Morning wrap: Wall Street rallies as Russia-Ukraine peace talks advance, ASX set to rise

ASX Futures (SPI 200) imply the ASX will open 56 points higher, up 0.75%.

Major US indices were buoyed by optimism over Russia-Ukraine peace talks, Russia’s military said it would cut back operations near Kyiv, the Federal Budget has several initiatives to ease the rising cost of living and the US Treasury yield curve is flashing a warning sign for the economy.

Let’s dive in.

Stocks

• Wall Street rallied on positive developments between Russia and Ukraine. The parties have described the peace talks as constructive and compromise found on issues including Ukraine’s previous ambitions of joining NATO

• 10 out of 11 US sectors finished in green with real estate, tech and consumer discretionary stocks topping the leaderboards

• Energy was the only negative sector

• 75% of US stocks advanced, indicating a broad-based rally

• 55% of US stocks trade below their 200-day moving average (59% yesterday, 59% a week ago)

  • This shows that breadth is coming back into the market as stocks push above long term moving averages 

• GameStop shares fell -5.1%, snapping a record 10-day winning streak where the stock rallied as much as 120%

• Shares of trading and investing app Robinhood rallied 24% after announcing it would extend the hours that its customers could trade and working towards 24/7 trading

Economy

• US consumer confidence rose to 107.2 in March, the first increase in 2022

• The 2022-23 Federal Budget introduced several policies to ease the cost of living

  • Reduce fuel excise by 50% for 6 months - this will reduce the excise petrol and diesel from 44.2c to 22.1c per litre

  • One-off $420 cost-of-living tax offset

  • One-off income tax–exempt payment of $250 for pensioners, welfare recipients, veterans and eligible concession card holders

• Other areas of interest include

  • A further $2.8bn support for Australian apprenticeships

  • $2bn for regional economies including modern manufacturing, critical minerals and agriculture sectors

  • $120bn 10-year infrastructure investment pipeline

Commodities

• Iron ore prices edged slightly higher after a slight increase in trading activity in China, some traders anticipate supply tightness in May, according to Fastmarkets 

• Oil prices sold off sharply on Tuesday and holding the US$110 level. Intensifying lockdowns in China is weighing on near-term demand expectations

• Gold prices continue to ease as risk appetite improves

Equity markets have demonstrated an almost V-shaped recovery in the past few weeks. US trader Mark Minervini warned the dangers of chasing the extended market, saying "the S&P 500 looks like it's starting to get a little ahead of itself."

"If the market has indeed bottomed, an initial pullback is likely to be contained to 3-5%. If the indexes continue to run up extended from here with no pullback, the odds of a sharp or quick pullback will increase."

#1 Tech

Tech names continue to top the leaderboard as risk-appetite returns for fast-growing companies.

Notable US gainers include:

• Affirm +11.3%

• DraftKings +11%

• Zoom +7.5%

• Block +6.3%

• PayPal +4.3%

The Global X FinTech, eCommerce and Cloud ETFs all rallied at least 3%.

The strong gains from US BNPL companies like Affirm, Block and PayPal could see some positive flow for local names including Zip (ASX: Z1P).

The tech-led rally and positive SPI futures should support another encouraging session for local tech stocks, including:

• Xero (ASX: XRO)

• WiseTech Global (ASX: WTC)

#2 Hydrogen

The Global X Hydrogen ETF has managed to consolidate for most of March and teasing at a breakout.

Global X Hydrogen ETF (Source: TradingView, annotations by Market Index)

An interesting development for the industry has come out of China, where the nation's top economic planner has announced a target to produce up to 200,000 tonnes per year of green hydrogen.

China recognised hydrogen as a "crucial element of the nation's future energy system".

Notable ASX-listed hydrogen companies include:

• Hazer (ASX: HZR)

• Pure Hydrogen (ASX: PH2)

#3 Travel

The US Global Jets ETF rose 3.5% overnight. Though it struggled to push above the 200-day moving average.

The Jets ETF is comprised of mostly US airline companies, with a lessor exposure to international airlines including Qantas (ASX: QAN). The ETF is a good indicator for how airlines are performing and overall sentiment for airlines/travel.

Several local airline and travel stocks are beginning to rally into overhead trendlines. Could the stocks/sectors be poised for a breakout?

(Source: TradingView, annotations by Market Index)

#4 Lithium 

The Rare Earth/Strategic Metals ETF took a slight two-day breather before continuing its V-shaped bounce back. The ETF was up 2.4% overnight, closing at a year-to-date high.

The ETF has exposure to mainly Chinese and ASX-listed lithium, rare earths and cobalt stocks including Allkem (ASX: AKE), Pilbara Minerals (ASX: PLS) and AVZ Minerals (ASX: AVZ).

The continued strength of the ETF should be encouraging for local lithium and green metal stocks.

See a full list of ASX lithium stocks here.

ASX corporate actions occurring today:

• Ex-dividend: AOF, ARF, CIP, CLW, CMW, COF, COS, CQE, CWP, DXC, DXI, ECF, GCI, GDF, HCW, HDN, HM1, KKC, NPR, PCI, QRI, REP, RFF, SFY, SLF, STW, SYI, TCF, TGP, TOT, WPR, WQG

• Dividends paid: AGL, AZJ, CBA, CEN, EAI, FMG, GQG, ORA, SFR, TGR, WES, WOR

• Listing: None today

• Issued shares: AMA, ANL, ANZ, AUC, CNU, DVP, FSA, GBZ, HAS, HIQ, HLA