Market Highlights: The US stripped of AAA rating; Bitcoin now less volatile than stocks and gold

The ASX is poised to open lower on Wednesday
The US has been stripped off its sovereign AAA rating
Bitcoin is less volatile than gold

The ASX 200 is set to open lower on Wednesday following a mixed session on Wall Street. At 8am AEST this morning, the ASX 200 index futures was pointing down by -0.55%.

Overnight, the S&P 500 fell by 0.26%, tech heavy Nasdaq by -0.43%, but blue chips Dow Jones finished 0.20% higher.

US investors assessed earnings results from big pharma against data showing manufacturing activity in the US slowed more than expected in July.

Pfizer fell -1.25% after saying it would launch a cost-cutting program if demand for its COVID-19 products remains muted this quarter.

Uber fell almost -6% despite reporting its first-ever quarterly operating profit. Total revenue grew 14% to $US9.2 billion during the quarter, but has missed analysts’ forecasts.

Keeping the Dow afloat meanwhile was construction and mining equipment maker Caterpillar, which rose 9% after reporting a rise in Q2 profits.

Elsewhere, the US has been stripped of its top tier AAA rating by Fitch Ratings.

Fitch downgraded long term US Treasuries from AAA – a rating it has enjoyed since 1994 – to AA+, while keeping the Outlook rating as ‘Stable’.

Fitch noted:

“The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades that has manifested in repeated debt limit standoffs and last-minute resolutions.”

Downside risk in H2, but Australia may hold up – analyst

AI enthusiasm, cash on the sidelines, and resilient economic growth are supporting stocks in the near-term as the economy continues to slow down, slowly.

Despite that, Russell Investments sees risk skewed to the downside.

“A recession in the United States seems probable over the next 12-18 months,” said Andrew Pease, Russell Investment’s global head of investment strategy.

Pease added that identifying the investment winners and losers from AI is not clear-cut.

“The gains may end up more evenly shared between the users and creators of AI,” he said.

He also said the Australian economy is continuing to slow, but the probability of a recession remains lower than for countries in the northern hemisphere.

“Immigration levels are high, which will support economic activity,” he said.

“However, the increase in interest rates and the expiration of many fixed-rate mortgages over the last three months will further slow household spending.”

In other markets …

Gold fell -1% to US$1,943.66/oz ahead of US manufacturing and labour market data.

“Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status,” said a report from the World Gold Council.

Crude prices fell by around -0.5%, with WTI now trading at US$81.37 a barrel.

Iron Ore 62% fe dipped almost -4% to $US108.32/ a tonne.

Bitcoin meanwhile was modestly lower by -0.1% in the last 24 hours to US$29,194.

According to data from crypto research firm K33, BTC is now less volatile than traditional assets and indices like the Nasdaq, S&P 500, and even gold.

“But my short-term thesis is that the market’s volatility pressure is about to climax and that an eruption is near,” said Vetle Lunde, senior analyst at K33.

“The tricky job is to build an informed view of when the pressure gets too strong.”

5 ASX small caps to watch today

BCAL Diagnostics (ASX:BDX)
BCAL has announced breakthrough results and a major step towards commercialisation of its breast cancer diagnostic test. A clinical study it sponsored with Precion Inc. in North Carolina achieved an impressive sensitivity of 90% and a specificity of 85.5%. These results were consistent with the findings of earlier studies conducted in Australia using a different mass spectrometry platform. The company now expects first sales in the second half of 2024.

Midas Minerals (ASX:MM1)
Midas has received a further 147 assay results from its Yellowknife Lithium Project in Northwest Territories, Canada. Significant assay results from this batch include: 4.65%, 4.12%, 3.02%, 2.97%, 1.80% and 1.63% Li2O.

Westgold Resources (ASX:WGX)
Westgold has provided its production, cost and capital guidance for FY24. Production guidance is 245-265koz at an All-In Sustaining Cost (AISC) of $1,800 – $2,000/oz. Meanwhile, Westgold has delivered on its guidance in FY23, hitting the top end of production guidance and mid-point of costs.

Podium Minerals (ASX:POD)
Podium said that Sam Rodda has tendered his resignation as CEO effective immediately. With this resignation, the company will not have a full-time Managing Director for a period of time. Leadership of the company will be provided by Chairman Rod Baxter, who will assume executive responsibilities for an interim period as an Executive Director.

EDU Holdings (ASX:EDU)
EDU has cancelled its plan to acquire Nurse Training Australia (NTA). Completion of the acquisition was subject to NTA gaining reaccreditation of its Diploma of Nursing program by the Australian Nursing and Midwifery Accreditation Council (ANMAC). But after 12 months, the assessment is still ongoing without a timeframe.