Market Wraps

Morning Wrap: Wall St rally takes a breather, OPEC slashes oil production, ASX to fall

Thu 06 Oct 22, 8:31am (AEST)

ASX Futures (SPI 200) imply the ASX 200 will open 27 points lower, down -0.4%.

Major US benchmarks closed slightly lower in a volatile session, oil stocks rallied after OPEC announced a historic 2 million barrels a day production cut and private US payrolls were unexpectedly strong.

Let’s dive in.

Overnight Summary

Thu 06 Oct 22, 8:31am (AEST)

Name Value Chg %
Major Indices
S&P 500 3,783 -0.20%
Dow Jones 30,274 -0.14%
NASDAQ Comp 11,149 -0.25%
Russell 2000 1,763 -0.74%
Country Indices
Canada 19,235 -0.70%
China 3,024 -0.55%
Germany 12,517 -1.21%
Hong Kong 18,088 +5.90%
India 58,065 +2.25%
Japan 27,121 +0.48%
United Kingdom 7,053 -0.48%
Name Value Chg %
Commodities (USD)
Gold 1,725.00 -0.32%
Iron Ore 95.21 -
Copper 3.544 +1.53%
WTI Oil 88.03 +1.75%
Currency
AUD/USD 0.6488 +0.06%
Cryptocurrency
Bitcoin (AUD) 30,881 -2.15%
Ethereum (AUD) 2,077 -1.61%
Miscellaneous
US 10 Yr T-bond 3.759 +3.93%
VIX 29 -1.79%

MARKETS

The S&P 500 tumbled -1.8% in early trade after fresh economic data reminded investors that the economy is still too strong for the Fed to pivot. A better-than-expected private payroll report and improving services sector data shows that the US economy has the stomach for more rate hikes.

Still, benchmarks made a valiant effort in trying to close towards breakeven.

  • 3 out of 11 US sectors advanced

  • Energy was a clear outlier, rallying 2.1% after OPEC announced a hefty oil production cut

  • Tech and Healthcare were also green

  • Utilities, Materials and Real Estate sectors declined by more than -1%

  • 62% of US stocks declined

  • 66% of US stocks trade below their 200-day moving average  (66% on Wednesday, 71% a week ago)

STOCKS

  • Exxon Mobil (+4%) and other energy stocks rallied after OPEC+ announced a 2 million barrels a day oil production cut

  • Airbnb (+0.9%) received an Outperform rating from Bernstein. The broker said Airbnb is on track to become the biggest western travel platform in the next five years

  • Tesla (-3.5%) after confirmation that CEO Elon Musk will proceed to buy Twitter in a plan to create an “everything app” 

QUICK BITES

  • More pain, more gain: "The fourth quarter has historically done better when September is down big," said Ryan Detrick, Chief Market Strategist at Carson Investment Research

S&P 500 performance
Source: Carson Investment Research
  • Close to lows: "As you can see, many times once the S&P 500 was down 25%, it was quite near a major low," said Detrick

S&P 500 -25 corrections
Source: Carson Investment Research
  • Retail shorting: The ProShares Short S&P 500 ETF has had its biggest inflows on record, according to Bloomberg

S&P 500 shorts
Source: Bloomberg

WORLD NEWS 

  • US national debt hits US$31tn for the first time (The New York Times)

  • Saudi-Russian oil axis snubs Biden with production cuts (Bloomberg)

  • US companies hired at a solid clip in September (Bloomberg)

  • UK mortgage rate exceeds 6% for the first time since 2008 (Bloomberg)

ECONOMY

  • Germany Balance of Trade shrunk to 0.6bn euros from 4.9bn euros in September

    • “"The war in Ukraine has succeeded in delivery what nothing else had managed before: letting the notorious German trade surplus disappear,” said Carsten Brzeski, global head of macro at ING 

    • “However, it is not a ‘good’ disappearing, driven by stronger domestic demand, but rather a ‘bad’ disappearing, driven by high energy prices and structurally weaker exports.”

  • US private companies added 208,000 jobs in September from 185,000 in August

    • Analysts expected an increase of 200,000 jobs

    • “After a couple of downbeat labor data readings, the ISM manufacturing employment component fell into contraction and JOLTS data lost over a million job openings, Wall Street was starting to grow confident that a labor market slowdown had arrived,” said Oanda senior market analyst, Ed Moya

    • A big jump in trade, transport and utilities sectors helped offset losses in goods-producing industries 

  • US services PMI improved to 49.5 in September from 44.6 in August

    • “US service providers signalled a much slower contraction in business activity during September,” S&P Global said in a report

    • “New orders returned to growth, with domestic sales supporting the upturn, as new export business fell further.”

    • “The rate of job creation softened to the slowest in 2022 to date.”

    • “Cost pressures eased for the fourth month running amid reports of some reductions in input prices.”

