Market Highlights: Fedspeak sinks Wall Street, and 5 ASX small caps to watch on Monday

The ASX is expected to open flat on Monday
Wall Street traders assess the risk of higher Fed rates
Binance exits US partnerships

The ASX looks poised to open flat this morning despite a slump in New York. At 8am AEDT, the ASX 200 March futures contract was pointing down by 1 point.

On Friday, the S&P 500 and Nasdaq extended losses by around half a percent on concerns the Fed could lift rates more than the last hike of 25bp.

Fed board member and Governor Michelle Bowman told a bankers’ conference the Fed needs to keep raising interest rates to reduce inflation which remains “much too high.”

“I don’t think we’re seeing what we need to be seeing, especially with inflation,” Bowman said.

“I think we’ll have to continue to raise the federal funds rate until we start to see a lot more progress on that.”

Equity markets are moving on the back of this uncertainty, ie whether the Fed will keep the rate hike at 25bp in the March meeting, or go for something higher.

Bond yields are showing the Fed could go for 50bp, and the CBOE Volatility index, also known as Wall Street’s fear gauge, also traded above 20 points for a second straight session on Friday.

“It doesn’t look there is a chance that the Fed will be holding anytime soon, which should keep sending yields higher at the short-end of the curve,” said Oanda analyst, Edward Moya.

And it isn’t just Fed expectations that are rising, traders are also expecting the ECB to send rates much higher.

“It looks like global growth will definitely take a harder hit as monetary policy gets even more restrictive over the next few months,” added Moya.

In company news, Meta/Facebook gave 7,000 employees poor performance reviews, a sign that it might be gearing up for more layoffs. Employees who score low on the key performance metrics often leave the company, sources said.

In other markets, crude prices fell 3% on Friday as global growth concerns return, while Bitcoin stayed steady at Us$24,295 at 8am AEDT.

Crypto traders are paying close attention to reports that Binance is on the verge of exiting relationships with US companies as regulators close in.

We pulled back on some potential investments, or bids on bankrupt companies in the US for now. Seek permission first. https://t.co/js0OR7gy68

— CZ 🔶 BNB (@cz_binance) February 17, 2023

Back home, earnings season continues on the ASX today. Companies to report this morning include: BlueScope Steel, Bendigo & Adelaide Bank, Adairs and Ampol.

5 ASX small caps to watch today

Nuix (ASX:NXL)
Nuix’ half year saw Annualised Contract Value (ACV) of $170.2m, up 3.4% on the pcp. The ACV outcome is in line with the guidance range provided earlier. Statutory revenue was $87.6m, up 4.3% on the pcp. Bottom line NPAT was $1.3m, up 153.8% on the pcp.

Adairs (ASX:ADH)
Group sales for the first half were up +34.1% to $324.2m. Bottom line statutory NPAT was $21.m, up +23.9% on pcp, with EPS (earnings per share) of 12.7c, up 22% on pcp. Adairs declared an interim dividend of 8cents per share, fully franked.

Essential Metals (ASX:ESS)
A mining lease has been granted for Essential over the Dome North lithium Mineral Resource in WA, with a term of 21 years. The lease covers 2,408 hectares, encompassing the Dome North lithium Mineral Resource and the surrounding area where the future mining operation infrastructure will be located.

Perenti (ASX:PRN)
Perenti’s subsidiary Ausdrill has been awarded a new Australian surface contract at the Northern Star Resources-owned Kalgoorlie Consolidated Gold Mines Fimiston open pit gold mine in Kalgoorlie, WA. The new circa $160 million contract will see Ausdrill provide up to 14 production blast hole drill rigs to support ongoing operations. Perenti does not expect any new capital outlay to support this contract.

Many Peaks Gold (ASX:MPG)
MPG announced the granting of an additional two mineral licences expanding the Aska Lithium Project from 151km2 to a 193km2 area in an emerging lithium district in Newfoundland, Canada. The area overs favourable geological setting host to Lithium-Caesium-Tantalum (LCT) type pegmatites. The new licence have now been added to the planned mapping and reconnaissance work commencing in April.