Market Wrap

Morning wrap: Wall Street rallies, Powell points to 25 bps hike in March, ASX set to jump

Thu 03 Mar 22, 8:34am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 69 points higher, up 0.97%.

Wall Street recouped yesterday’s losses amid a broad-based rally led by energy and material stocks.

Overnight summary

Wed 02 Mar 22, 9:34pm (AEST)

Name Value Chg %
US Indices
S&P 500 4386.54 +1.86%
Dow Jones 33,891 +1.79%
NASDAQ Comp 13,752 +1.62%
Russell 2000 2,059 +2.49%
Country Indices
Canada 21,256 +1.20%
China 3,484 -0.13%
Germany 14,000 +0.69%
Hong Kong 22,344 -1.84%
India 55,469 -1.38%
Japan 26,393 -1.68%
United Kingdom 7,430 +1.36%
Name Value Chg %
Commodities (USD)
Gold 1,927.70 -0.83%
Iron Ore 143.45 -
Copper 4.682 +1.86%
WTI Oil 111.38 +7.71%
Currency
AUD/USD 0.7300 +0.70%
Cryptocurrency
Bitcoin (AUD) 60,024 -1.21%
Ethereum (AUD) 4,038 -1.38%
Miscellaneous
U.S. 10 Year Treasury 1.865 +9.26%
VIX 31 -8.34%

Stocks

  • Investors appear to be taking a break from defensive sectors as consumer staples, utilities and healthcare stocks underperformed the broader market 

  • US Federal Reserve Chair Jerome Powell held his testimony to the House Financial Services Committee, flagging inflation as a major risk to the economy and the likelihood of a 25 bps rate hike in March

  • Overall, Powell's comments contained no surprises and the markets were pleased that the Fed won't go too aggressive with rate hikes

  • “The bottom line is we will proceed, but we will proceed carefully, as we learn more about the implications of the Ukraine war on the economy,” said Powell

  • 72% of US stocks advanced, indicating a broad-based rally 

  • 62% of US stocks trade below their 200-day moving average (66% yesterday, 68% a week ago) 

Economy

  • The US private sector added 475,000 new jobs in February, well above the 400,000 forecast by economists surveyed by The Wall Street Journal

  • Australia’s GDP growth rate for the December quarter was 3.4% and up 4.2% for the full year

  • The Bank of Canada hiked interest rates for the first time since October 2018, raising rates from 0.25% to 0.50%. The central bank said that the Russia-Ukraine crisis has increased uncertainty while adding more inflationary pressures to the economy. There are expectations of another hike in April 

Commodities 

  • China’s top government officials have ordered state-owned energy and commodity companies to “scour markets for materials … to fill any potential gaps brought on by the conflict”, according to Bloomberg

  • Fastmarkets reported a bullish uplift in Chinese iron ore futures amid supply concerns resulting from the Russia-Ukraine crisis. Iron ore was making headway thanks to an uptrend in steel prices and a recovery in downstream demand 

  • Commodities tied to Russia continue to go berserk. In the last two days:

    • Brent crude is up 17% to US$115 a barrel 

    • Nickel prices are up 8% to US$26,000/lb, an 11 year high

    • Palladium prices are up 7.5% to an 8-month high

 

US Sectors

Wed 02 Mar 22, 9:34pm (AEST)

Sector Chg %
Communication Services +0.71%
Consumer Discretionary +1.94%
Consumer Staples +1.00%
Energy +2.22%
Financials +2.55%
Health Care +1.54%
Sector Chg %
Industrials +2.19%
Information Technology +2.19%
Materials +2.24%
Real Estate +1.83%
Utilities +1.21%

Industry ETFs

Wed 02 Mar 22, 9:34pm (AEST)

