Market Wrap

Morning wrap: Wall Street falters as Ukraine worries mount, ASX set to bounce

Mon 07 Mar 22, 8:35am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 28 points higher, up 0.4%.

Major US indices ended lower on Friday as sentiment continued to be weighted by the worsening conflict between Russia and Ukraine.

Overnight summary

Sun 06 Mar 22, 9:35pm (AEST)

Name Value Chg %
US Indices
S&P 500 4328.87 -0.79%
Dow Jones 33,615 -0.53%
NASDAQ Comp 13,313 -1.66%
Russell 2000 2,001 -1.55%
Country Indices
Canada 21,402 +0.72%
China 3,448 -0.96%
Germany 13,095 -4.41%
Hong Kong 21,905 -2.50%
India 54,334 -1.40%
Japan 25,985 -2.23%
United Kingdom 6,987 -3.48%
Name Value Chg %
Commodities (USD)
Gold 1,974.90 +2.01%
Iron Ore 152.28 -
Copper 4.919 +2.87%
WTI Oil 115.00 +6.81%
Currency
AUD/USD 0.7355 +0.04%
Cryptocurrency
Bitcoin (AUD) 52,995 -1.75%
Ethereum (AUD) 3,569 -2.00%
Miscellaneous
U.S. 10 Year Treasury 1.724 -6.51%
VIX 32 +4.92%

Stocks

  • The US market exhibited a classic risk-off attitude on Friday with technology stocks underperforming, bond yields selling off and gold hitting fresh 16-month highs

  • The Nasdaq (tech) closed towards session lows, signalling that sellers were in control. The index is down -15% year-to-date 

  • The S&P 500 (large cap) and Dow Jones (blue chip) closed well off session lows, buoyed by an outperformance across energy, utilities and real estate sectors

  • Goldman Sachs thinks that most of the Russia-Ukraine crisis is already priced into the market

  • “Equities were already falling before this had happened, and because European markets were not very expensive at the outset, we do think a lot of bad news is already priced in,” said Peter Oppenheimer, chief global equity strategist

  • 66% of US stocks declined

  • 64% of US stocks trade below their 200-day moving averages, (63% yesterday, 63% a week ago)

Economy

  • The US added 678,000 jobs in February, beating consensus estimates of 423,000

    • Leisure and hospitality, business services and healthcare posted strong job gains

  • US unemployment rate fell from 4.0% to 3.8% while the participation rate edged slightly higher

  • US wage growth was underwhelming, with average hourly earnings rising just 1 cent to US$31.58

    • Slow wage growth may deter the US Federal Reserve from raising interest rates too quickly 

Commodities 

  • Iron ore prices were relatively stable last Friday following a sharp surge the day before. Trading activity at Chinese ports showed signs of slowing down, with most steel mills choosing to remain on the market sidelines, according to Fastmarkets

  • Commodities tied to Russia including oil, nickel, platinum and gold continued to rally. More details below  

 

US Sectors

Sun 06 Mar 22, 9:35pm (AEST)

Sector Chg %
Communication Services -1.40%
Consumer Discretionary -1.51%
Consumer Staples +0.14%
Energy +2.85%
Financials -1.96%
Health Care +0.49%
Sector Chg %
Industrials -0.23%
Information Technology -1.78%
Materials -0.42%
Real Estate +0.82%
Utilities +2.19%

Industry ETFs

Sun 06 Mar 22, 9:35pm (AEST)

Description Last Chg %
Commodities
Aluminum 80.25 +1.89%
Copper Miners 44.88 -0.85%
Gold 180.8 +1.59%
Lithium & Battery Tech 73.66 -2.50%
Nickel 36.67 +8.62%
Strategic Metals 108.66 -3.17%
Steel 64.25 -0.58%
Silver 23.29 +1.50%
Uranium 24.23 -3.96%
Industrials
Aerospace & Defense 109.85 -0.47%
Global Jets 20.02 -4.95%
Healthcare
Biotechnology 124.44 -1.50%
Cannabis 4.82 -3.53%
Description Last Chg %
Cryptocurrency
Bitcoin 26.41 -6.17%
Renewables
CleanTech 15.3 -1.76%
Hydrogen 17.13 -4.20%
Solar 68.33 -0.54%
Technology
Cloud Computing 20.63 -2.08%
Cybersecurity 30.91 -2.23%
E-commerce 22.3 -3.50%
Electric Vehicles 26.57 -3.88%
FinTech 30.67 -4.37%
Robotics & AI 29.14 -3.60%
Semiconductor 461.61 -2.65%
Sports Betting/Gaming 20.09 -3.38%
Video Games/eSports 57.95 -2.62%

ASX Sectors to watch

#1 Oil

Oil charts have gone completely vertical since the beginning of the Russian invasion.

