Market Wraps

Morning Wrap: Wall St gains begin to stall, oil tumbles below US$90, ASX to open flat

Fri 05 Aug 22, 8:38am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 6 points higher, up 0.08%. 

Major US benchmarks begin to stall, Coinbase signs a deal with BlackRock, the Bank of England predicts a recession that’ll last five quarters and Aussie lithium exports spiked more than 1,000% in June.

Let’s dive in.

Overnight Summary

Fri 05 Aug 22, 8:38am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,152 -0.08%
Dow Jones 32,727 -0.26%
NASDAQ Comp 12,721 +0.41%
Russell 2000 1,906 -0.13%
Country Indices
Canada 19,577 +0.16%
China 3,189 +0.80%
Germany 13,663 +0.55%
Hong Kong 20,174 +2.06%
India 58,299 -0.09%
Japan 27,932 +0.69%
United Kingdom 7,448 +0.03%
Name Value Chg %
Commodities (USD)
Gold 1,807.60 +0.04%
Iron Ore 107.03 -
Copper 3.477 -0.13%
WTI Oil 88.12 -0.47%
AUD/USD 0.6966 +0.02%
Bitcoin (AUD) 32,336 -3.80%
Ethereum (AUD) 2,283 -3.47%
US 10 Yr T-bond 2.676 -2.62%
VIX 21 -2.32%


Quick one from JP Morgan about “why are we rallying”:

  • Short covering as folks re-assess the macro environment. Many believe that the Fed re-centres from inflation to growth and if growth continues to disappoint, that brings the end of tightening cycle earlier

  • Better-than-expected earnings from mega cap tech in an environment that looks like Q2 will be the worse quarter of the year

  • Retail bid appears to have returned

  • Ton of money is on the sidelines, so light volume and low liquidity. This is exacerbating the move higher

  • At some point, that money on the sidelines is pulled into the market but many investors think we need to retest, and make new lows. Look for a “flush day” with VIX through 40 and S&P 500 down 4-5% as part of forming that bottom

Anyhow, onto the usual stuff.

  • 7 out of 11 US sectors higher

  • Growth-y and cyclical sectors outperformed

  • Energy fell an outsized -3.6% as oil continues to roll over

  • Financials, Healthcare and Consumer Staples were the other red sectors

  • 50% of US stocks advanced

  • 56% of US stocks trade below their 200-day moving average (56% on Thursday, 60% a week ago) 


  • Coinbase (+10%) announced a partnership with BlackRock, the world’s largest asset manager, to enable its institutional clients to buy bitcoin

  • Restaurant Brands International (+7.4%) is the parent company of Burger King, Popeyes and Tim Hortons. Quarterly earnings and revenue beat Wall St expectations thanks to strong international sales growth from Burger King

  • Alibaba (+1.8%) posted better-than-expected quarterly earnings, with revenue flat at 205.55 yuan. Covid-related lockdowns in major cities such as Shanghai and Beijing during the quarter weighed on growth

    • “Following a relatively slow April and May, we saw signs of recovery across our businesses in June,” said CEO Daniel Zhang

After hours earnings:

  • Lyft (+4.1%, after hours: +8.9%) posted record quarterly earnings as ride-hailing demand rebounds. Adjusted EBITDA was US$79.1m, well-ahead of its own forecasts of US$10m to US$20m 

    • “We generated the highest Adjusted EBITDA in our company’s history and saw COVID highs for Active Riders, drivers and rides,” said CEO Logan Green

  • Doordash (+2.3%, after hours: +14.4%) quarterly earnings rose 30% year-on-year to US$1.61bn, beating consensus estimates of US$1.52bn. For the full-year, the company expects to post US$200 to US$500m in adjusted EBITDA

    • "Order rate for existing consumers typically peaks around the end of February and then enters a seasonally slow period ... Starting from the typical peak, the trend so far in 2022 is similar to what we experienced in 2021 and 2019,” said Doordash

    • "Although we have noticed several external indications of shifts in consumer discretionary spending, so far we have not seen changes to consumer engagement on our U.S. Marketplace that are measurable or distinguishable from normal seasonal patterns.”

  • Zillow (+0.2%, after hours: -7.5%) is a US tech real-estate marketplace. The company said it's seeing slowing demand for ads amid a housing downturn. Quarterly mortgage segment revenue was US$29m, slightly below the low end of its guidance range

    • "Rapidly rising mortgage rates have compounded existing affordability challenges created by unprecedented home price appreciation. This has driven buyer sentiment to a 20-year low & reduced buyer demand, which has cooled the previously red-hot seller’s market,” Zillow said in its earnings statement


US corporate earnings we’re watching this week:

  • Fri: DraftKings, Norwegian Cruise Line 


  • Australian Balance of Trade was $17.67bn in June, well above consensus expectations of $14bn

