Morning wrap: Wall Street shakes of Russia-Ukraine crisis, Nasdaq up 3%, ASX set to jump

ASX Futures (SPI 200) imply the ASX will open 85 points higher, up 1.22%.

Russian President Vladimir Putin announced a “special military operation”, striking Ukrainian military infrastructure and border positions. The US and its allies retaliate by unleashing trillions of dollars worth of sanctions on Russian technology exports and financials.

US stocks staged an immense rebound after an initial plunge, led by previously hard-hit tech and growth names.

Key points

Stocks

• Major US indices fell at least -2% as the market opened, by market close:

  • The Dow Jones (blue chip) had bounced 2.9% from lows

  • The S&P 500 (large cap) was 4.2% off session lows

  • The Nasdaq (tech) was up 6.6% from lows

• It appears that the market had already tried to ‘price-in’ the worst-case scenario

• 61% of US stocks advanced, led by mega cap tech stocks 

• 68% of US stocks remain below their 200-day moving average (68% on Thursday, 62% a week ago)  

Economy

• The US recorded annualised GDP growth of 7% in the December quarter, in-line with consensus expectations

• The probability of a 50 bps hike is now 13.3%, down from a peak of 89% on 11 February, according to CME’s FedWatch tool 

• Investors are now expecting a more traditional 25 bps hike for the Fed’s 16 March meeting

• “Financial conditions are tightening, and the Fed will not want to shock markets,” said Oanda senior market analyst, Ed Moya

Commodities 

• Iron ore prices were slightly lower as traders said there were no clear signs of steel mills resuming production in northern China, according to Fastmarkets 

• Oil experienced a knee-jerk reaction, with Brent crude briefly rallying 9% to US$105.7 a barrel. Towards the end of the US session, prices reversed to US$99

• Gold had a likewise reaction, rallying to a 1 ½ year high of US$1,974. As equity markets began to rebound, gold prices faded back below US$1,900

• Other Russian-export materials including palladium, platinum, nickel and aluminium all experienced a similar jump and fade overnight

#1 Tech

Tech stocks bounced back as investors bought the dip. The Global X Cloud and FinTech ETF both rallied more than 4%. 

Notable US winners include: 

• Affirm +10%

• Block +7.5% 

• Zoom +7% 

• Microsoft +4.6% 

• Amazon +4.5% 

The bounce should see some positive flow for local BNPL names, especially:

• Block (ASX: SQ2)

• Zip (ASX: Z1P)

• Sezzle (ASX: SZL)

#2 Energy

Oil prices went backwards after the Biden administration announced they will tap into strategic reserves when they need to. 

“The oil market remains tight and potential for an extended military conflict is growing and that should keep oil prices above the $100 level over the short-term. What is complicating the bullish outlook for crude is how much of a release from strategic reserves energy markets will see and what will happen with Iran nuclear deal talks,” said Moya. 

The sharp reversal of oil prices could cause some pain for local energy stocks. 

The US energy sector was one of the worst performing sectors overnight, down -1.6%. US energy stocks mirrored the price action of oil, rallying at open before closing in negative territory.

Exxon Mobil for example, rallied 2.9% as the market opened, before closing -1.3% lower.  

#3 Gold

“Russia’s invasion of Ukraine is a gamechanger and demand for safe-havens will remain elevated and gold prices will likely see strong support over the short-term,” said Moya.

Though, the sharp reversal of gold prices could flag some negative flow for local gold miners.  

#4 Uranium

The Uranium ETF has held up relatively well amid the market volatility, down just -3% year-to-date.

The ETF rallied 3.8% overnight with its eyes set on the 200-day moving average. A close above the 200-day would be encouraging.

Source: TradingView

Uranium spot prices spiked overnight, up 4.9% to US$45.5/lb according to EvoMarkets.

This could see local names rebound sharply at open. See a full list of uranium stocks here.

ASX corporate actions occurring today:

• Ex-dividend: AVA, AWC, BAP, BPT, BSL, EHE, FID, GCI, INA, JLG, KKC, LLC, NCM, PCI, PPE, PTL, PWR, QRI, TCF

• Dividends paid: AFI, APZ, BWP, EZL, HCW, HDN

• Issued shares: ACF, ADR, AFL, AMH, CAM, CRR, CTQ, DEM