“Oil prices has been a one-way market, but the potential return of Iranian crude supplies could provide much relief to this very tight market," said Oanda senior market analyst, Ed Moya.

 "Over the weekend, IAEA chief is expected to visit Tehran and could make a breakthrough over the last roadblocks that are preventing a revival of the 2015 Iran nuclear deal."

JPMorgan has forecast a number of possible scenarios for where oil prices could go, subject to the Iran deal and the release of strategic petroleum reserves (SPR).

JP Morgan Oil Outlook

See a list of oil stocks here.

#2 Gold

A strong US employment report and sluggish wage growth is expected to push a more dovish view from Fed members

Demand for safe haven assets was elevated after Russian troops hit a nuclear power plant in Ukraine. There were initial concerns that this could trigger a nuclear catastrophe - the fire has since been extinguished and early reports show no rise in radiation levels. 

“Russia’s military campaign continues to make gains and that is leading to fears they have an ambition to take control of all of Ukraine.  With both European equities and the euro in freefall, demand for safe-havens will not be easing anytime soon,” said Moya.

See a list of gold stocks here.

#3 Travel

The US Global Jets ETF hit a fresh 15-month low as the Russia-Ukraine war may halt the industry’s comeback story.

The ETF has bounced off the $19.30 area multiple times in prior sell offs. Slicing through this area of support is not a good look. The ETF is now trading lower than when Pfizer announced successful trials for its covid vaccine.

US Global Jets ETF
Source: TradingView

Notable movers on Friday include:

  • United Airlines -9%

  • American Airlines -7%

  • Airbnb -5.9%

  • Booking.com -5.6% 

There is also the concern that surging fuel prices may weigh on earnings, and force airlines to pass price hikes onto customers.

#4 Tech

Tech stocks bore the brunt of the selling last Friday. The Global X FinTech ETF fell -4.3% and close to late-February lows. Notable losers include: 

  • Affirm -8.4%

  • Block -6.7%

This will mean local Block (ASX: SQ2) will tumble at open. This could also flag weakness for the broader BNPL and tech sector, including:

#5 Uranium

ASX uranium stocks all fell as much as -25% on Friday after Russian troops set Europe’s largest nuclear power plant, Ukraine’s Zaporizhzhia, on fire

Ukrainian Minister of Foreign Affairs elevated the panic by tweeting: 

“Russian army is firing from all sides upon Zaporizhzhia NPP, the largest nuclear power plant in Europe. Fire has already broke out. If it blows up, it will be 10 times larger than Chornobyl! Russians must IMMEDIATELY cease the fire, allow firefighters, establish a security zone!”

It has since been confirmed that the fire has not affected essential equipment and that there has been no change in local radiation levels. 

Encouragingly, uranium prices hit fresh 10-year highs of US$51.2/lb last week. 

The panic has since subsided and ASX uranium stocks should bounce on Monday.

See a list of uranium stocks here.

#6 Copper and Nickel

Copper prices hit all-time highs of US$4.94/lb on Friday.

See a list of copper stocks here.

Nickel price charts have also gone complete vertical since the beginning of the war. Spot prices gained another 9% last Friday to almost US$30,000 a tonne.

See a list of nickel stocks here.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: AFG, ALU, BEN, BRI, CSL, ECL, MVF, NAC, NSC, NST, PRU, QBE, REA, RHC, SGM, SUL, VEA

  • Dividends paid: MAM, PCI, RYD, TCF

  • Issued shares: HDN, HMC, MKR, NAB, PEB, PFE, PIC, RDT, RF1, RTG, SDR, XTC

Economic news:

  • China Balance of Trade (Jan-Feb) at 2:00 pm AEDT

 

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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