• The ASX will open lower on Thursday, tracking movements in New York
  • A slew of economics data were released in the US overnight
  • Microsoft to fire 10,000 staff

 

Aussie shares are set to drift lower at the open on Thursday following a selloff in New York. At 8am AEDT, the ASX 200 Feb futures contract was pointing down by 0.15%.

Overnight, major US stock indexes dipped around 1.5% after a swathe of economic data confirmed that slowdown trends in the US clearly remain in place.

Recession risks are rising after a larger-than-expected PPI decline, a major downshift in retail spending, and plunging industrial production.

US retails sales for December dropped 1.1% – worse than the expected fall of 0.9% – marking the biggest drop in 12 months.

There were declines in discretionary purchases across the board, and fears abound now the Fed’s persistent rate hikes could actually tip the economy into a recession.

“The economy is clearly in slowdown mode and growth fears will be hard to shake going forward,” said OANDA analyst, Edward Moya.

 

On a positive note, the Fed’s Beige Book survey says growth in US prices is expected to ease in the year ahead.

“Selling prices increased at a modest or moderate pace in most districts, though many said that the pace of increases had slowed from that of recent reporting periods,” the Fed said in the report.

In stock news, Microsoft fell almost 2% after announcing plans to cut around 10,000 engineering staff in the US.

CEO Satya Nadella said that Microsoft wasn’t “immune to the global changes,” and predicted a “challenging” next two years.

The market is now bracing for Big Tech’s earnings results which will be released over the next few days.

Meanwhile, the University of Texas at Austin has banned the use of Tiktok from its wifi and across its wired networks, citing Texas Governor Greg Abbott’s recent decision to forbid state employees from having the Chinese app on government-issued devices.

In other markets, crude oil continues to rally on Chinese reopening momentum and on US soft landing hopes – with Brent trading at US$84.83.

Gold prices softened but are still holding onto the $1,900 level.

“The end of Fed tightening is approaching us, but a shallow recession might not be supportive of inflows for gold as that might lead to a stronger dollar,” said Moya.

Bitcoin price is weakening from its seven-day rally, slipping 2.5% in the last 24 hours to US20,755.

Another crypto exchange owner has been charged by the US Department of Justice with unlicensed money transmitting.

Prosecutors allege that the Russian owner of crypto exchange Bitzlato, Anatoly Legkodymov, used his exchange as a safe haven for criminal acitivity. He was arrested in Miami overnight.

Looking ahead to today’s session on the ASX, we expect to see the release of the Australian unemployment rate.

 

5 ASX small caps to watch today

Michael Hill (ASX:MHJ)
The jeweller anticipates first half of FY22 group EBIT of between $52m to $55m (FY22H1: $51.6m). For the half, group sales were up 14.5% on FY21 (with seven fewer stores). And despite experiencing higher input costs, the company continued to deliver strong margins in line with prior year.

Knosys (ASX:KNO)
Optus has signed an additional one-year contract extension for Knosys’ enterprise Knowledge Management solution. The value of this contract extension is expected to exceed $1 million. In April last year, Optus finalised a contract extension for two years to January 2024, and this latest contract extends the engagement for another year to January 2025.

Quickstep (ASX:QHL)
Quickstep says its Aerostructures business has secured an order for Lot 17 F-35 vertical tail components. The $11.3 million order will be delivered in FY24 and FY25 from the group’s Bankstown facility. The customer, Marand Precision Engineering, is a longstanding partner to Quickstep on the F-35 program.

A-Cap Energy (ASX:ACB)
A 1,500m diamond drilling is now underway at Letlhakane Uranium Project to collect up to two tonnes of uranium mineralisation for a new, detailed beneficiation study. The 2010 beneficiation program delivered a 1.5 times uranium upgrade using radiometric sorting, but was not incorporated into 2015 feasibility study. Beneficiated samples will now undergo additional metallurgical testing as part of ramp up in activities at Letlhakane.

Everest Metals (ASX:EMC)
EMC has entered into an agreement to acquire 100% of the Ninghan Project, southwest of Paynes Find in WA– subject to due diligence. The Ninghan Project includes two exploration leases E59/2464 and E59/2500 which cover a combined 228km2. EMC is now planning a geochemical program in the near-term to collect further data for a drilling program scheduled for mid-2023.

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