Market Highlights: Rotation into small caps in full swing, and Martin Currie bullish on lithium

ASX set to rise after strong Wall Street lead
Rotation into small caps is in full swing
Martin Currie bullish on lithium

The ASX is set to jump higher when the market resumes on Thursday following a solid night on Wall Street. At 8am AEDT, the SPI ASX200 futures contract was pointing up by 0.7%.

Overnight, the S&P 500 rose by 0.47%, the blue chips Dow Jones lifted by 0.79%, and the tech heavy Nasdaq climbed by 0.28%.

The Russell 2000 index, which tracks small caps in the US, hit its highest level in nearly three years.

“Investors may be looking to rotate away from large technology companies, which are widely owned and may have fewer clear catalysts going forward,” said David Russell at TradeStation.

Nicholas Lentini at Morgan Stanley added,” We recently upgraded small caps to neutral vs large caps after a persistent 3 1/2 year period of underperformance.”

To stocks, while most big tech stocks dropped, Nvidia Corp rose by over 3%.

Traders also dug through a bunch of corporate earnings reports. Morgan Stanley rose 6.5% to an all-time high after posting better-than-expected revenue and a 32% profit jump for Q3.

United Airlines soared 12% after beating earnings estimate.

Qualcomm will hold off on deciding whether to pursue a buyout of Intel Corp until after the US presidential election in November, according to people in the know.

Speaking of the election, billionaire Stan Druckenmiller believes the markets are pricing in a Donald Trump win. In a Bloomberg TV interview, he said, “You can see it in the bank stocks and in crypto.”

Airbus plans to cut up to 2,500 jobs in its defence and space division as the European aircraft maker looks to streamline operations amid losses and tough competition. Shares rose by 0.15% in Paris.

The best moving US stock overnight, however, was biotech firm 180 Life Sciences Corp, which skyrocketed by over 325% after a strategic pivot into the online gaming industry. The company said it will use blockchain technology, and has just acquired a back-end gaming platform with plans to launch a business-to-consumer online casino.

Martin Currie bullish on lithium

Chris Schade, Senior Research Analyst at Martin Currie, provided insights following Rio Tinto’s recent announcement of its intention to acquire Arcadium Lithium.

Martin Currie is a significant investor in Arcadium alongside Rio, and Schade said there’s a trend among Australian investors who have been focusing on local hard rock lithium projects, often overlooking opportunities like Arcadium.

“Arcadium stands out due to its lower-cost, long-life assets, combined with a substantial existing resource base and decades of operator experience,” Schade said.

He noted the company’s potential for expansion, particularly through innovative technologies like Direct Lithium Extraction (DLE), which differentiates it from traditional hard rock operators.

Schade acknowledged the lithium market has faced challenges, including overcapacity in China’s refineries, which has put downward pressure on lithium carbonate prices. This situation has led to Arcadium’s stock underperforming compared to peers, causing some investors to exit.

But Schade said “As value investors, we saw an opportunity.”

“We believe the evolving dynamics of the lithium market will provide further opportunities, and we remain committed to applying our deep research capabilities to navigate these developments.”

In other markets …

Gold price rose another 0.5% to US$2,673.44 an ounce.

Oil prices lifted by around 0.3%, with Brent crude now trading at US$74.50 a barrel.

The benchmark 10-year US Treasury yield fell by 2 basis points (bond prices higher) to 4.01%.

The Aussie dollar was down a further 0.5% to US66.70 cents.

Bitcoin climbed by 2% in the last 24 hours to US$67,562, while Ethereum rose by 1% to US$2,614.

And iron ore slid by 1% to $US104.55 a tonne.

5 ASX small caps to watch today

DY6 Metals (ASX:DY6)
DY6 has announced positive results from its metallurgy sampling at the Tundulu REE & Niobium project in Malawi. The sampling revealed grades of up to 3.35% TREO and 27.5% P2O5, with low levels of harmful elements, confirming the phosphate’s high quality. Selected samples will undergo further metallurgical analysis, while five bioavailability samples showed excellent phosphate solubility, with one reaching 81%. Additionally, nine key rock type samples will be analysed for mineral composition. The findings indicate strong potential for rare earth elements and niobium at Tundulu, especially in unexplored areas.

Lunnon Metals (ASX:LM8)
Lunnon reported promising grab sample results from the Lady Herial area, located near the Foster nickel mine. Significant findings include gold grades of 6.24g/t, 5.06g/t, and 3.06g/t. Additionally, a re-assay of a 2021 diamond hole returned 18.09m at 3.41g/t gold. Surface mapping identified shallow prospecting pits aligned with zones of gold mineralisation.The company will now initiate a drilling program to explore these pits further. CEO Edmund Ainscough noted the strong results are encouraging as the company seeks to confirm and extend the high-grade zones identified in previous drilling.

Ovanti (ASX:OVT)
Ovanti, a fintech firm, has appointed Simon Keast as its new CEO, effective 1 November. This appointment follows an extensive search, and Keast will lead Ovanti’s efforts to launch its Buy-Now-Pay-Later (BNPL) offering in the US, which is a new strategic shift for the company. With 30 years of experience in financial services, including roles as CFO of Zip Co, Keast brings strong market knowledge and operational expertise. Zip said Keast will drive Ovanti’s growth and success in the US market.

Altech Batteries (ASX:ATC)
Altech has announced a 55% increase in energy capacity for its Silumina Anodes lithium-ion batteries, achieving an average retention capacity of approximately 500 mAh/g. This improvement builds on a previous 30% energy increase and comes from a composite of alumina-coated silicon particles and battery-grade graphite. The new anode material shows excellent stability and cycling performance, overcoming past challenges related to capacity fading. Led by Dr. Jingyuan Liu, Altech said its research team has made strides in revolutionising the lithium-ion battery industry.

Euro Manganese (ASX:EMN)
EMN has announced the successful completion of a 5-day continuous operation program at its Demonstration Plant in the Czech Republic, producing high-purity electrolytic manganese metal (HPEMM). The plant achieved key technical targets necessary for accessing further funding from the Orion financing package. From October 7 to October 12, the plant operated continuously, producing 172 kg of HPEMM, surpassing its target by over 30% without any downtime. CEO Dr. Matthew James said the Chvaletice Project positions Euro Manganese well to meet the increasing demand for high-purity manganese in battery applications.

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