• ASX set to sink today after a broad selloff in US and Europe
  • The market was spooked by China’s missed data
  • Pimco explains why commodities are a good bet for the long term

 

The ASX is set to fall on Wednesday, in line with broad losses on Wall Street and Europe. At 8am AEST, the ASX 200 index futures was pointing down by around -1%.

Overnight, the S&P 500 tumbled by -1.16% on heightened worries about China’s economy’s outlook after the country’s latest data missed expectations.

Blue chips Dow Jones, tech heavy Nasdaq, and Europe’s EURO STOXX 50 also fell more than 1% each.

The market reacted to China’s data release yesterday which showed July industrial output and retail sales growth coming in below forecasts.

China’s PBOC responded by cutting its key rate by 15bp, while authorities halted the release of youth unemployment figures, which were seen by experts as a key indication of the country’s slowdown.

“As long as I don’t announce it, then nobody is unemployed,” said a cheeky post on Chinese social media platform Weibo.

Now read: China has a new problem. It’s a big one. And it’s possible top brass don’t know what to do.

To stock news, Home Depot rose 1% after beating quarterly earnings and revenue estimates.

Mega tech stocks like Tesla, Apple and Amazon fell as traders exited risky trades.

Major banks JPMorgan Chase, Wells Fargo also dipped more than 2% after rating agency Fitch reiterated that it may downgrade larger lenders.

Back home, ASX stocks to report their earnings today include Yancoal, Bapcor, Mirvac, and Transurban.

 

Pimco says go long commodities

Fund manager Pimco says it has a positive outlook for commodities based on supply constraints, the transition to a net-zero economy, and their historical correlation with inflation.

According to Pimco’s commodity executive vice president, Michael Haigh, over the longer term, the net-zero transition and deglobalisation could add to upside inflationary risks.

“Transitioning to this net-zero economy will be commodity-intensive,” Haigh said.

He also believes a long-term investor may view weakness stemming from a mild recession as an opportunity to use commodities to guard against inflation.

Haigh also said opportunities are abundant in agriculture after extreme weather caused two years of poor crops.

“Climate change appears to be having adverse effects on supplies of agricultural commodities, which is supportive of prices.”

Metals on the other hand, the most sensitive commodity to the shorter-term industrial cycle, face a clear headwind, Haigh said.

“Nonetheless, global inventories for some major industrial metals are at the lowest levels in decades.

“Longer term, the transition to a net-zero economy will likely be extremely metals-intensive.”

 

In other markets …

Gold traded lower again by -0.3% to US$1,901.50 an ounce.

Crude prices fell around 1.5%, with WTI now trading at US$81.15 a barrel.

“Considering that China is expected to account for more than 70% of this year’s global oil demand growth, the worries about the Chinese economy are top of the bearish factors for oil,” says oil analyst, Tsevetana Paraskova.

Iron ore 62% fe was up slightly to $US104.80/tonne.

Bitcoin meanwhile was trading lower by -0.5% in the last 24 hours t0 US$29,203.

Europe’s inaugural spot Bitcoin ETF is going live on Euronext Amsterdam. The ETF, trading under the ticker BCOIN, lets investors tap into the Bitcoin price without directly buying or handling the cryptocurrency.

 

5 ASX small caps to watch today

AML3D (ASX:AL3)
AL3 has received a $2.02m order from the US Navy for submarine parts. The contract accelerates AML3D’s strategy to embed its ARCEMY 3D metal printing technology in the US Navy’s submarine industrial base. The contract will run for a period of nine months starting in September.

Loyal Lithium (ASX:LLI)
Loyal says it has made a discovery of five spodumene bearing pegmatite dykes in the ongoing field program at the Trieste Lithium Project in Canada. They were identified within a 6km2 area to the south of the Trieste Greenstone Belt, situated in a metasediment host – leaving several high value greenstone targets yet to be explored.

Battery Age Minerals (ASX:BM8)
BM8 also made a discovery of pegmatite outcrops hosting visible spodumene at the eastern extent of the Falcon Lake Project, which has extended the prospective mineralised corridor at the project to 5km. Nine new pegmatites were discovered including five containing visible spodumene ranging from 5 to 20% content.

Everest Metals (ASX:EMC)
Six promising Exploration Licences were granted for a six-year period in Alice Springs and Central Desert Regions, Northern Territory. Granted tenements covered an area of 3,421km2, giving EMC significant land holding in the NT. Preliminary desktop studies are now completed, and the company says it wants to further develop targets for battery and other critical metals over this large tenure.

Rewardle Holdings (ASX:RXH)
A $550k funding has been received by Rewardle from specialist R&D finance provider Radium Capital. The non-dilutive financing boosts Rewardle’s working capital and supports the company’s ongoing investment in growth initiatives. Rewardle also says its growth strategy is on track and gaining momentum.

 

At Stockhead we tell it like it is. While Battery Age Minerals is a Stockhead advertiser, it did not sponsor this article.

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