Market Wraps

Morning Wrap: Wall St rallies again, oil plummets on slowing Chinese economy, ASX to rise

Tue 16 Aug 22, 8:41am (AEDT)

ASX Futures (SPI 200) imply the ASX 200 will open 22 points higher, up 0.31%.

US stocks continue to rally, China unexpectedly cuts key interest rates as economic data disappoints and oil prices tumble as much as 5%.

Let’s dive in.

Overnight Summary

Tue 16 Aug 22, 8:41am (AEDT)

Name Value Chg %
Major Indices
S&P 500 4,297 +0.40%
Dow Jones 33,912 +0.45%
NASDAQ Comp 13,128 +0.62%
Russell 2000 2,021 +0.23%
Country Indices
Canada 20,181 +0.00%
China 3,276 -0.02%
Germany 13,817 +0.15%
Hong Kong 20,041 -0.67%
India 59,463 +0.22%
Japan 28,872 +1.14%
United Kingdom 7,509 +0.11%
Name Value Chg %
Commodities (USD)
Gold 1,795.40 -0.15%
Iron Ore 107.60 -
Copper 3.605 -0.35%
WTI Oil 88.37 -1.16%
AUD/USD 0.7022 +0.01%
Bitcoin (AUD) 34,239 -1.47%
Ethereum (AUD) 2,711 -2.11%
US 10 Yr T-bond 2.791 -2.04%
VIX 20 +2.15%


This V-shaped rebound has likely caught many investors off guard and unable to capitalise on such an abrupt upward move, especially after the market’s sharp correction in June.

I saw an interesting old blog post from Julian Komar that explains a type of rally called a “lock out rally” - essentially when institutions underestimate the turnaround in the stock market and have to increase their exposure in a short amount of time. These rallies typically end in exhaustion runs, with leading names showing ‘blow off tops’.

The S&P 500's market breadth is getting stretched, with the share of index members trading at overbought levels surging from zero to almost a third, according to Bloomberg.

"The message from us for the next several months remains: risk/reward is unattractive, and this bear market remains incomplete. What's likely to drive the next leg lower in stocks? We think the catalysts will end up centering around earnings disappointment," said Morgan Stanley.

Still, markets continue to rally and everyday I ask myself, when is the selling going to come?

  • Benchmarks closed near session highs, up from intraday lows between -0.4% and -0.5%

  • 9 out of 11 US sectors higher

  • Staples and Utilities headlined gains

  • Growth-heavy sectors also outperformed

  • Energy fell an outsized -1.98% fall as oil prices rolled over

  • 52% of US stocks advanced

  • 44% of US stocks trade below their 200-day moving average (44% on Monday, 53% a week ago)


  • Bed Bath & Beyond (+23.5%) is seeing another meme inspired trading frenzy. The stock is up almost 250% since late July

  • Gilead Sciences (+5.2%) shares rallied after successful trial results demonstrated the drug Trodelvy significantly improves the overall survival rate of metastatic breast cancer patients 

  • Moderna (+3.3%) updated covid-19 vaccine was approved in the UK. The dual vaccine targets both the original virus and the omicron variant

  • Disney (+2.2%) shares rallied after New York-based hedge fund Third Point took an almost US$1bn stake in the company

    • In a letter to Disney CEO Bob Chapek, Third Point CEO Daniel Loeb made a case for Disney to spin off its ESPN business, CNBC reported

    • “ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting,” Loeb said

  • Unity Software (-7.1%) rejected AppLovin’s US$17.5bn takeover offer and said it will proceed with its own takeover of app platform ironSource


US corporate earnings we’re watching this week:

  • Tue: Walmart, Sea, The Home Depot

  • Wed: Tencent, Lowe’s, Target, Cisco, Amcor

  • Thur: Weibo, Estee Lauder

  • Fri: John Deere, Footlocker 


  • China unexpectedly cut its one-year medium-term lending facility loans to some financial institutions by 10 bps from 2.85% to 2.75%

    • Consensus expected rate to remain unchanged

    • In parallel, the People’s Bank of China drained liquidity from the local financial system. “Trying to ease conditions for the desperate while recognising a dip in credit costs still won't generate demand from the masses," said China Beige Book International

  • China industrial production rose 3.8% year-on-year in July from 3.9% in June

    • Economists expected a gain of 4.6%

  • China fixed asset investment was rose 5.7% year-on-year between January and July

    • Economists expected a gain of 6.2%

  • China retail sales was up 2.7% year-on-year in July from 3.1% in June

    • Economists expected a gain of 4.9%

  • China residential property sales fell -28.6% year-on-year 

  • China property investment fell -12.3% in July, the fastest rate this year

  • US Empire State business conditions index unexpectedly plummeted to -31.3 in August from 42.4 in July

    • Second largest monthly decline on record and lowest levels in the survey’s history

    • "New orders and shipments plunged, and unfilled orders declined. Delivery times held steady for the first time in nearly two years, and inventories edged higher," the survey said


