• The ASX will open lower on Friday after another day of losses on Wall St
  • Hawkish US Fed speak drove equities lower and yields higher
  • Oil fell 4% 

The ASX is set to open marginally lower on Friday after a second straight day of losses in New York. At 8.30am AEDT, the ASX 200 Dec futures contract was pointing down by 0.15%.

Overnight, Wall St finished lower – the S&P 500 by 0.31%, the Dow by 0.02% and Nasdaq by 0.35% – after key Fed policy makers signalled that rate hikes will continue.

St. Louis Fed President James Bullard revised the peak for the US Fed Funds rate, saying the Fed should raise rates to at least 5-5.25%.

“In the past I have said 4.75% to 5%. “Based on this analysis today, I would say 5% to 5.25%. That’s a minimum level. According to this analysis, that would at least get us in the zone,” Bullard said in a speech.

His counterpart, Kansas City Fed Governor Esther George, echoed the sentiment and said that it’s increasingly difficult to bring down inflation without a recession.

The yield on the benchmark US 10-year Treasury jumped 9bp to 3.77% after the speech.

Bath & Body Works and Macy’s Inc share prices surged 25% and 8% respectively after both companies raised their annual profit guidance.

In economics data, the US weekly jobless claims edged lower despite what feels like a couple weeks of significant job loss announcements.

The housing market correction in the US continues and is approaching a bottom.  Both housing starts and permits continue to decline as borrowing costs skyrocket.

“This latest round of economic data complicates the Fed’s tightening path as the labor market is slowly softening, and as the housing market is in a recession,” said OANDA analyst, Edward Moya.

Oil prices got punished with Brent crude crumbling almost 4% to US$89.82 a barrel.

Oil traders were cautious as China’s new Covid cases rose above 23,000, which is the highest level since April and is approaching a record high.

“The world’s two largest economies are struggling here, as China battles Covid and the US is seeing a significant drop with manufacturing activity,” Moya said.

The spot gold price also sank 1% to US$1,760.50 an ounce.

Precious metal investors turned risk averse after North Korea fired another ballistic missile and warned the US it will face a “fiercer” military response against any joint drills in its region.

To cryptos, where Bitcoin has gained ground in the last 24 hours by 1% to trade at US$16,713.

There is no shortage of news across crypto markets right now, and a lot of is speculative,” said Moya.

“We will be talking a lot about FTX for months to come, but what will drive the cryptos is if Binance, Coinbase, Lbank, or Consbit have any liquidity crunches.”

Looking ahead to today’s session on the ASX, the accounts for Australian states for financial year 2021/22 will be released.

5 ASX small caps to watch today

Duratec (ASX:DUR)
Duratec has issued a guidance and says that full year revenue is expected to be in the range of $420m to $460m, delivering a forecast EBITDA of $32m to $35m. In FY22, Duratec reported revenue of $310m and EBITDA of $19.3m.

Respiri (ASX:RSH)
Respiri’s wheezo has been selected for a pilot program to help manage patients suffering from asthma and Chronic Obstructive Pulmonary Disease (COPD) that are cared for by Minnesota Lung Center (MLC). This pilot program initially involves 20 patients and will be conducted over three months to ensure seamless integration into MLC’s systems and processes.

Fonterra (ASX:FSF)
Fonterra announcd the divestment of its Chilean Soprole business. The divestment comprises a number of transactions that result in aggregate consideration of 591.07 billion Chilean Pesos (approximately NZD1.055 billion). The divestment process formally commenced in April, following the launch of Fonterra’s strategy to 2030.

My Food Bag (ASX:MFB)
MFB’s NPAT in the last six months to September was $5.9 million, versus $9.4 million in the pcp. Gross margin was 49.3%, up on 48.1% in the pcp. However the company said full year earnings will be lower than last year, and as a consequence the board anticipates the final dividend will also be lower than the prior year.

RLF AgTech has received formal government permission to operate in Vietnam via the establishment of a Representative Office in country. This presence will allow RLF AgTech to capitalise on the increasing product demand and market presence in emerging high growth markets within South-East Asia.