Market highlights and 5 ASX small caps to watch on Wednesday

The ASX 200 is set to open lower on Wednesday
Wall Street drops overnight ahead of the FOMC meeting
Australia’s June CPI number to be released today

Local shares are set to open lower today. At 8.30am AEDT, the ASX 200 August futures is pointing down by 0.40%.

Overnight, tech heavy Nasdaq fell almost 2%, while the broad-based S&P 500 was down 1.15%.

US stocks opened lower after Walmart cut its profit outlook late Monday, citing reduced spending from customers due to high inflation. Walmart stock fell 7%, driving other retailers like Macy’s and Target down.

Mega tech stocks like Amazon and Meta also fell around 4-5% ahead of their earnings announcements later this week.

“There’s concern advertising spending will be much weaker,” said Eric Merlis, co-head of global markets at Citizens.

Adding to the gloom outlook, the IMF has just downgraded its outlook on the global economy.

In its report, the IMF forecast growth of just 3.2% for 2022 and 2.9% for 2023, a downgrade of 0.4% and 0.7% respectively from April.

Investors also nervously await the Fed interest rate decision to be revealed later today (US time) following the FOMC meeting.

While market consensus points to a 75bp hike, some hawkish analysts have predicted a 100bp hike.

Jim Caron, chief fixed income strategist at Morgan Stanley, expects a 75bp hike and believes that 75bp is still a very large move by historic standards which will send a strong message.

“However, it’s interesting to note that on Thursday we may learn that we are already in a technical recession with the Q2 advance GDP release, if it turns out to be negative,” he says.

“The Fed has not seen progress toward their inflation goals despite rate hikes. It seems that the Fed is tightening aggressively into a slowing economy, but they prefer to risk a hard landing or recession in order to rein in inflation risks.

“As a result, the path of rate hikes will be closely linked to the path of inflation,” Caron added.

The ABS will also release Australia’s June quarter CPI later today.

In the March quarter, annual headline CPI inflation increased to 5.1%, driven by higher dwelling construction costs and fuel prices. The market consensus is for that to increase to 6.1% today.

In other markets, oil prices fell by 1% while iron ore also dropped 6% to US$112.50 a tonne.

Bitcoin is currently trading at US$21,107, down by 1% in the last 24 hours.

5 ASX small caps to watch today

Echo IQ (ASX:EIQ)
EIQ entered into a study agreement with Beth Israel Deaconess Medical Center, a world-leading US teaching hospital. The study will evaluate Echo IQ’s artificial intelligence algorithm in detecting individuals with severe aortic stenosis.

Metals Australia (ASX:MLS)
MLS has completed Phase 2 metallurgical testing on the Lac Rainy High-Grade Graphite Project in Canada. Results showed a pilot scale bulk sample of graphite concentrate that has met the required specifications for downstream lithium-ion battery testing.

Cobre (ASX:CBE)
Significant visual copper mineralisation was intersected in the first diamond drill hole at the Ngami Copper Project in Botswana. Mineralisation includes chrysocolla along with fine-grained disseminated copper sulphides which occur over a broad 59m interval downhole, with an increase in abundance in the lower 10m.

Strike Resources (ASX:SRK)
Works approval has been granted for the export of iron ore from the Port of Ashburton, Onslow. The approval was issued by DWER under the Environmental Protection Act 1986, allowing Strike to undertake Category 58 bulk loading and unloading of iron ore from the Port of Ashburton. The approval is based upon assessed iron ore export capacity of up to 1.8 Mtpa.

Lithium Energy (ASX:LEL)
Exploration geophysics is now well advanced at the Solaroz Lithium Brine Project in Argentina, with passive seismic surveys now largely complete across all of the concessions. A drilling rig has been secured, and drilling is planned following the completion of the interpretation of the passive seismic and TEM surveys.

At Stockhead we tell it like it is. While Strike Resources and Lithium Energy are Stockhead advertisers, they did not sponsor this article.