• The ASX will open lower on Thursday
  • US and European sharemarkets are on a six-day losing streak
  • Minutes from FOMC show that Fed officials expect rates to remain high

Local shares are set to open slightly lower on Thursday. At 8am AEST, the ASX 200 October futures contract is pointing down by just 2 points.

Shares on Wall Street struggled for direction and slid in the last hour of trading, finishing marginally lower.

Both US and European sharemarkets are now on a six-day losing streak.

Minutes from the FOMC September meeting revealed that Fed officials have been surprised at the pace of inflation and expect rates to remain high until prices come down.

“Participants judged that the Committee needed to move to, and then maintain, a more restrictive policy stance in order to meet the Committee’s legislative mandate to promote maximum employment and price stability,” an excerpt from the the meeting summary stated.

The US producer price inflation data released overnight showed that wholesale prices rose more than expected, up 0.4% in September and 5.6% from a year ago.

The Consumer Inflation index meanwhile will be released tomorrow (US time), and although economists predict a headline CPI of 8.1% YoY, anything higher than the previous reading of 8.3% could spell disaster for equities.

Rates have caused havoc in valuations particularly in growth stocks. Tech-heavy Nasdaq has been particularly hard hit, down 35% from its record high in November last year.

The VIX index, which gauges market volatility and also called the “fear index”, has spiked by 15% in the last five days.

 

Source: Google

 

Adding to market anxiety is the continuing chaos in the UK bond market after Bank of England (BoE) governor Andrew Bailey reportedly reversed course on his earlier decision to end the Bank’s emergency bond purchases by Friday.

The uncertainty triggered a selloff in British bonds last night, sending the 30-year gilt yield rising by 20bp. A one-day 20bp move is a big move for an asset that usually trades within a 1bp ~ 2 bp band.

Oil prices eased for the third consecutive day by another 2% after reports that Russia was willing to sell oil at a discount.

“Last month, Russia was threatening they would stop selling oil to countries that would agree to use a price cap, but now it seems like that was just a bluff,” said OANDA analyst Edward Moya.

Gold remains in choppy waters ahead of the pivotal inflation report that could raise the risk of even more Fed tightening, trading now at US$1,653 an ounce.

Bitcoin also continues to hover around the $19,000 level as traders await tomorrow’s inflation report.

“Bitcoin could breakout after the inflation report as Wall Street will have a better idea if the Fed needs to maintain an aggressive tightening stance beyond the November FOMC meeting,” said Moya.

“If inflation stays hot, Bitcoin could be vulnerable to test last month’s lows just ahead of the $18,000 level.”

Looking ahead to today’s session on the ASX, the Australian October MI inflation expectation is due out, along with NZ house sales and food prices.
 

5 ASX small caps to watch today

Campifly (ASX:CHL)
Camplify reported a strong quarter, with Gross Transaction Volumes coming in at $20.1m for Q1 FY23, a pcp growth rate of 91.44% versus Q1 FY22. Revenue for the quarter was $5.46m, a pcp growth rate of 77.4%.

Catalyst Metals (ASX:CYL)
James Champion de Crespigny, currently a non-executive director of Catalyst, has been appointed CEO. Catalyst says the appointment is a further step forward in advancing its strategy to create value through gold exploration, production and acquisition.

AdAlta (ASX:1AD)
AdAlta and GPCR Therapeutics have formed a collaboration to evaluate a new cancer treatment approach combining beta blockers plus AdAlta’s CXCR4-inhibiting i-bodies. AdAlta has the first option to license and further commercialise any products resulting from the collaboration.

Latin Resources (ASX:LRS)
Latin has completed the trial mining test-pit and is currently in discussions with offtake partners at its 100%-owned Cloud Nine Halloysite-Kaolin Deposit in WA. The company previously released its Maiden JORC (2012) Inferred Mineral Resource of 207Mt of kaolinised granite, including a sub-domain of 50Mt grading 6% halloysite – making Cloud Nine one of the largest undeveloped kaolin-halloysite deposits in Australia.

Hammer Metals (ASX:HMX)
Anomalous gold zones have been confirmed at the Bower and Harrier prospect at the Yandal Project in WA. Nickel anomalies and anomalous lithium samples have also been recorded.

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