Market Highlights: Risk back on as Yellen comes to rescue, and 5 ASX small caps to watch on Wednesday

The ASX is set to rise again on Wednesday
Wall Street rallied on the back of bank stocks as Yellen eased concerns
Fed interest rates decision ahead

The ASX is set to rise for a second straight day. At 7.30am AEDT, the ASX 200 April futures contract was pointing up by 0.90%.

Overnight, shares in New York and Europe advanced as traders anticipated that the worst of the banking crisis might be behind them.

On Wall Street, the S&P 500 index closed 1.30% higher, the Dow Jones was up 0.98%, and tech heavy Nasdaq rallied by 1.58%.

Regional banks shares led after US Treasury Secretary Janet Yellen said the US banking sector is “stabilising”, and that the US government would intervene more if there was another bank run.

First Republic shares surged 30% on Yellen’s comments, erasing yesterday’s losses.

Tesla rose 8% after getting boost from Moody’s which assigned a Baa3 issuer rating to Tesla with an Stable outlook.

Moody’s says the rating “reflects Moody’s expectation that Tesla will remain one of the foremost manufacturers of battery electric vehicles with an expanding global presence and very high profitability.”

Sportswear company On Holding jumped 27% after posting a better-than-expected earnings report with strong sales and margin expansion.

The Biden administration is set to unveil the US$50 billion CHIPS and Science Act which will take chip manufacturing away from China, Taiwan and South Korea and into the US.

Fed preview

Bond yields are rising ahead of the all important Fed interest rates decision later tonight.

Jerome Powell and his cohort will face a tough decision on whether to raise rates again, or take a pause amid the banking turmoil.

The futures market is pricing in an 80% chance of another 25bp rate hike, but the fear is that hiking rates could put more pressure on banks.

“The broader macro data shows some further tightening is warranted,” said Michael Gapen, chief US economist at Bank of America.

Nigel Green of deVere Group said central banks have the unenviable task of trying to cool stubbornly high inflation and restore financial stability at the same time, but added that investors are too happy to jump back into risk assets.

“It seems that investors are gripped by the Fear Of Missing Out.

“They’re looking past interest rate hikes and assuming that the chaos in the banking sector will unleash looser monetary policies from central banks, which will be fuel for the markets.”

Meanwhile, the Bank of England will also meet on Thursday to decide on rates.

Other markets

Oil prices rallied another 2.5% overnight as Russia sent signals it will keep oil output at reduced levels for a few more months. But analysts say the oil rally could struggle if the Fed remains hawkish tonight.

Gold price slumped 2% to US$1,940.04 after profit-taking as the price surged above US$2,000 earlier.

“Profit-taking might not last beyond the Fed as investors are lacking conviction with their Fed bets,” said Oanda analyst, Edward Moya.

Now read: Gold Digger – Forecasters get bullish with banking crisis to drive gold towards all time high

Bitcoin meanwhile slipped 0.5% in the last 24 hours to US$28,008.

A lot of traders are eyeing the $30k level for Bitcoin, and depending on how price reacts there, momentum flows could support a 5% move in either direction, said Moya.

“If the Fed doesn’t spark a rally, Bitcoin could settle closer to the $25,000 region,” he added.

Looking ahead to to today’s session on the ASX, no major data is due out but we expect to see the NZ consumer sentiment survey.

5 ASX small caps to watch today

Mount Gibson Iron (ASX:MGX)
MGX says the shipping rate of high grade (65% Fe) iron ore cargoes from its Koolan Island operation in WA is scheduled to accelerate from the end of this month as crushing capacity expands. Over 1.1 million wet metric tonnes (Mwmt) of high grade iron ore is stockpiled for processing, and this material, once crushed, has a current market value in excess of $150 million, says the company.

Industrial Minerals (ASX:IND)
IND announced that it will expand its exploration focus into high purity quartz on its existing Karratha tenure. Surface samples taken on recent reconnaissance trip will test the quality of the quartz outcrop as well as suitability. RC and diamond drill program planning will commence on receipt of surface sample assay results.

Orbital Corp (ASX:OEC)
OEC says it has received confirmation from the State of Western Australia that $3 million of the company’s legacy government loan has been converted to a grant, following the delivery of agreed performance milestones during the six months ending 31 December 2022. The grant reduces OEC’s legacy loan balance with the WA government, and improves the company’s balance sheet.

Minerals 260 (ASX:MI6)
Further significant copper-gold mineralisation was intersected in recent reverse circulation (RC) drilling at the Mynt prospect, part of the 100%-owned Moora Project in WA. Results include: 11m @ 1.4% Cu and 1.3g/t Au from 124 – 135m, including: 3m @ 2.8% Cu and 4.2g/t Au from 128 – 131m.

GBM Resources (ASX:GBZ)
Gold mineralisation between Yandan Main to East Hill defines a kilometre long trend that contains 900,000oz Au from both historic and the current Mineral Resource Estimate (MRE). The geology model has defined compelling targets, with the key geological focus being the high grade core of 1.1Mt @ 5.7g/t Au for 201,000oz Au.

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