Market Wrap

Morning wrap: Wall Street gives back gains in tech led reversal, ASX set to slide

Fri 04 Mar 22, 8:35am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 58 points lower, down -0.8%.

US stocks pulled back as energy prices eased and risk-sectors like technology and cryptocurrencies sold off.

Overnight summary

Fri 04 Mar 22, 8:35am (AEST)

Name Value Chg %
US Indices
S&P 500 4363.49 -0.53%
Dow Jones 33,795 -0.29%
NASDAQ Comp 13,538 -1.56%
Russell 2000 2,033 -1.27%
Country Indices
Canada 21,250 -0.02%
China 3,481 -0.09%
Germany 13,698 -2.16%
Hong Kong 22,467 +0.55%
India 55,103 -0.66%
Japan 26,577 +0.70%
United Kingdom 7,239 -2.57%
Name Value Chg %
Commodities (USD)
Gold 1,940.70 +0.96%
Iron Ore 146.07 -
Copper 4.787 +2.59%
WTI Oil 108.30 -2.08%
Currency
AUD/USD 0.7327 +0.42%
Cryptocurrency
Bitcoin (AUD) 57,407 -4.56%
Ethereum (AUD) 3,833 -5.27%
Miscellaneous
U.S. 10 Year Treasury 1.844 -1.13%
VIX 31 +0.07%

Stocks

  • A risk-off attitude echoed the US market as tech stocks tumbled while defensive sectors like utilities, real estate and consumer staples outperformed

  • Major US indices were pulled lower by outsized declines from heavyweight stocks like Facebook-parent Meta (-2.5%), Amazon (-2.7%) and Tesla (-4.6%)

  • The probability of a 25 bps hike from the US Federal Reserve is almost certain, sitting at 99.8% according to CME’s FedWatch Tool 

  • The focus will now shift to what the Fed will do in the next few months, especially if the 25 bp hike in March has no impact on inflation

  • 58% of US stocks declined

  • 62% of US stocks trade below their 200-day moving averages (62% yesterday, 68% a week ago) 

Economy

  • Australia’s balance of trade for January hit $12.9bn compared to consensus expectations of $9.1bn 

    • The rise in exports was driven by metals and minerals 

    • Lower iron ore prices were offset by higher coal prices and other commodities

  • First-time applications for unemployment benefits in the US fell to a two-month low of 215,000 in the last week of February 

    • Indicates a pickup in hiring and declining layoffs as the economy rebounds from earlier omicron concerns

    • Economists polled by The Wall Street Journal had forecast 225,000 applications

Commodities 

  • Russia-Ukraine related commodities continued to lift overnight including palladium and nickel 

  • Iron ore is retesting February highs of US$150 a tonne

  • Oil prices pulled back after reports that the US-Iran nuclear deal was near. This could bring up to 1.3m barrels a day back into the market very quickly

 

US Sectors

Friday, 04 March 2022

Sector Chg %
Communication Services -0.78%
Consumer Discretionary -2.29%
Consumer Staples +0.72%
Energy +0.27%
Financials -0.30%
Health Care +0.49%
Sector Chg %
Industrials +0.08%
Information Technology -1.24%
Materials +0.12%
Real Estate +1.10%
Utilities +1.72%

Industry ETFs

Friday, 04 March 2022

Description Last Chg %
Commodities
Aluminum 75.476 +6.21%
Copper Miners 43.86 +2.30%
Gold 179.73 +0.60%
Lithium & Battery Tech 75.25 -2.14%
Nickel 34.92 +4.73%
Strategic Metals 110.59 -1.70%
Steel 63.08 +1.93%
Silver 23.37 -0.34%
Uranium 24.68 -2.13%
Industrials
Aerospace & Defense 111.54 -1.61%
Global Jets 20.73 -3.42%
Healthcare
Biotechnology 126.07 -1.29%
Cannabis 4.94 -2.43%
Description Last Chg %
Cryptocurrency
Bitcoin 27.58 -4.17%
Renewables
CleanTech 15.94 -4.02%
Hydrogen 18 -4.83%
Solar 70.35 -2.89%
Technology
Cloud Computing 21.13 -2.37%
Cybersecurity 31.62 -2.25%
E-commerce 23.13 -3.59%
Electric Vehicles 27.03 -1.70%
FinTech 32 -4.16%
Robotics & AI 29.74 -2.02%
Semiconductor 471.5 -2.10%
Sports Betting/Gaming 20.96 -3.96%
Video Games/eSports 59.91 -3.27%

ASX Sectors to watch

From yesterday's morning wrap - “the market is in an extremely bipolar state where investors are feeling immensely bullish one day, and running for the hills the next”. 

After a strong rally on Thursday, US markets have now pulled back, led by tech stocks. The only sector that appears immune to recent volatility is commodities.

Russia, as a major exporter of several commodities, is stress testing the rest of the world. Prices across the board are surging amid an already supply tight market.

It goes without saying, local miners and explorers are poised to benefit.

#1 Aluminium 

Aluminium prices are on a tear as Russia’s invasion of Ukraine enters into a second week.

Aluminium prices hit US$3,800 a tonne, up almost 20% in March alone.

Aluminium price
Source: TradingEconomics

Russian exports of aluminium account for circa 4.2% of global production, according to JPMorgan. 

See a list of aluminium stocks here

#2 Nickel

Nickel is another metal facing the Russian stress test. Nickel prices hit US$26,500 a tonne compared to US$25,000 at the end of February.

Prices have rallied almost 30% year-to-date.

Nickel price
Source: TradingEconomics

Nickel stocks are LME-registered warehouse inventories are below 80,000 tonnes, an almost three year low, according to Reuters. It is said that 52% of those stocks have been booked for delivery.   

See a list of nickel stocks here.

#3 Steel

The VanEck Steel ETF broke out last Friday, marking a fresh 6-month high. The ETF has since gained 8.7% since its breakout.

This plays into the narrative of tight iron ore supplies given Ukraine's position as the world's 6th largest producer. In addition, local iron ore majors like BHP (ASX: BHP) and Rio Tinto (ASX: RIO) both missed production estimates for 2021.

Iron ore players and ports in northern WA could be at risk of a tropical cyclone over the next few days. This would only exacerbate current supply tight conditions.

VanEck Steel ETF
VanEck Steel ETF breaks above 6-month trading range (Source: TradingView)

Notable ASX-listed players include:

#4 Copper 

The Global X Copper Mines ETF has its eyes set on previous all-time highs set last May.

Global X Copper Mines ETF
Source: TradingView

Copper prices are currently trading near all-time highs of US$4.79/lb.

See a list of copper stocks here.

#5 Tech

Wall Street’s tech led selloff could weigh on local names, notably the BNPL sector

This follows sharp declines from: 

  • Block -8.8% 

  • Affirm -7%

This means that local Block (ASX: SQ2) will open sharply lower. This could also impact other names such as:

 

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: ALD, ALI, LIC, MLD, MPL, NCK, PFG, PFP, SSR, UNI, VGI

  • Dividends paid: GUD, GWA, HPI, KOV, QVE

  • Issued shares: AD8, AHI, AOU, ARN, BEX, BKT, BUD, CDT, CNU, CPH, CXO, EFE, ESS, FLT, GLL, GLV, IDT, IEC, PEX, PSC, RF1, RXL, SDV, SLM, SMR, TSO, VOR

Economic news:

  • US Non Farm Payrolls (Feb) on Saturday, 12:30 am AEDT 

  • US Unemployment rate (Feb) on Saturday, 12:30 am 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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