Market Highlights and 5 ASX Small Caps to watch on Wednesday

ASX to extend losses and open lower
Snapchat plunges 43% after profit warning
Russian energy embargo could be “within days”

Local shares are set to extend yesterday’s losses and open 0.50% lower today, following a sharp 2.35% drop in Nasdaq overnight.

The US tech sector was under pressure as Snap Inc, owner of Snapchat, plunged 43% after issuing a profit warning,

Snap said that it will miss revenue and earnings targets for the current quarter. CEO Evan Spiegel also said in a staff memo that he was planning on slowing hirings through to the end of the year.

Other social media platforms like Meta and Twitter also fell on the news, down by 7% and 5% respectively.

The US flash PMI readings showed a sharper deceleration in economic activity than expected, with manufacturing activity falling to a three-month low.

“The US economy is not falling apart, but the weakness it is experiencing is much worse than many expected,” said Oanda’s senior market analyst Edward Moya.

Oil prices were mixed overnight as the EU moves closer to a Russian energy embargo.

The German economy minister said the EU will likely “reach a breakthrough” on a ban on Russian oil imports “within days.”

“It looks like the only thing that will send oil back to the pre-COVID levels is demand destruction across the world’s largest economies, and that probably won’t happen,” commented Moya.

Gold is making a mini comeback and has surged by 3% this week, trading at US$1,866 an ounce.

It’s been surging as Treasury yields plunge following a wave of risk aversion that saw the VIX index (also called the fear index) rising by 3% overnight.

“There might be no stopping gold right now as the wall of worry on Wall Street continues to grow,” said Moya.

Meanwhile, Bitcoin is trading at US$29,750 at 8.30am AEDT, up around 1% from yesterday.

“Bitcoin is in the danger zone as sentiment for risky assets have fallen off a cliff. Normally plunging Treasury yields makes crypto attractive but right now, no one wants to buy this dip,” said Moya.

5 ASX small caps to watch today

Sunstone Metals (ASX:STM)
Sunstone says the El Palmar gold-copper discover in Ecuador has returned strong assays that establish broad mineralisation over 500m by 300m from surface to 500m deep. The company says that El Palmar is clearly emerging as a substantial project with scale and grade.

Genmin (ASX:GEN)
Genmin says the Mineral Resource at the Baniaka iron ore project in Gabon grew by 168% to 700 million tonnes. The company says there is still significant growth upside remaining, given the Mineral Resource Estimates are prepared for just 15km of interpreted strike, with over 70km still to be drill tested.

Minbos Resources (ASX:MNB)
Minbos has completed the $2.46m sale of its Ambato Rare Earths Project in Madagascar. The funds will be used to complete the Definitive Feasibility Study (DFS) for the Cabinda Phosphate Project, and studies for the Capanda Green Hydrogen-Ammonia Project – both located in Angola.

Ovato (ASX:OVT)
Ovato says printing company Opus will acquire Ovato’s printing business for $8.5 million. In addition, Opus will also subscribe for one convertible note in Ovato with a face value of $2.5 million. The funds raised will be used for general working capital initiatives of Ovato.

Firebrick Pharma (ASX:FRE)
Firebrick says that its Nasodine Nasal Spray, a treatment and preventative for the common cold, has received a patent grant in Malaysia. This brings the number of countries where Firebrick’s common cold patent has been granted to 26.