Market Highlights: Powell comments scare away the bulls, and 5 ASX small caps to watch today
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Aussie shares are set to drop at the open following a shaky session in New York. At 8am this morning, the ASX 200 March futures contract was pointing down by 0.70%.
Overnight, Wall Street finished much lower as Fed chair Jerome Powell killed risk appetite with a hawkish first day on Capitol Hill.
Powell told Congress the Fed will likely continue to hike rates in the coming months, and that bringing down inflation “has a long way to go and is likely to be bumpy”.
“The full effects of our tightening so far are yet to be felt. Even so, we have more work to do,” he said.
“Restoring price stability will likely require that we maintain a restrictive stance on monetary policy for some time.”
US shares plunged on his comments with the S&P 500 finishing 1.55% lower, the Dow 1.72% lower, and tech heavy Nasdaq falling 1.25%.
The long US dollar trade got another wind after the comments, pushing all other major currencies down. The Aussie dollar weakened by 2% to US65.93c.
We also saw major moves in fixed income, as the 2-year yield finally broke above 5%, the highest level since 2007.
The 2-year/10-year curve inversion reached 1 percentage point (~103bps), the most inverted in over 40 years. An inverted 2yr/10yr curve is usually a sign of an incoming recession.
“Powell is not taking any chances and wants to send home a clear message that the Fed will do whatever it takes to bring down inflation,” said Oanda analyst, Edward Moya.
In stock news, EV maker Rivian fell 14.5% after unveiling plans to sell bonds worth US$1.3 billion.
Dick’s Sporting Goods rose 11% after forecasting annual earnings above Wall Street estimates. Meta was flat after news that its employees could be bracing for another round of layoffs this week.
To commodities, oil prices sank 4% on Powell’s comments, gold slipped 1.75% and spot iron ore climbed 2% to US$127.05.
Bitcoin is down 1.35% in the last 24 hours to US$22,047.
“Risk appetite is very vulnerable here and if this wave of risk aversion does not pass, cryptos may struggle to make fresh 2023 lows,” said Moya.
Closer to home, China is making a series of moves to counter the US, including expanding its Ministry of Science and Technology’s role in orchestrating nationwide initiatives to counter US curbs on AI chips.
Looking ahead to the ASX today, we expect to hear a speech by RBA governor Philip Lowe, following the 25bp hike yesterday.
Swift Networks (ASX:SW1)
Swift has been awarded project contracts with multiple companies including OTOC, AngloGold Ashanti, Mineral Resources, and Roy Hill. The total contract value is $2.06 million and involves infrastructure work which will be undertaken in calendar 2023.
Evolution Energy Minerals (ASX:EV1)
Landmark agreements have been settled with the Government of Tanzania, confirming the Government’s 16% non-dilutable free carried interest shareholding and commitment to jointly develop Chilalo. A new joint venture company, Kudu Graphite, has been incorporated and will be owned 84% by Evolution (indirectly), and 16% by the Tanzanian Government. The agreements provide for a reissued 10-year term to the Mining Licence and reissued terms for all Prospecting Licences.
Golden State Mining (ASX:GSM)
First pass soil geochemistry results have identified coherent lithium anomalism up to 217ppm at the Paynes Find lithium project. Two priority targets identified up to 6km long, with infill soil testing underway. Sampling to date has only covered 14.4% of the overall granted project area.
Feasibility study has confirmed improved Net Present Value compared to Preliminary Feasibility Study to recover vanadium pentoxide (V2O5) from vanadium-bearing steelmaking by-products in Finland. Neometals said there is an opportunity now to deliver some of the highest-grade, lowest-cost vanadium chemicals globally with a carbon-negative footprint.
European Lithium (ASX:EUR)
The Definitive Feasibility Study (DFS) has demonstrated that the Wolfsberg Lithium project is set to deliver high returns, leveraging low operating costs, and benefiting from a lithium market which is anticipated to be in structural undersupply during most of the life of mine. Estimated CAPEX is US$866 million which supports a post-tax NPV of US$1.5 billion. Construction of downstream project facilities are now expected in Q4 this year.