• Wall Street sold off last night after Fed Powell’s comments on recession
  • The Fed had earlier hiked its key rate by 25bp
  • Crude prices fell another 5pc

 

The ASX is poised to extend its losses on Thursday following a selloff in New York. At 8am AEST, the ASX 200 May futures contract was pointing down by 0.40%.

Overnight, Wall Street fell by around half a per cent as Fed policymakers decided to lift the key rate by 25bp, broadly in line with market expectations.

The Fed’s 10th consecutive rate hike has now brought the Fed funds rate to a 5-5.25% range – the highest since mid-2007.

Stocks initially rallied on the decision, but started falling as Fed Chairman Jerome Powell spooked the market with recession talk during his press conference.

Powell said tighter credit is starting to have an impact on the economy, and that there could be a “mild recession” as a result.

“It’s possible that we will have, what I hope, will be a mild recession,” Powell told the media.

“The case of avoiding a recession is, in my view, more likely than that of having a recession. But the case of having a recession, I don’t rule that out either.”

Powell added that the Fed board had not yet decided whether it will “pause” its streak of 10 rate rises, but acknowledged there was a possibility of one soon.

 

Icahn gets the Hindenburg treatment

In stock news, Icahn Enterprises fell 19% after the investments company became the latest target of short seller, Hindenburg Research.

Hindenburg accused the company of committing a ‘Ponzi-like structure’.

“Icahn has been using money taken in from new investors to pay out dividends to old investors,” Hindenburg wrote.

“Such Ponzi-like economic structures are sustainable only to the extent that new money is willing to risk being the last one ‘holding the bag’.”

Meanwhile, Beverly Hills based PacWest Bancorp fell 55% after hours following rumours suggesting that it has been weighing a range of strategic options, including a sale. PacWest shares have now lost around 80% in the last two trading days.

Ford Motor was flat after its EV unit registered a $722 million quarterly loss.

Starbucks fell 9% despite reporting solid Q1 earnings that beat estimates. Analysts believe Starbucks fell because of recession concerns.

Estée Lauder plunged 17% on guidance cut, citing an uncertain post-pandemic recovery in Asia.

 

Oil is down another 5pc

In other markets, crude prices fell another 5% overnight after the 5% fall the previous day.

WTI is currently trading at US$68.15 a barrel.

“If the Fed is worried, that is bad news for the economy and the crude demand outlook,” said Oanda analyst, Edward Moya.

The focus will now shift to the OPEC+ meeting to see if the cartel might want to stabilise prices.

Safe haven gold was up 1% to US$2,037 an ounce, driven by the Fed’s recession talk.

“The journey to record highs has been a long one for gold, but if the Fed is truly done lifting rates, further tightening of credit conditions could be the key catalyst,” said Moya.

Iron ore was down -1% to US$101.25 a tonne.

Bitcoin however was up 1% in the last 24 hours to US$28,932.50.

Balaji Srinivasan, the crypto investor and tech entrepreneur, lost and paid a $1m bet that that Bitcoin would reach $1 million in 90 days.

The bet was announced in Twitter in March after an account called Medlock tweeted that he’d bet anyone $1 million the US wouldn’t enter hyperinflation.

The bet itself wasn’t technically about US hyperinflation, but rather Srinivasan had bet that Bitcoin, which he views as a hedge against inflation, would be worth $1 million in 90 days.

 

5 ASX small caps to watch today

ikeGPS Group (ASX:IKE)
The data tech company has delivered a strong FY23 growth, with $30.8m revenue, a +93% increase vs pcp. This result is ~$6m ahead of internal budgets set at the beginning of the financial year, and above upgraded analyst consensus. FY23 gross margin was approximately of $16.4m (+67% vs pcp), with a gross margin percentage of ~53%.

Orbital Corporation (ASX:OEC)
OEC announced a new engine development contract with Anduril Industries, one of the fastest growing defence companies in the world. This initial contract is worth ~$3 million, and will see Orbital UAV begin development of a new and larger engine configuration for Anduril’s future propulsion requirements. The first prototype engines are to be supplied to Anduril for ground testing by January 2024.

Briscoe Group (ASX:BGP)
The homeware and sporting goods retailer said unaudited sales for Q1 were $181.2 million, which is around 3% higher than the pcp. The group’s homeware segment increased by 2.85% to $109.9 million, while sporting goods sales increased by 2.78% to $71.3 million. The company however warned that New Zealand retail could have ongoing uncertainty as a result of deteriorating economic conditions.

Future Metals (ASX:FME)
Electromagnetics data indicates significant area of anomalism over the untested embayment feature (BC1 area) at the company’s wholly owned Panton Project. Rock chip sampling at BC1 has identified anomalous nickel sulphide mineralisation on the margin of the EM anomaly, and multiple occurrences of mineralised ultramafic rock throughout the BC1 area.

Helix Resources (ASX:HLX)
New, large scale copper veins have emerged along the Rochford Copper Trend. Anomalies of Cu – arsenic (As) and zinc (Zn) were identified in southern portion the Trend, associated with the zone hosting the Canbelego-Caballero-Bijoux prospects. The company said its regional discovery program has been accelerated with second auger rig and ground geophysical surveys commencing this month, ahead of drill testing programs.

 

At Stockhead we tell it like it is. While Orbital Corp is a Stockhead advertiser, it did not sponsor this article.

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