Morning wrap: Wall Street posts best day of 2022, ASX set for soft start
ASX Futures (SPI 200) imply the ASX will open 16 points lower, down -0.2%.
Mentioned
ASX Futures (SPI 200) imply the ASX will open 16 points lower, down -0.2%.
US stocks rallied strongly last Friday, notably in the last hour of trade. The rebound was led by technology stocks, on the back of better-than-expected earnings from Apple, Mastercard and Visa.
Key points
The S&P 500 (large cap) and Dow Jones (blue chip) both avoided a four-week losing streak, rebounding back above their 200-day moving averages
The Nasdaq (tech) narrowly avoided a fifth straight week of declines
The rebound does not mean the market is out of the woods just yet. Major indices need more than just a single-session bounce to escape correction territory. Only time will tell if this is the start of a comeback
Apple rocketed 7% after reporting its largest ever quarterly revenue result. The tech giant delivered 11% sales growth despite global supply chain challenges. Revenue came in at US$123.9bn vs. US$118.7bn estimates, according to Refinitiv
On the economic front, the US reported a -0.6% decline in December personal spending. This is at a time where consumer sentiment is at 10-year lows amid inflation and covid concerns
China’s official manufacturing PMI came in a 50.1 in January vs. 50.3 a month ago. Manufacturing activity was weighed by the nation’s ‘zero tolerance’ approach to covid. Any reading below 50 represents a contraction
All sectors except energy closed in positive territory.
▲ Tech
Mega cap tech stocks including Alphabet, Facebook-parent Meta, Microsoft and Amazon all rallied more than 2.8%.
Apple, Visa and Mastercard delivered better-than-expected earnings, further supporting the tech-led rally.
▲ Materials
The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) fell -2.5% and -2.6% respectively last Friday.
However, iron ore prices have continued to march higher, up 6.6% to US$147.9 a tonne.
“A sharp rise in demand has been anticipated for after the week-long holiday in China when steelmakers are likely to resume production and need to replenish iron ore inventories,” a Shanghai-based analyst told Fastmarkets.
▼ Energy
Oil prices diverged in performance. The international benchmark, Brent Crude gained 0.9% to US$90.67 a barrel while the US benchmark, West Texas Intermediate eased -0.02% to US$87.24 a barrel.
“The supply side continues to support a tight market as OPEC+ is expected to stick to their plan of increasing output by 400,000 bpd in March, even though their compliance last month only hit 60% of plan,” said OANDA senior market analyst, Ed Moya.
“Now that $90 oil is here, it won’t take much to get prices to $100 and that will just intensify the global energy crisis. News of an Omicron subvariant have not rattled markets as boosters appear to still be getting the job done.”
ASX Morning Brief
#1 BNPL
US-listed BNPL rival Affirm rallied 17.1% last Friday, on no news. The outsized move was likely influenced by the better-than-expected earnings from Visa and Mastercard. Before today’s rebound, Affirm shares had declined -70% between November highs and last Thursday’s lows.
Visa’s quarterly revenue topped US$7bn for the first time, supported by a strong rebound in travel spending and continued growth in eCommerce. The company said that it's seeing a “massive shift in adoption of debit and credit”.
This could see some positive flow for beaten up local BNPL stocks that have also declined more than -50% from all-time highs.
#2 Tech
BNPL was deserving of its own section, though, the tech-led rally on Wall Street could drive a rebound for local tech stocks.
The FinTech and Cloud ETFs both rallied more than 3.5% last Friday, bouncing off of 16-month lows. While encouraging, tech stocks need to continue rebounding or at the very least, consolidate around recent lows.
#3 Copper
Copper prices fell -2.6% to US$4.31/t, potentially influenced by China's weak manufacturing figures.
Local copper miners like Oz Minerals (ASX: OZL) and Sandfire Resources (ASX: SFR) have experienced a sharp -10% correction after rallying to all-time highs two weeks ago.
#4 Iron Ore
As mentioned earlier, iron ore prices have rallied back up to 4-month highs of US$147.9 a tonne.
Beyond the big three iron ore majors, other notable iron ore players include:
Key Events
ASX corporate actions occurring today:
Ex-dividend: CBC, MOT, MXT, PGG
Dividends paid: KPG, PL8, RF1, RFF, SCP, SEC
IPOs: CMO, FXG
Issued shares: ANP, AVL, CCR, CMO, CXM, CXO, EMH, EUR, FXG, LCK, LCL, NAB, NZK, PHO, RAD, RLT, RNT, SEQ, SKF, SYA, TYR, WAM
