the best performing sectors in the past 2 years. The headlines being:
Goldman Sachs and Credit Suisse call the top for lithium
Argentina establishing a reference price for lithium carbonate exports
Price set at US$53kg (current spot prices are roughly US$70kg)
Chinese battery major BYD plans to buy six African lithium mines, enough to supply a decade worth of production
The VanEck Rare Earth/Strategic Metals ETF dipped -6.8% overnight. Several US lithium giants like Albemarle and Lithium Americas fell around 8-10%. Chinese lithium names fell a lot less.
US travel stocks including cruise lines, air lines, hotels and travel booking systems sold off after JPMorgan CEO Jamie Dimon said the economy is headed for a "hurricane".
Delta Air Lines dipped -5.2% even after an earnings upgrade. Whereas most US-travel related names fell around 3-5%.
Interestingly, Australia's GDP rose 3.3% in the March quarter, boosted by solid household spending, which contributed roughly 0.8 percentage points. Household spending has seen a shift from goods to services, including transport, hotels, cafes and recreation.
So two rather diverging narratives for travel stocks to try and digest.
It's surprising to see the Nasdaq fall less than the S&P 500, buoyed by a small gain from mega caps Alphabet, Microsoft and Amazon.
However, the same can't be said about other mid-large caps:
Weakness across US FinTech and Cloud related names could flag some negative flows for local players.
ASX corporate actions occurring today:
Dividends paid: None
Issued shares: ADX, AGY, AML, APZ, CE1, CNU, CUS, DDR, DXC, DXI, EML, EMN, EMR, HOR, HPG, HVY, KAT, LAU, MAY, MCT, MFG, MGH, MPR, NBI, NVX, OCL, RUL, S32, SNC, SOL, TOP
Other things of interest:
Aus Balance of Trade (April) at 11:30 am
Aus Retail Sales (April) at 11:30 am
US Initial Jobless Claims at 10:30 pm
Finance Writer & Social Media
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