Description Last Chg %
Commodities
Aluminum 73.4047 +2.16%
Copper Miners 42.61 +2.93%
Gold 181.62 -1.04%
Lithium & Battery Tech 75.58 -0.44%
Nickel 34 +2.59%
Strategic Metals 106.99 +3.28%
Steel 60.61 +4.08%
Silver 23.54 -0.72%
Uranium 24.07 +2.53%
Industrials
Aerospace & Defense 110.71 +0.71%
Global Jets 20.39 +1.67%
Healthcare
Biotechnology 125.4 +0.53%
Cannabis 4.88 +1.23%
Description Last Chg %
Cryptocurrency
Bitcoin 27.78 -0.76%
Renewables
CleanTech 16.24 -1.85%
Hydrogen 17.6 +2.27%
Solar 72.84 -3.43%
Technology
Cloud Computing 21.01 +0.57%
Cybersecurity 31.07 +1.77%
E-commerce 22.9 +1.00%
Electric Vehicles 26.68 +1.31%
FinTech 31.56 +1.39%
Robotics & AI 29.02 +2.48%
Semiconductor 456.97 +3.18%
Sports Betting/Gaming 20.89 +0.34%
Video Games/eSports 59.23 +1.15%

ASX Sectors to watch

The market is in an extremely bipolar state where investors are feeling immensely bullish one day, and running for the hills the next - and rightfully so, this is what uncertainty feels like. 

US stock trader Mark Minervini Tweeted this morning that market conditions are beginning to improve, saying: 

“This is one of the best day’s action coming from breakout names since the correction started. If we can build on today with the proliferation of constructive setups and breakouts can hold, then we are heading in the right direction. I’ve incrementally added a few select names.” 

#1 Energy

Local energy stocks rallied on Wednesday, with names like Woodside Petroleum (ASX: WPL), Santos (ASX: STO) and Beach Energy (ASX: BPT) up between 4-6%. 

From a technical perspective, the S&P/ASX 200 Energy Index is breaking out to a 2-year high after trading sideways for two-years. A breakout after such a prolonged period of consolidation is typically a very bullish sign.

Though, the upside for energy stocks will continue to be dictated by the news coming out of Russia-Ukraine, and to a lessor extent, OPEC+.

ASX 200 Energy Index
Source: TradingView

“Oil prices are surging once again today and have topped US$110 as reports of disruptions to Russian exports as a result of the sanctions emerge. This is something that was already being priced into the markets prior to and after the invasion and the severity of the sanctions have justified those moves,” said Oanda senior market analyst, Ed Moya. 

“And at a time when the market is already extremely tight, something OPEC+ still seems unwilling to acknowledge after leaving planned increases unchanged again in April.”

See a list of energy stocks here

#2 Iron Ore & Steel

Steel prices in Europe are surging as a result of increasing energy costs due to the Russia-Ukraine conflict. 

The VanEck Steel ETF has rallied 13% in the last five sessions to a 6-month high. With notable gains from the world's largest iron ore producer, Vale SA, which rallied 3% overnight.

This could see positive flow come through for local steel names, notably:

As well as local iron ore names, see a full list of iron ore stocks here.

#3 Lithium & Rare Earths 

The VanEck Rare Earths/Strategic Metals ETF rallied 3.3% overnight and has held up relatively well in recent weeks. 

Most local lithium and rare earth stocks have taken a breather after a massive run up in the last 12-months. This is against the backdrop of surging lithium prices, which is likely why lithium stocks have managed to stand tall amid the broader market volatility.

See a list of lithium stocks here.

#4 Copper 

The Global X Copper Mines ETF has hit a 10-month high as copper prices test US$4.6/lb.

This could see some strength in local names such as:

See a list of copper stocks here.

#5 Uranium 

Uranium spot prices broke above US$50/lb for the first time since September last year. Most ASX uranium stocks are trading well below last September levels.

The Global X Uranium ETF is up 18% in the last five sessions, trading around a two-month high. Some catalysts for uranium that we've pointed out in past market wraps include:

  • Sprott’s Physical Uranium Trust due to debut on the NYSE this week

  • Germany considering extending the life span of remaining nuclear reactors

  • Russia supplies circa 20% of uranium fuel for Europe and the US, these supplies are now at risk 

See a list of uranium stocks here.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: ABA, AMO, ASX, BLX, CAA, CAJ, COL, DBI, EBO, EGN, FRI, FWD, GNG, HIT, HLA, IBC, IEL, IFM, IGO, IVC, JIN, KSL, MND, NEC, NHF, PAC, PBP, PME, PNI, SFC, SHA, SLH, WOW

  • Dividends paid: BKI

Economic news:

  • Australia Balance of Trade (Jan) at 11:30 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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