Market Highlights: Market slumps after inflation shock, Chinese stock plunges 99pc in 15 minutes

Wall Street slumps after shocking inflation report
Chinese cement company plunges 99pc in 15 minutes
And when will the RBA cut interest rates?

Aussie shares are set to open sharply lower on Thursday after US inflation came in higher than expected. At 8am AEDT, the ASX 200 index futures contract was pointing down by -0.80%.

Overnight, the S&P 500 slipped by -0.95% , the blue chips Dow Jones index was down by -1.09%, and the tech-heavy Nasdaq fell by -0.84%.

Stocks slumped after the US inflation for March came in shockingly high at 3.5%, up from 3.2% in February and higher than the consensus forecast of 3.3%.

Fed swaps are now showing bets of only two rate cuts for 2024, from the three rate cuts before the inflation report.

“It’s often said that the Fed takes the escalator up and the elevator down when setting rates,” Richard Flynn at Charles Schwab told Bloomberg. “But for the path downwards in this cycle, it looks like they will opt for the stairs.”

The Fed minutes however showed that while policymakers expressed concern that inflation wasn’t going down, they still expected to cut interest rates at some point this year.

To stocks, Meta Platforms climbed +0.6% after announcing the deployment of a homegrown chip to help power its AI services.

Apple fell -1% despite reporting that it assembled US$14 billion worth of iPhones in India last fiscal year, doubling its production in the country.

Taiwan Semiconductor Manufacturing (TSMC) fell -0.5% despite quarterly revenue growing at its fastest pace in more than a year.

Meanwhile, a little known Chinese company listed in HK, China Tianrui Group Cement, was in the spotlight in late Wednesday afternoon after its share price fell 99% within 15 minutes before being suspended.

“When there is a relatively large selling order, it is easy to trigger panic since there are not enough buyers,” said Steven Leung at UOB.

When will the RBA cut rates?

In its latest Central Bank Watch report, Franklin Templeton says it expects Australian interest rates to move in Q4.

The asset manager notes that the RBA has turned less hawkish at its March 19 meeting, despite maintaining that it was “not ruling anything in or out”.

“Additional fiscal easing in the May 14 federal budget on cost-of-living pressures as well as the Stage III tax cuts, which will be implemented from July 1, should lift spending in the second half of 2024, in our view.

“Labour data continues to show signs of tightness, with the unemployment rate crawling back to 3.7% from 4.1% previously, despite stable participation rates.

“This will give credence to the RBA’s view that labour-market trends lend support to the goal of reaching the inflation target by the end of 2024,” says Franklin.

“We therefore expect a move only in the fourth quarter once the impact of fiscal easing on growth is ascertained, and inflation and labour trends are more stabilised.”

In other markets …

Gold price was down -0.8% to US$2,334.70 an ounce.

Oil prices rebounded by +1.3%, with Brent now trading at US$90.61 a barrel.

The benchmark 10-year US Treasury yield surged by 18bp (bond prices lower) after the CPI report to 4.55%.

Iron ore fell -0.8% to S$106.60 a tonne.

The Aussie dollar slumped by -1.77% to US65.13 cents after the USD appreciated against major currencies following the CPI report.

Bitcoin meanwhile rose by +2.5% in the last 24 hours to US$70,759.

5 ASX small caps to watch today

Vanadium Resources (ASX:VR8)
VR8 has entered into a Memorandum of Understanding with Panjin Hexiang New Materials Technology, one of China’s largest vanadium nitride producers. The MOU envisions the purchase of 4,000 tonnes per annum of vanadium pentoxide (V2O5) for an initial five-year term with an option to extend for a further 5 years. The MOU represents approximately 37% of VR8’s planned V2O5 production in Phase 1.

European Metals (ASX:EMH)
EMH announced the successful production of lithium hydroxide monohydrate from pregnant leach solution, manufactured during the recent larger-scale Cinovec pilot programme. The programme has confirmed the viability of the Lithium Chemical Plant process flowsheet for the industrial-scale production of either lithium carbonate or lithium hydroxide.

Koba Resources (ASX:KOB)
Koba has entered into an agreement that provides it the right to acquire a 100% interest in the Harrier Uranium Project encompassing 131km2 in eastern Canada. The project is located within a heavily under-explored world-class uranium district that hosts numerous deposits, including 127.7mlbs of U3O81 at the Michelin uranium project. Up-front consideration payable for the project is C$150,000, which provides a 12-month option. Koba can then acquire 100% with further staged payments of C$575,000 over four years.

Krakatoa Resources (ASX:KTA)
KTA updated the market on its ongoing reconnaissance work on new prospects at the Turon Project. New copper-gold prospect on Turon Project defined with rock-chip assays to 1.24g/t Au, 10.45% Cu, with anomalous Mo, and Sn. Four samples returned over 1% Cu, averaging 4.83% Cu to a maximum of 10.45%.

Olympio Metals (ASX:OLY)
Diamond drilling at the Wells-Lacourcière Prospect Dyke B has returned up to 2.3% Li2O (CAD56) associated with spodumene mineralisation. Olympio’s field crews will be back on ground in coming weeks exploring high priority targets amongst >400 known pegmatites.

At Stockhead we tell it like it is. While Koba Resources, Krakatoa Resources, and Olympio Metals are Stockhead advertisers, they did not sponsor this article.