Morning wrap: Wall Street falters as Biden imposes sanctions on Russia, ASX to edge lower

ASX Futures (SPI 200) imply the ASX will open 6 points lower, down -0.08%.

The selloff intensified on Wall Street after Russian President Vladimir Putin deployed troops to two separatist regions in Ukraine.

US stocks tried to bounce off session lows after President Joe Biden outlined sanctions against Russia including blocking Russian banks from raising foreign debt.

Key points

Stocks

• Major US indices closed towards session lows as stocks failed to bounce

• The S&P 500 (large cap), Dow Jones (blue chip) and Nasdaq (tech) were all trading at least 1% off session lows until the last hour of trade

• All three major indices are now trading at or below late January lows

• 71% of US stocks declined, indicating a broad-based selloff

• 66% of US stocks are below their 200-day moving average (+2% from last session)

• Home Depot beat December quarter earnings expectations and said it sees sales growth for the year ahead. The company’s stock still fell -8.9%

Economy

• US manufacturing purchasing managers’ index (PMI) rose to 57.5 from 55.5 last month 

• US services PMI increased to 56.7 from 51.2 last month 

• A reading over 50 indicates growth or expansion in the sector 

• Traders are now pricing in a 100% certainty that the US Federal Reserve will raise interest rates in March 

• According to CME’s FedWatch Tool, there is currently a 63% possibility of a 25bps hike and a 36% likelihood of a 50 bps hike 

Commodities 

• Nickel and aluminium prices continue to trend higher amid concerns that Russian sanctions could impact global supply

• Iron ore prices continue to falter as most iron ore traders in China put stock replenishment plans on hold due to uncertainty about further regulatory measures, according to Fastmarkets 

• Oil prices hit a wall as prospects of additional Iranian supply and the possibility of OPEC+ ramping up output outweighed the Russia-Ukraine escalation 

• Gold closed well off session highs after Biden outlined sanctions

#1 Energy 

Surging oil prices hit a wall as the US-Iran nuclear talks could quickly bring 1.3m barrels per day back into markets. 

“Yesterday, Iran Foreign Ministry spokesman Khatibzadeh noted that significant progress has been made in reviving the 2015 nuclear deal. Energy traders are looking at a long list of geopolitical risks and see the Biden administration being extra motivated to make a deal with Tehran,” said Oanda senior market analyst, Ed Moya. 

“Crude prices still seem like they have a good chance to make a run towards the US$100 level, but it might take a major escalation by Russia for that breakout to happen … Whatever dips happen with crude prices will likely be short-lived.”

See a list of ASX energy stocks here. 

#2 Gold

Even when gold is on the move, it isn’t. 

The yellow metal sat around US$1,900 towards the end of the US session. 

“The likelihood of a regional war seems high and that will likely keep inflationary pressures elevated for much of the year.  Bullion seems like it is taking a little break right now, but investors will soon be saying, “I love gold” as geopolitical and growth concerns will drive safe-haven demand,” said Moya. 

See a list of ASX gold stocks here. 

#3 Aluminium and nickel

Aluminium and nickel prices continue to climb multi-year highs amid supply disruption concerns from Russia in an already tight market.  

That said, broader market weakness and bearish sentiment could outweigh bullish spot prices. 

On Tuesday, South 32 (ASX: S32) fell -3.3% despite another positive session for aluminium prices. On the same day, nickel hopeful Mincor (ASX: MCR) rallied 6.4%.

#4 Tech

ASX tech stocks fell sharply on Tuesday as investors continued to flee from risky and richly valued pockets of the market.

The pain is likely to continue given the weakness in risk-on sectors overnight. This includes sectors such as cryptocurrency, renewables and household US tech stocks.

Notably, Block fell -3.9% and Affirm closed -2.5% lower.

ASX corporate actions occurring today:

• Ex-dividend: AGL, AUI, CDA, DHG, DOW, DUI, FSA, IRE, JBH, MFG, MYS, NGI, NWL, SEQ, SGF

• Dividends paid: DJW

• Issued shares: 88E, ADD, ADT, CHK, D2O, DBF, HMD, HMI, KME, LRS, MGF, MLS, NAB, NES, PFG, PGL, PIC, PNI, RFR, SLR, SRN, TAR, TCL, TPD, VHT, WAM