Market Wrap

Morning wrap: Russia-Ukraine peace talks drive Wall Street higher, ASX set to rise

Tue 29 Mar 22, 8:33am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 38 points higher, up 0.5%.

Major US indices pushed higher, Ukraine President Zelensky is willing to discuss neutrality in peace talks, China locked down its financial capital Shanghai in response to rising covid cases and the yield curve continues to flatten - a potential sign of an economic downturn.

Oh and Will Smith slapped Chris Rock during the Oscars last night - it doesn’t seem scripted. 

Let’s dive in.

Overnight summary

Mon 28 Mar 22, 9:33pm (AEST)

Name Value Chg %
US Indices
S&P 500 4575.52 +0.71%
Dow Jones 34,956 +0.27%
NASDAQ Comp 14,355 +1.31%
Russell 2000 2,078 +0.00%
Country Indices
Canada 21,978 -0.13%
China 3,215 +0.07%
Germany 14,417 +0.78%
Hong Kong 21,685 +1.31%
India 57,593 +0.40%
Japan 27,944 -0.73%
United Kingdom 7,473 -0.14%
Name Value Chg %
Commodities (USD)
Gold 1,922.10 -1.64%
Iron Ore 149.87 -
Copper 4.723 +0.52%
WTI Oil 103.49 -9.14%
Currency
AUD/USD 0.7489 +0.02%
Cryptocurrency
Bitcoin (AUD) 64,064 +3.62%
Ethereum (AUD) 4,560 +5.00%
Miscellaneous
U.S. 10 Year Treasury 2.477 -0.60%
VIX 20 -5.67%

Stocks

  • All three major US indices closed at intraday highs as Ukraine-Russia peace talks began making progress

  • Ukraine’s president said his government is prepared to discuss adopting a neutral status as part of a peace deal with Russia

    • Neutrality means a country does not apply itself militarily with others

  • Consumer discretionary, real estate and tech stocks outperformed

  • Financials, materials and energy sectors closed in negative territory

  • Only 45% of US stocks advanced, indicating large cap stocks did the heavy lifting

  • 59% of US stocks trade below their 200-day moving average (58% yesterday, 60% a week ago)

  • Tesla jumped 8% after the company disclosed plans for a stock split. This would mark the second split in two years

  • Netflix shares +1.25% even after executives flagged that growth would slow much more than expected in 2022

Economy

  • This week is stacked for economic data. Most employment, inflation, manufacturing and services data from the US, Europe and China will begin to flow from Wednesday onwards

Commodities

Most commodities fell sharply after China’s financial hub of Shanghai launched a lockdown to curb the nation’s highest surge in covid cases since March 2020. Confirmed talks between Ukraine and Russia also relieved commodity prices.

  • Iron ore prices were mostly unchanged, market participants remain pessimistic about iron ore demand in China over the coming weeks, according to Fastmarkets

  • Oil prices fell sharply as ceasefire talks and Chinese lockdowns take some heat out of the market

  • Gold is down almost -2% as investors continue to return to risk-assets

 

US Sectors

Mon 28 Mar 22, 9:33pm (AEST)

Sector Chg %
Communication Services +0.27%
Consumer Discretionary +2.67%
Consumer Staples +0.41%
Energy -2.56%
Financials -0.30%
Health Care +0.74%
Sector Chg %
Industrials +0.03%
Information Technology +1.23%
Materials -0.46%
Real Estate +1.28%
Utilities +0.62%

Industry ETFs

Mon 28 Mar 22, 9:33pm (AEST)