  • Iron ore futures fell -2.97% to US$106 a tonne

    • The last time China lowered its 1-year mid-term loan facility rate was in January 2022 . The economy has since consistently underperformed, weighed by property market turmoil and a zero tolerance policy stance on covid

    • “China's market for imported iron ore saw prices for port inventories and seaborne cargoes make modest gains during the August 8-12 week after their earlier weakness and fluctuations - a revival that market pundits attributed to the recovery in ore demand among steelmakers resuming production,” said Mysteel

  • Oil tumbled on China growth fears and an increasingly unlikely deal between US and Iran

  • Gold failed to hold US$1,800 as Treasury yields in higher, the US dollar rebounds and risk appetite remains buoyant 


US Sectors

Tue 16 Aug 22, 8:41am (AEDT)

Sector Chg %
Consumer Staples +1.05%
Utilities +0.81%
Information Technology +0.63%
Consumer Discretionary +0.61%
Health Care +0.49%
Communication Services +0.48%
Real Estate +0.48%
Industrials +0.23%
Financials +0.02%
Materials -0.09%
Energy -1.98%

Industry ETFs

Tue 16 Aug 22, 8:41am (AEDT)

Description Last Chg %
Lithium & Battery Tech 80.83 +1.19%
Strategic Metals 105.68 -0.22%
Gold 167.87 -1.29%
Aluminum 51.2349 -1.41%
Steel 57.34 -1.59%
Uranium 21.6 -2.27%
Silver 19.17 -2.56%
Copper Miners 32.2 -3.35%
Nickel 30.888 -4.88%
Global Jets 18.9 +0.95%
Aerospace & Defense 107.68 +0.80%
Cannabis 19.28 +3.48%
Biotechnology 132.52 +1.74%
Description Last Chg %
Bitcoin 14.96 -1.07%
Hydrogen 16.48 +0.49%
Solar 89.08 -0.21%
CleanTech 17.68 -0.91%
Cybersecurity 28.27 +1.70%
Cloud Computing 19.47 +0.51%
Semiconductor 421.75 +0.37%
Electric Vehicles 26.04 +0.27%
Robotics & AI 23.76 +0.17%
E-commerce 19.69 +0.15%
Sports Betting/Gaming 17.63 +0.06%
FinTech 26.99 -0.04%
Video Games/eSports 52.03 -0.19%

ASX Morning Brief

FYI: This is the section where I'm speaking and thinking out loud as opposed to the stuff above where it's quotes and stuff from various sources. I also wanted to ask, is this section too technical?

On the topic of thinking out loud, there are a lot of investors out there waiting for a pullback. So does that mean in the event of a pullback, it will be well supported?

#1 Energy

The 20-day moving average has really started to act as a key point of resistance for oil. You can see several upthrusts around or slightly above the 20-day from late June onwards, followed by sharp selling.

Brent crude price chart
Brent crude price chart (Source: TradingView)

Even though the energy sector underperformed on Wall St, most oil stocks rallied from session lows to close 1-2% lower.

Exxon Mobil for example, hit session lows of -4.6% but closed just -1.8% lower.

#2 Biotech

iShares Biotechnology ETF is rallying into resistance.

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

Biotech sector has been very strong with names like Polynovo (ASX: PNV), Telix Pharma (ASX: TLX) and Neuren Pharma (ASX: NEU) seeing some crazy breakouts in July.

CSL (ASX: CSL) is starting to consolidate and move sideways in a rather tight fashion after breaking out in July. 

#3 Travel

US Global Jets ETF just chugging along, around 5% away from the 200-day moving average.

The ETF invests in mostly US airlines, also has tiny exposure to international airlines including Qantas (ASX: QAN), its a useful gauge for sector performance and sentiment.

US Global Jets ETF
US Global Jets ETF (Source: TradingView)

On the topic of Qantas. It's broken above its key resistance line.

Qantas share price chart
Qantas share price chart (Source: TradingView, Annotations by market Index)

#4 Copper

Copper prices fell as much as -3.5% to US$3.55/lb overnight but recovered back to the US$3.6 level.

Still, the Global X Copper Miners ETF slumped -3.4%.

#5 Uranium

The Global X Uranium ETF also joined in on the broad-based selling we're seeing across commodity markets.

The ETF closed -2.27% lower, slightly above session lows of -3.4%.

Overall, weakness in commodities could see some negative flow for local energy and material sectors.

Key Events

Stocks going ex-dividend:

  • Tue: CPU, DDR, GMA, GQG, PL8

  • Wed: CBA, FSA, RMD

  • Thur: GPT, IAG, KOV, MYS, QBE

  • Fri: BWP, CD3, CMW, NEW

  • Mon: AZJ

ASX corporate actions occurring today:

  • Dividends paid: MVB, PGG

  • Listing: None

  • Issued shares:

Other things of interest (AEST): 

  • RBA Meeting Minutes at 11:30 am

  • UK Unemployment Rate (June) at 4:00 pm

  • Canada Inflation 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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