• The ASX is set to extend losses despite a more subdued session on Wall Street
  • Australian bond market implies a 3.6% RBA cash rate by end of 2022
  • US Fed rates decision ahead tonight

The ASX is poised to extend its losses this morning, after a mixed session on Wall Street overnight.

At 8am AEST, the ASX 200 June futures is pointing down by 0.60%, while US stocks were mainly down by around 0.30%.

Fear still dictates sentiment in the market as investors await the outcome of the Fed meeting later today (US time).

Experts are pretty much unanimous about a 75bp hike rate, despite Fed Chairman Powell previously communicating a 50bp increase.

Other experts have said the Fed must go harder to bring the 8.6% inflation to heel, even at the expense of having a recession.

“We’re expecting the Fed to underscore that it is going to do everything it takes to bring down inflation. And of course the big question hanging over markets is, are you doing enough and what are you going to do to show us that you are,” says Bloomberg’s expert Kathleen Hays.

Among the best performing US stocks overnight was FedEx, which jumped by 14% after announcing a rise in its quarterly dividends by 50%.

US treasury yields have climbed another 11bp to 3.48% ahead of the Fed decision. In Australia, the bond market at Tuesday close implied that the cash rate will jump from the current 0.85% to 3.6% by the end of 2022.

Governor Philip Lowe told the ABC 7.30 program last night that a cash rate of 2.5% was ‘necessary’ to keep Australia’s inflation from jumping to 7% (currently at 5.1%).

But Lowe admitted that he was unclear how far or how fast rates would go.

“It’s unclear at the moment how far interest rates will need to go up to get that,” Dr Lowe told the ABC programme.

“I’m confident that inflation will come down over time but we’ll have to have higher interest rates to get that outcome.”

In other markets, the Aussie dollar has fallen rapidly and is now trading at US68.75c, while Bitcoin plunged by another 7% to trade at $US21,450 at 8.30am AEST.

5 ASX small caps to watch today

Coventry Group (ASX:CYG)
The industrial products supplier has forecast a full year FY22 revenue of $315m to $325m (unaudited), being 10.9% higher at the mid-point from FY21. The FY22 forecast net profit before tax is $10m to $11m, being 13.6% higher at the mid-point from FY21.

Invigor Group (ASX:IVO)
The data intelligence company has been awarded a contract with Catch.com.au to supply its Pricing Insights solution across all Catch categories including health & beauty, pet supplies, baby products and many others. Rvenue in the range of $600,000-$650,000 is expected over the next three years from this contract.

Meteoric Resources (ASX:MEI)
Meteoric’s exploration team have mobilised to the Palm Springs Gold Project to commence work for the 2022 field season after a mild wet season. The 2022 season will build on the significant progress made in the company’s first two years.

Kalina Power (ASX:KPO)
The Kalina Energy Centre – Saddle Hills project in Canada has been granted approval under the Environmental Protection and Enhancement Act. The EPEA approval has been granted for a 64MW gas-fired combined cycle facility to be equipped with dry-low NOx emission controls, and utilising the KALiNA Cycle technology.

Sihayo Gold (ASX:SIH)
First phase of drilling has been completed at Sihorbo South in Indonesia, with a total of 5,215m in 30 diamond drill holes completed since September. Drilling results include: 3m @ 25.15 AuEq with 24.88g/t Au, and 20g/t Ag from 112m, and 7m @ 1.18g/t AuEq with 0.9g/t Au, and 21g/t Ag from 129m.