Morning wrap: Wall Street carnage over Russia-Ukraine crisis, ASX set to plunge

ASX Futures (SPI 200) imply the ASX will open 90 points lower, down -1.3%.

Major US indices hit year-to-date lows as earlier optimism that the Russia-Ukraine conflict could find a path towards diplomacy fell through.

Rising geopolitical tensions is expected to drive inflationary pressures, notably commodities and oil, which could feed into the US Federal Reserve’s aggressive stance on interest rates.

Key points

Stocks

• Ukraine is bracing for war after Russian President Vladimir Putin ordered troops into separatist regions of eastern Ukraine 

• Major US indices tumbled below late January lows, a bearish sign that markets are going to roll over. In terms of year-to-date performances:

• • Dow Jones (blue chip) -9.4%

  • S&P 500 (large cap) -11.9%

  • Nasdaq (tech) -17.7%

• 72% of US stocks fell, indicating a broad-based selloff  

• 68% of US stocks trade below their 200-day moving averages (65% yesterday, 60% a week ago)  

• Lowe’s rallied 6% in early trade after the home improvement retailer topped four-quarter earnings expectations and provided an encouraging full-year outlook. The stock closed just 0.2% higher 

• Virgin Galactic shares rallied 3.5% after reaffirming its plans to fly tourists to space this year   

Economy

• New Zealand’s central bank raised interest rates by 25 bps to 1.0%, the third rate hike in the last four months 

• The central bank projects interest rates to be sitting around 3.35% by the end of 2024

Commodities 

• Iron ore prices inched higher as sources from Shandong said there has been an increase in demand from Chinese steel mills for iron ore fines as production resumed after the Winter Olympics, according to Fastmarkets

• Oil prices have flatlined, “WTI crude should remain around the low USD 90s until a major update with Iran nuclear deal talks or if the new Cold War leads to military conflict,” said Oanda senior market analyst, Ed Moya 

• “The gold trade is an easy one right now as geopolitical tensions will continue to drive inflationary pressures to the next level,” said Moya 

#1 Travel

Reopening plays like airlines fell heavily overnight, with notable losers including: 

• Airbnb -8.4% 

• Carnival Corp -5.6% 

• United Airlines -5.2% 

• American Airlines -4.3% 

Local airlines and travel stocks bounced strongly on Wednesday as part of the market's broad-based rally.

Today’s session could see a sharp reversal of yesterday’s gains, taking into consideration the weak overnight session and SPI futures.

#2 Tech

US tech stocks continue to bear the brunt of selling as investors run back towards safe-haven assets. 

Tesla tumbled -7%, Block fell another -5.5% and Affirm closed the session -3.9% lower. 

The Global X Cloud and FinTech ETF both closed at fresh 20-month lows. The ETFs are close to being down -30% year-to-date.

This could spell another trouble session for local tech stocks.

• Block (ASX: SQ2) will have nowhere to go but down

• Can WiseTech (ASX: WTC) hold onto its post-earnings gains

#3 Gold

Gold is finally getting its groove back, testing 8-month highs of US$1,908.

Investors continue to express fears that a full-scale invasion is on the horizon. US authorities have estimated more than 150,000 Russian troops along the Ukraine border.

This could trigger a chain reaction of more Western sanctions, driving higher commodity prices, which flows into more inflation and making central banks’ jobs even more difficult.

See a list of gold stocks here.

ASX corporate actions occurring today:

• Ex-dividend: BBN, BHP, BRG, CGF, EGG, HSN, OZL, PAI, PGH, PMC, TWD, WHC, WPL

• Dividends paid: AMH, FSI, GMG

• Issued shares: 88E, AAJ, ADO, AMN, AVR, CRR, DJW, EN1, ERL, EUR, FZO, JAV, KNB, LYN, MAF, MRR, MXC, NAB, NAC, NES, NWE, OPH, PEK, PSI, RF1, RLT, SSH, TIE, VAL, WAM