• Local shares will open much lower on Wednesday after a big plunge on Wall Street
  • US CPI came in higher than expected
  • Bitcoin slumps 10pc

Local shares are set to plunge on Wednesday morning after a big selloff on Wall Street overnight. At 8am AEST, the ASX 200 September futures contract was pointing down by 2.5%.

It was an ugly day for US stocks, the worst in more than two years with the S&P 500 and Dow Jones crumbling by 4%, and tech-heavy Nasdaq by 5%.

Investors bolted for the door after a surprise headline CPI reading which came in at 8.3% in August, higher than the 8.1% median estimate. In July, the rate was at 8.5%.

Core CPI, which strips out food and gasoline, measured 6.3% in August and the month-on-month gain of 0.6% was double what economists had predicted.

The latest data will keep pressure on the Fed to hike rates by 75 basis points for the third-straight time, with a decent chance of 100bp.

Prior to the CPI report, traders had expected the Fed rate to peak at 3.75%-4%, but the market has now priced in 4%-4.25% by the end of 2022.

“This inflation report killed any chance of a downward shift in Fed tightening as core goods and services pricing pressures remain hot,” said OANDA analyst Edward Moya.

“The Fed will likely have to be even more aggressive with raising rates, and that is bad news for risky assets.”

US treasury yields spiked after the release, with the short ends being impacted the most.

The 2-year yield rose by 17bp while the 10-year was up by just 5bp – widening the 2yr vs 10yr inversion spread which is usually used as a sign of a potential recession.

Rate sensitive stocks like Tech tumbled with Meta trading down by more than 9%, Amazon by 7%, and Apple by 6%.

All major currencies were weaker against the US dollar as the result of higher yields, which in turn pushed down metal prices.

Gold, which is usually a safe haven, fell 2% to US$1,702 an ounce on the back of the stronger USD.

“We are nowhere near pricing in peak Fed tightening and that means this could be a rough patch for gold.  If gold breaks below $1700, not much support is there until the $1650 region,” said Moya.

Brent crude was down by almost 1% to US$93.40, while the equties selloff also dragged down Bitcoin heavily.

At 8.30am AEST, BTC was trading at US$20,176, almost 10% lower than 24 hours ago.

Looking ahead at the markets today, the Australian labour account date will be released this afternoon.
 

5 ASX small caps to watch today

Noxopharm (ASX:NOX)
Noxopharm has published its first anti-cancer results from the preclinical ‘dual-cell’ therapy drug. The results show that tumour cells decreased by up to 85%, and barrier cells reduced by up to 87%. The study was conducted by using a cutting-edge model developed by UNSW Sydney.

Matrix Composites and Engineering (ASX:MCE)
Matrix has signed a Joint Development Agreement with Rio Tinto for a trial replacement of steel conveyor components at Rio Tinto’s operations. Rio Tinto will contribute to the development of a significantly lighter weight, cost effective, corrosion-free and fully recyclable alternative product. Matrix meanwhile will own the product patent and intellectual property.

Sierra Nevada Gold (ASX:SNX)
A Reverse Circulation (RC) drill rig is set to test targets across three SNX projects. In total, SNX plans to complete 12,000m of drilling in its first 12 months after ASX listing.

Earlypay (ASX:EPY)
After 20 years with the company, including 12 years as CEO, Daniel Riley will retire from his role following the AGM in November. Beyond November, Riley will continue as a non-executive director. In the interim, James Beeson, currently chief operating officer, will transition from COO to CEO. Earlypay has also commenced the hiring process to fill the COO role with an experienced finance executive.

Altech Chemicals (ASX:ATC)
Altech announces that it has executed a JV agreement with German battery institute Fraunhofer IKTS to commercialise IKTS’ revolutionary CERENERGY Sodium Alumina Solid State (SAS) Battery. Altech will be the majority owner at 75% of the JV company, which will commercialise a 100 MWh project to be constructed on Altech’s land in Schwarze Pumpe, