Market Wrap

Morning wrap: Wall Street rallies despite Russia-Ukraine escalation, ASX set to surge

Mon 28 Feb 22, 8:26am (AEST)

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ASX Futures (SPI 200) imply the ASX will open 166 points higher, up 2.4%. 

Elevated volatility has helped Wall Street post one of its best days in over a year on Friday. 

Investors are trying to assess the back-and-forth between Russia, Ukraine and the onset of Western sanctions.

Overnight summary

Sun 27 Feb 22, 9:26pm (AEST)

Name Value Chg %
US Indices
S&P 500 4384.65 +2.24%
Dow Jones 34,059 +2.51%
NASDAQ 100 13,695 +1.64%
Russell 2000 2,041 +2.25%
Country Indices
Canada 21,106 +1.66%
China 3,451 +0.63%
Germany 14,567 +3.67%
Hong Kong 22,767 -0.59%
India 55,859 +2.44%
Japan 26,477 +1.95%
United Kingdom 7,489 +3.91%
Name Value Chg %
Commodities (USD)
Gold 1,890.10 -1.88%
Iron Ore 141.76 -
Copper 4.478 +0.48%
WTI Oil 91.94 -0.94%
Currency
AUD/USD 0.7163 -0.72%
Cryptocurrency
Bitcoin (AUD) 52,354 -5.16%
Ethereum (AUD) 3,630 -8.41%
Miscellaneous
U.S. 10 Year Treasury 1.986 +0.86%
VIX 28 -9.00%

Stocks

  • Major US indices rally on the view that the Federal Reserve won’t go overly aggressive with rate hikes

  • The probability of a 50 bps hike is now 24%, down from a peak of 89% in early February, according to CME’s FedWatch tool

  • The market isn’t quite out of the woods yet, as all three major US indices trade below their 200-day moving averages. More positive price action is needed to pull momentum back into positive territory 

  • Short interest in the Nasdaq is at almost 4-year highs 

  • 76% of US stocks advanced, indicating broad-based buying

  • 63% of US stocks trade below their 200-day moving averages (64% on Friday and 68% a week ago) 

Nasdaq Short Interest

Economy

  • US personal income spending rose 2.1% in January, beating consensus expectations of a 1.5% increase. Spending fell for the first time in 10 months last December, weighed by omicron concerns

  • US consumer sentiment (University of Michigan survey) rose to 62.8 in February compared to 61.7 a month ago, which was a 10-year low 

Commodities 

  • Iron ore prices declined amid mounting fears that Chinese regulators would unleash new measures to curb surging prices 

  • Oil prices fell below US$100 a barrel as investors realise Western sanctions won’t target Russian crude exports 

  • Gold prices retranced back below US$1,900 as risk assets rallied 

  • Major Russian-exported commodities including nickel, palladium and platinum all gave back earlier gains

 

US Sectors

Sun 27 Feb 22, 9:26pm (AEST)

Sector Chg %
Communication Services +1.48%
Consumer Discretionary +1.89%
Consumer Staples +3.12%
Energy +2.74%
Financials +3.16%
Health Care +3.03%
Sector Chg %
Industrials +2.40%
Information Technology +1.37%
Materials +3.58%
Real Estate +2.49%
Utilities +3.14%

Industry ETFs

Sun 27 Feb 22, 9:26pm (AEST)

Description Last Chg %
Commodities
Aluminum 71.63 -0.60%
Copper Miners 40.24 +4.10%
Gold 177.14 -0.33%
Lithium & Battery Tech 73.75 +3.55%
Nickel 32.66 -1.11%
Strategic Metals 104.22 +5.84%
Steel 55.72 +6.07%
Silver 22.31 +0.40%
Uranium 21.83 +4.03%
Industrials
Aerospace & Defense 104.49 +3.01%
Global Jets 21.46 +2.33%
Healthcare
Biotechnology 124.59 +1.36%
Cannabis 4.97 0.00%
Description Last Chg %
Cryptocurrency
Bitcoin 24.06 +1.95%
Renewables
CleanTech 14.65 +3.69%
Hydrogen 15.97 +2.50%
Solar 64.8 +2.50%
Technology
Cloud Computing 20.74 -0.24%
Cybersecurity 29.42 +1.05%
E-commerce 22.98 +1.61%
Electric Vehicles 26.9 +2.08%
FinTech 30.75 +2.63%
Robotics & AI 28.4 +3.17%
Semiconductor 469.24 +1.67%
Sports Betting/Gaming 21.05 +1.95%
Video Games/eSports 59.55 +2.10%