Fed speeches:

  • Atlanta Fed President Bostic:

    • “... We are still decidedly in the inflationary woods, not out of them.”

    • “[There is] considerable speculation already that the Fed could begin lowering rates in 2023 if economic activity slows and the rate of inflation starts to fall … I would say: Not so fast.”

    • “We should not let the emergence of weakness deter our push to lower inflation.” 

COMMODITIES

  • Iron ore futures traded flat at US$95 a tonne

    • Iron ore prices remain muted as China celebrates its week long National Day holiday (1-7 October) 

    • “China's Purchasing Managers' Index (PMI) for the domestic manufacturing industry resumed expanding this month after contracting during the prior two months, with the PMI reading edging up by 0.7 percentage point from August, just enough to push it above the threshold of 50 connoting expansion,” notes Mysteel

  • Gold prices edged lower, in the opposite direction of bond yields. A strong US private payrolls report reminded investors that the labour market remains strong and the Fed is expected to stay hawkish

  • Oil is up almost 10% in the last three sessions

    • OPEC+ agreed to cut their production target by 2 million barrels a day

Other commodities of interest:

  • Copper +1.7% to US$3.55

  • Aluminium +0.5% to US$2,349

  • Newcastle coal futures -0.86% to US$404.5

US Sectors

Thu 06 Oct 22, 8:31am (AEST)

Sector Chg %
Energy +2.06%
Information Technology +0.36%
Health Care +0.33%
Consumer Discretionary -0.54%
Industrials -0.58%
Consumer Staples -0.60%
Communication Services -0.62%
Financials -0.86%
Materials -1.09%
Real Estate -1.90%
Utilities -2.25%

Industry ETFs

Thu 06 Oct 22, 8:31am (AEST)

Description Last Chg %
Commodities
Nickel 29.1026 +4.60%
Aluminum 48.995 +1.57%
Gold 160.7 -0.55%
Uranium 21.45 -0.61%
Steel 52.85 -0.62%
Copper Miners 30.45 -0.85%
Lithium & Battery Tech 69.94 -1.39%
Silver 19.36 -1.86%
Strategic Metals 90.26 -2.08%
Industrials
Aerospace & Defense 96.94 -0.72%
Global Jets 16.32 -0.86%
Healthcare
Cannabis 14.6 +1.44%
Biotechnology 122.65 +0.18%
Description Last Chg %
Cryptocurrency
Bitcoin 12.52 -0.88%
Renewables
CleanTech 14.94 -3.71%
Solar 78.36 -3.96%
Hydrogen 12.22 -4.42%
Technology
Semiconductor 345.22 +0.82%
Cybersecurity 25.33 +0.28%
Sports Betting/Gaming 14.12 0.00%
Cloud Computing 17.06 -0.18%
E-commerce 16.41 -0.43%
FinTech 22.01 -0.55%
Robotics & AI 19.53 -1.02%
Video Games/eSports 43.12 -1.07%
Electric Vehicles 21.74 -1.43%

ASX Morning Brief

Major US benchmarks closed around -0.2% lower but there was a noticeable outperformance for Energy, Tech and Health Care sectors.

The market is once again buying into the idea of a Fed pivot. The upcoming US inflation report on Thursday, 13 October feels like an all-or-nothing scenario.

It comes in cooler-than-expected, then the market will believe inflation has truly peaked and the tightening cycle will soon end. It comes in hotter-than-expected, no pivot and goodbye bounce.

ASX sectors to watch

Notable overnight ETF list gainers:

  • Nickel +4.4%

  • Aluminium +1.57%

  • Semiconductors +0.82%

  • Biotech +0.18%

Notable overnight ETF list losers:

  • Hydrogen -4.4%

  • Solar -3.96%

  • Rare Earth/Strategic Metals -2.08%

Energy: Oil stocks surged on Wall St thanks to the OPEC production cut. Goldman says the supply cut is 'very bullish' for oil and raised its fourth quarter oil price forecast by US$10 to US$110 a barrel.

Biotech: The iShares Biotechnology ETF was one of few green ETFs on our watchlist, up 0.18%. Not a huge outperformance or move, but still worth noting the outperformance in healthcare-related stocks.

Lithium: A lot of green-related ETFs underperformed the market overnight. This could see some weakness for local sectors like lithium.

Key Events

Stocks going ex-dividend:

  • Thu: QRI, WCG, N1H, BIS, ARB

  • Fri: COS, MFF, ERF 

  • Mon: None

  • Tue: REH  

  • Wed: WGB, HZN, RRL, GOW

ASX corporate actions occurring today:

  • Dividends paid: FBU, MNY, WES, BRG, LIC, IVC, EGH, GDG, PGH, BRI, WDS, SRV, CGC

  • Listing: BGE

Other things of interest (AEST):

  • 11:30 am: Australia Balance of Trade

  • 8:00 pm: Eurozone Retail Sales

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.

Get the latest news and insights direct to your inbox

Subscribe free