    • Exports rose 5.1% to $61.53bn led by categories including rural goods (meat, cereal, grains and wool) and metal ores

    • Lithium concentrate exports in June surged 1,189% to $1.16bn 

    • Imports rose 0.7% to $43.86bn

  • UK raised interest rates by 50 bps to 1.75%, the biggest hike in 25 years

    • The Bank of England forecasts inflation to peak around 13.3% in October and warned that Britain faces a peak-to-trough fall in GDP of around -2.1%

    • The economy is predicted to begin shrinking in the fourth quarter of 2022 and last for around five quarters, the longest recession since the Global Financial Crisis 


  • Iron ore futures (Singapore) fell -4.2% to US$105.7 a tonne

    • The average daily outputs for crude steel, pig iron and steel have dropped between 5-8% year-on-year, according to data from the China Iron and Steel Association

    • “Chinese demand for iron ore will likely see some recovery this mth with some domestic steelmakers having plans to gradually lift production, but the room for growth might still be relatively limited,” said MySteel 

  • Oil prices tumbled as weakening economic data from the UK and Germany added further insult to injury. Oil is now around -5.6% lower than pre-invasion levels

  • Gold posted more gains as geopolitical tensions remain high and the US dollar weakened


US Sectors

Fri 05 Aug 22, 8:38am (AEST)

Sector Chg %
Consumer Discretionary +0.54%
Information Technology +0.42%
Industrials +0.31%
Communication Services +0.18%
Real Estate +0.12%
Utilities +0.12%
Materials +0.05%
Financials -0.34%
Health Care -0.49%
Consumer Staples -0.79%
Energy -3.60%

Industry ETFs

Fri 05 Aug 22, 8:38am (AEST)

Description Last Chg %
Gold 164.45 +1.65%
Steel 52.11 +1.19%
Copper Miners 28.74 +0.90%
Aluminum 49.8907 +0.90%
Strategic Metals 92.26 +0.82%
Silver 18.49 +0.81%
Lithium & Battery Tech 74.89 +0.41%
Uranium 21.05 0.00%
Nickel 30 -1.44%
Global Jets 18.24 +0.49%
Aerospace & Defense 105.13 -0.69%
Biotechnology 127.33 +2.24%
Cannabis 18.15 -0.27%
Description Last Chg %
Bitcoin 14.53 -4.82%
Hydrogen 14.59 +3.02%
Solar 81.77 +2.07%
CleanTech 15.98 +1.94%
Video Games/eSports 51.01 +1.41%
Robotics & AI 23.04 +0.82%
E-commerce 18.69 +0.80%
Semiconductor 419.46 +0.72%
Sports Betting/Gaming 16.26 +0.68%
FinTech 25.88 +0.23%
Cloud Computing 18.59 +0.16%
Electric Vehicles 24.71 +0.04%
Cybersecurity 27.86 -2.30%

ASX Morning Brief

The ASX 200 is starting to feel fatigued following a V-shaped rebound back towards key areas such as the 200-day moving average.

#1 Energy

Came across an interesting line from Bespoke that said "the worst performing decile of stocks during the decline is now up 32.5% in six weeks, while stocks that held up the best during the first-half of the year are up less than 3%."

That "held up best" is probably referring to energy stocks.

"Ongoing weakness should be unlikely since the oil market remains tight, but the break of the key technical US$90 level could unleash some momentum selling," said Oanda senior market analyst, Ed Moya.

"Oil price weakness should be limited from here as energy traders know that China’s demand for crude could bounce back anytime soon and that the SPR release will end in the fall ... The Saudis are keeping the oil market tight an that should eventually provide some support for crude prices."

As oil tries to find its floor, that'll mean some near-term pain for oil stocks, with the US energy sector down another down more than -3% for a second straight session.

#2 Gold

Gold is really starting to find its groove amid short-lived rallies for Treasury yields, a weakening US dollar and more recession talk.

The ASX All Ords Gold Index is up 11% from late July lows. It's taken a breather in the last few days, it'll be interesting to see if gold names can see another strong move thanks to higher gold prices overnight.

All Ords Gold Index chart
S&P/ASX All Ords Gold Index chart (Source: TradingView)

#3 Hydrogen

The Global X Hydrogen ETF continues to advance after a 11.1% gap up on 28 July.

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

#4 Biotech

The iShares Biotechnology ETF has rallied 6.2% in the last two sessions.

ASX-listed biotech names like Telix (ASX: TLX) and Clinuvel (ASX: CUV) have been breaking out in the past few weeks.

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


Key Events

ASX corporate actions occurring today:

  • Ex-dividend: JHG

  • Dividends paid: CIP, COF, EZL, TCF

  • Listing: SUM


Other things of interest (AEST): 

  • RBA Statement on Monetary Policy at 11:30 am

  • Canada Unemployment Rate (July) at 10:30 pm

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

Written By

Kerry Sun

Content Strategist

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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