Morning wrap: Wall Street rebounds, iron ore eyes US$160 a tonne, ASX set to rise

ASX Futures (SPI 200) imply the ASX will open 19 points higher, up +0.25%.

Major US indices were modestly higher after a wobbly session on Friday, the US added an impressive number of jobs in March, President Joe Biden invoked the Defensive Production Act for EV battery materials and the bond market continues to flag a looming recession. 

Let’s dive in.

Stocks

• All three major US indices were down around -0.5% in early-trade as investors weighed a solid non-farm payroll report against soft manufacturing data

• Equities were weighed by manufacturing data which confirmed that inflation is getting worse and activity is slowing as supply chain issues persist

• The Russia-Ukraine peace talks aren’t making much progress as Ukrainian investigators found more than 400 bodies in towns near Kyiv 

• 8 out of 11 sectors were green, led by defensive names from real estate, utilities and consumer staples

• Tech, financials and consumer discretionary sectors underperformed  

• 63% of US stocks advanced

• 58% of US stocks trade below their 200-day moving average (59% last Friday, 58% a week ago) 

• US-listed Chinese stocks rallied after Chinese authorities agreed to give US regulators full access to auditing reports. Notable gainers incl: 

  • DiDi Global +12.8%

  • Alibaba Group +1.3%

  • Nio +4.2% 

Economy

• The US added 431,000 jobs in March compared to economist expectations of a 490,000 gain

• The US unemployment rate fell to 3.6% to 3.8%, slightly ahead of economist forecasts of a fall to 3.7%

• Wages posted the biggest gain since May 2020, up 5.6% on-the-year, which should help consumers absorb higher prices

• The Institute for Supply Management’s manufacturing PMI, an index of US-based factory activity, slipped to 57.1 in March from 58.6 in February. This was the lowest reading since September 2020

Commodities

• Iron ore is closing in on US$160 as the Chinese economy is expected to receive additional policy support to bolster sectors such as infrastructure and property

• Oil prices continue to weaken after the Biden administration tapped into Strategic Petroleum Reserves

• Gold posted slight gains as the 2-year and 10-year Treasury yield curve inverts

#1 Iron ore

Iron ore futures lifted close to US$160 a tonne last Friday amid restocking ahead of China's 5 April Tomb Sweeping Day holiday.

Prices have further been buoyed by optimism over additional policy support to buoy China's industrial sector. Recent data relating to property sales, manufacturing and services and covid cases is putting the world's second-largest economy at risk.

The US-listed counterparts of BHP (ASX: BHP) and Rio Tinto (ASX: RIO) performed strongly in Friday's session, up 2.7% and 2.8% respectively.

This puts local iron ore majors in the spotlight on Monday, as well as smaller names such as:

• Champion Iron (ASX: CIA)

• Mount Gibson Iron (ASX: MGX)

• Fenix Resources (ASX: FEX)

#2 Lithium and rare earths

The VanEck Rare Earth/Strategic Metals ETF is making a V-shaped rebound towards previous all-time highs. The ETF is now teasing at a breakout after trading sideways for about 8 months.

Source: TradingView

Some highlights for the industry last Friday include:

• Tesla delivers record EV deliveries in the first quarter, in-line with analyst estimates. A total of 310,048 vehicles were delivered in the quarter, slightly higher than the December quarter and up 68% compared to last year

• President Joe Biden invokes the Defense Production Act to encourage domestic production of minerals required to make batteries for EVs and energy storage

  • This could help companies receive government funding for feasibility studies to progress green metal projects

• Allkem (ASX: AKE) expects June quarter lithium prices to continue to surge amid strong market conditions

See a full list of ASX lithium stocks here.

#3 Copper

Copper prices haven't been up to much, continuing to trade sideways around US$4.7/lb.

Source: TradingView

What's interesting is that the Global X Copper Mines ETF is teasing a breakout to 10-year highs.

Source: TradingView, annotations by Market Index

The ETF has exposure to several major global copper companies including BHP and Glencore.

Despite the ETF's bullish performance, local copper names like Oz Minerals (ASX: OZL) and Sandfire Resources (ASX: SFR) have struggled to keep up.

#4 Nickel

The sheer volatility of nickel prices is perhaps one of the reasons why local nickel names haven't taken off like other green metal stocks such as lithium, rare earths and vanadium.

Nickel prices have begun to stablise around the low-mid US$30,000/t level - which could provide some peace-of-mind after all the controversy and mayhem a few weeks ago.

See a list of ASX nickel stocks here.

#5 Energy   

Energy stocks are starting to trade sideways after a massive run up since the beginning of the year.

President Biden's release of strategic reserves caused a massive knee-jerk selloff for oil.

"The Strategic Petroleum Reserves over the next six months won’t have a lasting impact on oil prices, so if geopolitical risks continue to intensify, oil will recover most of this week’s losses," said Oanda senior market analyst, Ed Moya.

ASX corporate actions occurring today:

• Ex-dividend: BCN, CYC, SIG, WAR, WAX, WMA, WMI,

• Dividends paid: AUB, IDX, MFD, MVF, NHF

• Listing: TEE

• Issued shares: AKE, AKO, ANL, AO1, ARR, ATC, AUT, AVL, AWV, AZL, BLZ, BMN, BXB, CCR, CRS, CTD