Description Last Chg %
Commodities
Aluminum 76.0107 -0.65%
Copper Miners 46.47 -0.97%
Gold 182.38 -1.82%
Lithium & Battery Tech 75.5 -1.09%
Nickel 47.2971 -9.44%
Strategic Metals 116.8 -1.70%
Steel 69.79 -1.43%
Silver 23.48 -2.34%
Uranium 26.25 -2.78%
Industrials
Aerospace & Defense 112.95 -1.35%
Global Jets 20.84 +0.86%
Healthcare
Biotechnology 128.16 +0.71%
Cannabis 5.95 -6.05%
Description Last Chg %
Cryptocurrency
Bitcoin 27.94 +7.84%
Renewables
CleanTech 16.29 +0.43%
Hydrogen 18.92 -0.63%
Solar 75.36 +0.81%
Technology
Cloud Computing 21.62 +1.71%
Cybersecurity 31.37 +0.16%
E-commerce 22.31 +1.39%
Electric Vehicles 27.36 +0.22%
FinTech 31.71 +1.61%
Robotics & AI 29 +0.28%
Semiconductor 485.32 +0.78%
Sports Betting/Gaming 19.98 -0.80%
Video Games/eSports 58.68 +1.11%

ASX Sectors to watch

#1 Tech

The 8% Tesla rally gave the biggest boost to the S&P 500 and Nasdaq. Other notable tech gainers include:

  • Block +6%

  • Etsy +4.7%

  • Zoom +3.1%

  • Affirm +2.6%

  • Amazon +2.6%

The overnight tech-led rally as well as positive SPI futures could see some positive flows for ASX tech stocks. Local Block (ASX: SQ2) shares will have a positive open thanks to the 6% gain from its US-counterpart.

#2 Financials 

It was unusual to see all three major US indices close higher but most major US banks down between -0.4% and -1.5%.

Morgan Stanley downgraded US banks, flagging escalating risks and the likelihood that the market has already priced in the tailwinds from higher interest rates.

Investors should observe if the overnight underperformance impacts how local banks trade on Tuesday.

#3 Crypto

Bitcoin is now breakeven for the year after falling as much as -26%.

"Buoyed by improved sentiment, the cryptocurrency managed to break a level that has proven a key rotation point since the start of the year," said Oanda senior market analyst, Craig Erlam.

"The ascending triangle it traded in following that was technically bullish and the breakout confirms that."

BTCUSED
Source: TradingView (Annotations by Market Index)

Local stocks with exposure to cryptocurrencies include the Betashares Crypto Innovators ETF (ASX: CRYP) and DigitalX (ASX: DCC).

#4 Uranium & Lithium

Several uranium and lithium stocks have posted strong gains in the past few weeks.

Local uranium stocks reversed sharply on Monday, with big names like Paladin Energy (ASX: PDN) down -6%.

Overnight, the Global X Uranium ETF fell -2.8%, reflecting further weakness from international uranium stocks. The fall doesn't appear too alarming as no key moving averages were breached.

Uranium spot prices remained relatively stable, around US$58/lb.

In addition, several local lithium stocks faded into close on Monday. One of the most popular emerging producers, Lake Resources (ASX: LKE), was up 2% in early trade, before closing -5.4% lower.

The morning rally into a weak close was a consistent narrative across most lithium names.

The VanEck Rare Earth/Strategic Metals ETF fell -1.7% overnight, but well-above session lows of -3.1%.

Lithium stocks appear to be taking a breather after the massive recent run up.

#5 Energy

Energy was the worst performing US sector, down -2.56%.

Oil prices buckled -8% overnight as Chinese lockdowns are driving fears of 'demand destruction'.

oil
Oil price chart (Source: TradingView)

The Shanghai two-stage lockdown will put 26m people into lockdown, also closing bridges, tunnels and restricting highway traffic.

OPEC+ is due to meet on Thursday and its widely believed that the petroleum organisation will stick to its original output increase plan of 400,000 barrels per day. Any deviation or new updates could spark more volatility in oil prices.

The sharp overnight fall in oil prices and selloff for US energy stocks could spark negative flows for local names on Tuesday.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: SXE

  • Dividends paid: API, BSL, EQT, GRR, NST, PPE

  • Listing: None today

Other things of interest (AEDT):

  • Australia Retail Trade (Feb) at 11:30 am

  • US Job Openings (Feb) at 1:00 am (Wednesday)

 

Written By

Kerry Sun

Finance Writer & Social Media

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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