Morning Wrap: Wall St extends gains, ECB delivers jumbo rate hike, ASX to inch higher

ASX Futures (SPI 200) imply the ASX 200 will open 4 points higher, up 0.1%.

Wall Street locks in a two-day winning streak, the European Central Bank hikes interest rates by 75 bps, Fed Powell reiterates his hawkish views at the Cato Institute and Queen Elizabeth II passes, aged 96.

Let’s dive in.

MARKETS

Another strong session for major US benchmarks after a three week horror show.

"Our Index strategist Jason Hunter mentions that an improving inflation environment likely keeps the S&P 500 from retesting the 3,636 June low; he thinks the S&P 500 needs to take out its 50-day moving average (~4,020) and 100-day moving average (~4,035) to confirm another bullish reversal," said JP Morgan.

Interesting note from Guggenheim Partners: "Since 1960, P/Es have trended lower when inflation is higher. With year-on-year core PCE now at 4.6% and the S&P 500 trading at ~19x, we should see stocks fall another 20% by mid-October ... if historical seasonals mean anything."

Source: Guggenheim Investments

• 8 out of 11 US sectors higher

• Healthcare and Financials outperformed benchmarks

• Defensive sectors including Staples, Utilities, Real Estate and Industrials underperformed

• 58% of US stocks advanced

• 60% of US stocks trade below their 200-day moving average (62% on Wednesday, 63% a week ago)

STOCKS

• Asana (+24.8%) shares rallied after posting a smaller-than-expected quarterly loss and revenue that was ahead of analyst expectations

• Rivian Automotive (+11%) announced a point venture with Mercedes to build EV vans for both brands in Europe

  • Head of Mercedes Vans: “We are now joining forces with Rivian … We are sharing investments and technology because we also share the same strategic ambition: accelerating the electrification of the van market.” 

• Snapchat (+9.4%) CEO Evan Spiegel said the company aims to grow its user base by 30% to 450m and lift revenue to US$6bn in 2023

• GameStop (+7.5%) announced a new partnership with cryptocurrency exchange FTX. The two companies will work on eCommerce and online marketing initiatives

WORLD NEWS 

• Mineral Resources mulls mega lithium spin-off (AFR)

• China to add more new coal-fired power plants (Bloomberg)

• China extends Chengdu lockdowns as covid persists (Bloomberg) 

• Queen Elizabeth II passed away ‘peacefully’ at Balmoral, aged 96 (BBC)

• UK Treasury is setting up a 40bn euro fund to help energy companies access extra liquidity (Bloomberg)

ECONOMY

• Eurozone hiked interest rates by 75 bps to 1.25%

  • In-line with consensus expectations

  • ECB: “After a rebound in the first-half of 2022, recent data point to a substantial slowdown in euro area economic growth, with the economy expected to stagnate later in the year and in the first quarter of 2023.”

  • ECB: “Over the next several meetings the Governing Council expects to raise interest rates further to dampen demand and guard against the risk of a persistent upward shift in inflation expectations.” 

  • ECB’s Lagarde: “Level of underlying inflation at elevated levels. Wage dynamic remains contained overall. Risk to growth primarily on downside, especially in the near term.”

• Fed Chair Powell speaks at the Cato Institute:

  • “Historic cautions strongly against prematurely loosening policy. I can assure you that my colleagues and I are strongly committed to this project and we will keep at it until the job is done.”

  • Powell reiterated that the market shouldn't get excited about pricing rate cuts next year. However, there is typically only a 6-month gap between the last rate hike in a cycle and the first rate cut, according to ING

Source: ING

COMMODITIES

• Iron ore futures -0.54% to US$99.55 a tonne

• Oil prices stage a tiny bounce after a -5.5% tumble on Thursday

  • “It looks like crude prices are fighting for their life. ​ The crude demand destruction-driven oil price collapse might have found a floor,” said Oanda senior market analyst, Ed Moya

• Gold continues to stall around US$1,700 as the Eurozone and Denmark put an end to negative interest rates

Uranium ETF pushes near 4-month high: The Global X Uranium ETF is getting a move on, trading close to levels not seen since early May. Uranium spot prices rose 1% to US$52/lb, according to fuel brokers Uranium Markets.

Interesting piece about EU support for uranium and miners.

Global X Uranium ETF (Source: TradingView, Annotations by Market Index)

Biotech ETF rallies on abnormal volume: The iShares Biotech ETF rallied 3.33% with 5m volume compared to a 20-day average of 1.76m. It's still rangebound and trading below the 200-day moving average.

Although CSL (ASX: CSL) is on the verge of breaking above $300 for the first time since December 2021.

iShares Biotechnology ETF (Source: TradingView, Annotations by Market Index)

Copper prices muted, supply tight: Copper prices rose 2.8% overnight to US$3.55/lb, still unchanged compared to where it was two months ago. Bloomberg noted that "copper spreads are spiking in a signal that physical supplies remain tight despite global economic headwinds."

"The premium for cash copper over three-month futures on the London Metal Exchange rose by as much as 91% Thursday to a high of $145 per metric ton, an indication the market is paying more for units right now. That’s the biggest backwardation since November last year."

Stocks going ex-dividend:

• Fri: ALI, AMO, NEC, NTD, SEQ, WTC

• Mon: CNU, DSK, DUR, DVR, HUB, JYC, LSF, MTO, PGC, PRU, SND

• Tue: FOS, GRR, IGL, ING, NWS, OCL, PSI, TPG

• Wed: BRG, CAF, CGC, LOV, MCY, MGH, NZM, PPM

• Thu: 29M, ABA, BST, CTE, DDH, DTL, EGH, EPY, EQT, FBU, IGO, PGF, PWH, REG, RMS, S32, SPK, SVW, WQG

ASX corporate actions occurring today:

• Dividends paid: AGG, AUI, BBN, DUI, FRI, JBH, SDF

• Listing: None

• Issued shares: AL8, ALY, AMC, AVH, BAS, BEN, BLG, BRI, BSL, CAY, CKA, CPT, EGL, EHL, GT1, IMU, IVZ, LIT, LME, MEU, MFG, MOT, MSV, MXT, NAB, NBI, ONE, PFT, PKO, QIP, RF1, RHY, RMS, SHL, SHP, VTI, VTX, WEC, WGB, WNB

Other things of interest (AEST): 

• China August Inflation Rate at 11:30 am

• Canada August Unemployment Rate at 10:30 pm