ASX Sectors to watch

Global markets remain in a state of heightened volatility with both face-ripping selloffs and rallies.

As Oanda senior market analyst Ed Moya puts it, “financial markets will remain on edge as this is just the beginning of the War in Ukraine, so the dip buying that occurred over the past two days will run out of steam.” 

“Stock market volatility will not be going away anytime soon and if financial markets become convinced that the uncertainty that stems from Ukraine-Russia tensions will threaten global growth and intensify inflationary pressures, investors will hesitate to remain over exposed to risk.”

#1 Iron ore

It looks like iron ore prices topped out around the US$150 a tonne level as Chinese sentiment remains cautious ahead of potential measures from the National Development and Reform Commission. 

On the other hand, major commercial banks across several Chinese cities began lowering mortgage rates last week. More property easing signals is encouraging for China’s all-important real estate and construction markets, which typically account for 50-60% of steel consumption.

Interestingly, the US-listed counterparts for BHP (ASX: BHP) and Rio Tinto (ASX: RIO) surged 5.6% and 3.4% last Friday. 

See a list of iron ore stocks here

#2 Steel

The VanEck Steel ETF has hit 6-month highs as Russia-Ukraine tensions raise potential supply concerns. 

  • Japan’s Nippon Steel flagged a possible shortfall as it currently imports 14% of its iron ore pellet feedstock from Russia and Ukraine

  • ArcelorMittal, one of the largest steelmakers in Europe, said it was slowing down production at its major plant in Ukraine

VanEck Steel ETF
Source: TradingView

This could see some positive flow for local steel stocks including: 

#3 Lithium

The Rare Earth/Strategic Metals ETF closed 5.8% higher as investors returned to risk assets. The ETF is bouncing back after a brief pullback below the 200-day moving average. The sign of strength is encouraging relative to how the overall market is going.

  • Lithium carbonate prices in China continue to mark fresh all-time highs on an almost daily basis. 

  • Analysts at Daiwa Capital said that Tesla is a potential buy as supply chain concerns and rising oil prices weigh on legacy auto makers, according to MarketWatch. 

See a list of lithium stocks here

#4 Uranium 

The Global X Uranium ETF is also looking encouraging after bouncing above the 200-day last Friday.

The ETF needs to follow through on its new found strength. Otherwise, it might face the same fate as early-February, where it briefly rallied above the 200-day before sliding -8% a few days later.

Global X Uranium ETF
Source: TradingView

Some recent positive headlines for uranium include: 

  • Sprott’s Physical Uranium Trust to debut on the New York Stock Exchange on Wednesday, 30 February 

  • Sprott buys another 1.4m lbs of physical uranium last Friday, holding 47.49m lbs in total

  • Russia supplies circa 20% of uranium fuel for the US and Europe

See a list of uranium stocks here.

Today's events

ASX corporate actions occurring today:

  • Ex-dividend: AZJ, CCP, CIN, CWY, ECP, EVN, FMG, HT1, HUM, LFS, MCP, MEA, MOT, MXT, PGG, PIA, SDF, SXY, VNT, WOR

  • Dividends paid: ABP, CDP, CHC, CQR, DXS, ECF, ENN, ERF, FPP, GDI, GOZ, GPT, JHG, KPG, MGR, PL8, SCG, SGP, WPR

  • Issued shares: ABB, AFI, AGE, APX, ARN, AUH, AVW, BCB, BGL, CGO, COB, DVP, FLT, HLS, HXL, ICI, IMR, IPD, JLG, KAR, KNM, MHK

 

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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