Market Highlights: Tense week as Fed's decision looms; and 5 ASX small caps to watch on Monday

The ASX will track Wall St lower at the open on Monday
The market expects the Fed to pivot from a 75bp to a 50bp increase
Australia’s unemployment rate data is also scheduled later this week

The ASX is poised to open lower this morning, tracking the movements in New York. The ASX 200 Dec futures contract was pointing down by 0.50%.

On Friday, Wall St edged lower towards the close – with the S&P 500 falling by 0.73%, the Dow Jones by 0.90% and Nasdaq by 0.70%.

Biggest losers include Chevron and Walmart, while gainers were Disney and Tesla and Netflix.

This week is a huge week for stock markets with the release of the US inflation report, the Fed handing down its rates decision on Wednesday (US time), and Jerome Powell’s comments afterwards.

There are signs the Fed would not be as aggressive this time around, with a 50bps increase already telegraphed by Chairman Powell (compared with 75bps previously expected by the market).

What experts are more concerned with is the path from hereon in, says a note out of S&P Global Market Intelligence.

Daniela Hathorn, a market specialist at Capital.com, agreed and said:

“Given the recent comments from Powell, it’s not so much about the pace of rate hikes, which has been the key metric up until now, but rather for how long will rates remain elevated.”

Nigel Green of deVere Group says the Fed’s likely dovish pivot means the US dollar’s power era is coming to an end.

“Against this backdrop, investors are now trimming bets on aggressive Fed tightening as inflation is gradually tamed, which means the dollar will not be as attractive.”

The Bank of England will also meet and hand down its rates decision on December 15 (UK time). The market expects governor Andrew Bailey to hand down a 50bp hike to combat the spiralling UK inflation which has shot up to a 41-year high.

Back home, Australia’s November labour data (including the unemployment rate) for November will be released on Thursday amid a tight Aussie labour market.

In October, the jobless rate fell to 3.4% despite the spate of RBA rate rises.

In other markets, crude rose marginally after President Putin said Russia could cut its oil production in response to the G7 price cap.

“The short-term crude demand outlook has deteriorated significantly as no one has a strong handle on how bad a recession will hit the US economy,” says OANDA analyst, Edward Moya.

Gold prices pared gains after a hot US PPI report on Friday, but might struggle for meaningful moves until we get the inflation data before the Fed meets.

Crypto also traded sideways in the last 24 hours to US$17,143.

“If Wall Street is confident that the Fed will be done hiking after the February rate rise and nothing new breaks in crypto, you could see Bitcoin make a run for the $18,000 level,” said Moya.

5 ASX small caps to watch today

Tyro Payments (ASX:TYR)
Tyro says that following careful consideration by the Board, it has been determined that the company will cease all current discussions in relation to a change of control (or acquisition) of Tyro at this time. The company had earlier received takeover offers from Potentia and Westpac.

K2Fly (ASX:K2F)
Anglo American has selected K2fly’s Mineral Resource Governance Solution for use across all Anglo American commodities and operating regions. This represents a three-year contract with a Total Contract Value (TCV) of $1.44m, and an Annual Recurring Revenue of $375k to K2Fly.

Skyfii (ASX:SKF)
Skyfii announced that it has secured several new contract wins in the global airport vertical over the last five months. The company has signed several key contracts with a combined total contract value of US$2 million.

Live Verdure (ASX:LV1)
The health and wellness company reported record sales of around $579k over the month of November. This total is more than double the combined sales figures for the previous three months. The company says this success reflects the sales and marketing initiatives implemented by new CEO Mark Tucker, who joined the company just several months earlier.

Torque Metals (ASX:TOR)
Torque says significant rare earths potential have been discovered at Bullfinch Project in WA. Up to 1007ppm total rare earth oxides (TREO) and low levels of deleterious elements were discovered, including 3m @ 0.1% TREO with 187.15ppm NdPr from 15m.