• The ASX is set to rise today, tracking Wall Street’s rally
  • The US Fed Reserve hiked rates by 25bp, as expected
  • Fed Chair boss Jerome Powell warned there will be more hikes ahead

 

The ASX is set to rise again on Thursday after a rally in New York. At 8am AEDT, the ASX 200 Feb futures contract was pointing up by 0.30%.

Overnight, Wall Street went on a roller coaster ride following the Fed Reserve’s decision to increase rates by 25bp.

At first, stocks fell when the Fed’s statement suggested it will keep hiking rates, but then rose after Jerome Powell gave a press conference.

At the close of day, the S&P 500 was up 1.70%, the Dow by 0.65%, and tech heavy Nasdaq by 2.55%.

At the press conference, Powell said ongoing rate increases would likely be warranted, and that policymakers were considering a couple more hikes to get inflation back on track.

“Given our outlook, I don’t see us cutting rates this year, if our outlook comes true,” the Fed chair said.

“If we do see inflation coming down much more quickly, that will play into our policy setting, of course.”

But he gave the market a cause for optimism, saying: “My base case is that there will be positive growth this year.”

Risky assets recovered after Powell’s comments.

The 2-year and 10-year US treasury yields declined by around 10bp (bond prices higher), while Bitcoin rose by over 1% to US$23,524, and gold also by 1% to US$1,949.52.

“Powell didn’t go full hawk, and that gave many traders permission to pile back into risky assets,” said OANDA analyst, Edward Moya.

Other experts believe that even if this is the last rate hike of the cycle, the Fed could opt to keep rates where it is until inflation is significantly lower.

“Investors are dealing with a delicate balance. The Fed’s crusade for lower inflation calls for slowly adding to stock market risk and rotating out of defensive positions. But they need to be selective with the risks they take,” said eToro’s Callie Cox.

“High-rate environments favour quality companies that prove they can execute.”

In other news, Meta spiked 3% after hours despite hauling in just US$32.17bn in Q4 revenue, down from US$33.67bn a year ago. But these results came in better than expectations.

Shares of fitness equipment maker Peloton soared by 26% overnight after reporting a slowing cash burn. For Q3, Peloton forecast revenue to come in between $690 million – $715 million, which is above estimates.

Earnings reports to come later today include: Alphabet, Apple, Amazon, and Qualcomm.

Meanwhile, key events to hit the headlines this week include ECB and UK BoE rate decisions, and US unemployment and nonfarm payrolls on Friday.

 

5 ASX small caps to watch today

AFT Pharma (ASX:AFP)
AFT has reached a deal with Latitude Pharma to license Latitude’s key technology to develop a stable antibiotic eye drop for patients at risk of serious eye infections. The total addressable market is estimated by AFT and Latitude as US$1 billion globally.

DUG Technology (ASX:DUG)
DUG has received an order for US$2.5m from Searcher Seismic, relating to DUG’s share of a significant multi-client data sale made by Searcher. In 2016, Searcher acquired a large seismic survey in the Campeche Bay area in the Gulf of Mexico, and subsequently engaged DUG to perform 3D seismic processing and imaging on a 15,900 sqm area. This sale is expected to increase NPAT by US$2.5 million with the income recognised in Q3 FY23.

NickelSearch (ASX:NIS)
Nickel sulphides were intersected at the high priority regional prospects ofSexton, Javelin and RAV8 South. NIS said massive/matrix/stringer pyrrhotite-pyrite have been logged in several Sexton and Javelin holes. Holes at Sexton aimed to confirm and extend known mineralisation, based on the historic intercept of 2m @ 1.2% Ni and 0.17% Cu from 98m.

SRG Global (ASX:SRG)
SRG secured contracts with Northern Star Resources valued at ~$220m. The scope of services of both contracts include the provision of specialist drill and blast services, explosives management and grade control drilling. The contract works have now commenced.

Hazer Group (ASX:HZR)
Hazer has achieved a key progress milestone under the Australian Renewable Energy Agency (ARENA) funding agreement, facilitating the drawdown of $2.97 million. The company says this will strengthen its ability to fast-track the commercial scale-up of its hydrogen technology.

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