Market Highlights: Fed comments trigger Wall Street selloff; and where is gold headed from here?

ASX to open sharply lower after a selloff on Wall Street
Traders hit the sell button after comments from two Fed officials
Where gold is heading after its record high yesterday?

The ASX is set to give up yesterday’s gains and open sharply lower on Friday. At 8am AEDT, the ASX 200 index futures contract was pointing down by -0.8%.

Overnight, Wall Street wobbled after comments from Fed officials suggest rate cuts may come not in the middle, but instead late in the year or even next year.

The S&P 500 shed -1.23% , the blue chip Dow Jones index was down by -1.35%, and the tech-heavy Nasdaq slumped by -1.40%.

Stocks fell after Minneapolis Fed boss Neel Kashkari said that although the Fed has pencilled in two rate cuts, none may be implemented this year if inflation stays sticky.

“If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all,” Kashkari said. “There’s a lot of momentum in the economy right now.”

Earlier in the day, Richmond Fed President Thomas Barkin also said the US central bank has “time for the clouds to clear” on inflation before starting to cut rates.

After their comments, the probability of a rate cut this year, as measured by the CME’s FedWatch Tool, actually rose slightly from the previous day to 64%.

To stocks, and marketing software company Hubspot rose 5% after Alphabet Inc. was reported to be making an offer to buy out the company.

Levi Strauss & Co. surged +12% after cost-cutting measures boosted profitability.

Ford Motor Co slipped -3% after saying that it will delay the launch of an electric three-row sport utility vehicle by two years.

Brent crude meanwhile keeps going up and has breezed through US$90, trading now at US$91.14 a barrel, as Middle East tensions escalate.

“If we get a direct conflict between Israel and Iran, that’s something that will likely restrict the supply of oil coming from the Middle East. That has not been an issue up until now, but it could become one very quickly,” Matt Maley at Miller Tabak + told Bloomberg.

Where is gold headed?

Gold retreated from record highs last night, trading now at US$2,290/ounce.

Wael Makarem, a financial markets strategist lead at Exness, says gold prices have remained on an uptrend overal, but could see some correction risks as monetary policy expectations continue to change.

“Traders continue to monitor US economic data as well as the comments from the Federal Reserve governors,” said Makarem.

Fed Chair Jerome Powell stated on Wednesday that the central bank will require more evidence of inflation moving sustainably towards the 2% target before considering interest rate cuts.

Atlanta Fed President Raphael Bostic suggested the possibility of a single cut, while San Francisco’s Mary Daly and Cleveland’s Loretta Mester reiterated their forecasts for the commencement of policy easing this year.

“The latest ISM report also revealed a surprise slowdown in U.S. services growth, and easing price growth for service providers supported expectations of rate cuts and gold prices, while manufacturing PMI weighed on the asset,” said Makarem.

“At the same time, in February, central banks continued to strengthen their gold reserves, albeit at a slower pace compared to the previous month.

“Global central bank gold reserves increased by 19 tonnes, marking the 9th consecutive month of growth, which could support gold.”

In other markets …

Gold price retreated from all time highs by -0.3% overnight to to US$2,290.90 an ounce.

Oil prices also rose around +1.5%, with Brent now trading at US$91.14 a barrel.

The benchmark 10-year US Treasury yield fell by 4bp (bond prices higher) to 4.32%.

Iron ore futures fell another -1.5% US$98.00 a tonne.

The Aussie dollar climbed by +0.4% to US65.90c.

Bitcoin meanwhile rose +3.25% in the last 24 hours to US$67,801.

5 ASX small caps to watch today

Accelerate Resources (ASX:AX8)
AX8 says its Prinsep lithium project maiden drill program is rapidly advancing, with Aboriginal Heritage and Ethnographic surveys confirmed for mid-April. The survey will cover the full +1.8km strike extent of both the northern and southern mineralised lithium pegmatite trends where assay results up to 2.06% Li2O1 have been reported.

Emyria (ASX:EMD)
Emyria announced that the company’s first female psychiatry specialist (the company’s second specialist) has been granted “Authorised Prescriber” status by the Therapeutic Goods Administration (TGA). The authorisation enables the prescribing of MDMA according to an ethics committee endorsed care model developed by Emyria, and within the strict regulatory framework established by the TGA for the treatment of Post-Traumatic Stress Disorder (PTSD).

West African Resources (ASX:WAF)
WAF provided a production update from its Sanbrado gold operations for the March 2024 quarter (Q1). Highlights were: Q1 gold production: 56,595 oz. Q1 gold sales: 49,509 oz at an average price of US$2,078/oz. Underground mined ounces in Q1 increased 22% on the December 2023 quarter, with 105kt of ore mined from M1 South at 8.1g/t for 27,484 ounces of gold.

Mount Gibson Iron (ASX:MGX)
MGX advised that with the shipping of 0.7 million wet metric tonnes (Mwmt) of high grade (+65% Fe) iron ore fines products from Koolan Island in the March 2024 quarter, it is on track to achieve its annual FY24 shipping guidance of 3.8-4.2 Mwmt. High grade shipments for the 9-month period to 31 March 2024 total 3.2 Mwmt.

SQX Resources (ASX:SQX)
Soil sampling results at the Scrub Paddock prospect have identified two new areas for exploration targeting a copper/gold porphyry system. Geochemical anomalies overlies a magnetic high on the western side of the Elgin Vale Diorite, and the southwest extension of the known mineralisation was intersected in drilling.