Market highlights and 5 ASX small caps to watch on Tuesday

The ASX is set to open lower this morning
Wall Street softens overnight as oil prices fall by 4%
The RBA will announce its interest rates decision at 2.30pm in Sydney

Aussie shares are set to open lower this morning, ahead of the headline Reserve Bank of Australia interest rates decision at 2.30pm AEST.

At 8am, the ASX 200 was pointing down by 0.25%, taking directions from Wall Street overnight.

All three major US indices – the S&P 500, Dow, and Nasdaq – fell by less than 0.3% on the first trading day of the month after a bumper July.

Recent weak manufacturing data in the US, China and the EU, in addition to the potential visit to Taiwan by the US Speaker of the House of Reps, Democrat Nancy Pelosi, causing uncertainty across markets.

“Despite a robust July, Wall Street still has the mindset that the recent stock market gains are still just a bear-market rally,” said OANDA analyst, Edward Moya.

“Rising tensions amongst the two world largest economies also won’t support risk appetite anytime soon.”

The US energy sector fell by 2% overnight after a tumble in crude prices of around 4%. This week will all about the OPEC+ meeting as the market hopes for an unlikely increase in output from the cartel.

“The White House is hoping OPEC+ will deliver more production, but what will truly motivate the oil cartel is the recent rise in US production and potential loss for market share as exports have increased significantly,” Moya said.

Base metals and iron ore were also softer overnight, while Bitcoin fell by 1.5% in the last 24 hours to trade at US$22,970.

Back home, investors have priced in a 50bp hike by the RBA today.

The central bank has taken our cash rate from 0.1% to 1.35% over the past few months, and most experts predict the RBA won’t stop until it reaches 2.5%-2.6%.

Last week, Aussie inflation rose to 6.1% for the three months, bolstering the RBA’s case for an aggressive move.

Treasurer Chalmers has however announced a formal review into the RBA, while PM Albanese warned the central bank not to “overreach” on rates.

Albanese told The Australian’s Strategic Business Forum last week that a sharp spike in borrowing costs would place “real pressure on people,” and while he recognised the RBA’s independence, “they need to be careful that they don’t overreach as well.”

5 ASX small caps to watch today

Appen (ASX:APX)
Appen reported half year results this morning, where group revenue was down 7% on pcp to of $182.9 million. Underlying EBITDA (after FX impact) was $8.5 million, down 69% on pcp. Appen reported a bottom line underlying net loss after tax of $3.8 million, compared to a $12.5 million net profit after tax in H1 of FY21.

Ventia Services (ASX:VNT)
Ventia has been awarded a road maintenance contract by Auckland Transport (AT) for the Auckland West region. Ventia will provide reactive, routine and programmed maintenance and renewal activities across the network. The five-year contract has a value of NZ$220m over the initial term with a five-year extension option.

Calidus Resources (ASX:CAI)
Soil program targeted the untested western end of the Blue Spec Fault Zone provided compelling gold anomalies.Preliminary follow-up field work confirms that the main zone of anomalism coincides with an increase in carbonate alteration and quartz-ankerite veins.

DroneShield (ASX:DRO)
DroneShield has received approximately $2 million in cash payment as a grant from the Australian Government as an R&D Tax Incentive for its 2021 activities. The amount is a record R&D Tax Incentive Grant received by the company to date.

Lunnon Metals (ASX:LM8)
Thick, high grade nickel has continuesd at the Baker Shoot, part of the Kambalda Nickel Project. Above a 1.0% Ni cut off, the hole recorded results including: 19m @ 6.01% Ni, 0.59% Cu, 0.10% Co, 1.09g/t Pd, 0.67g/t Pt.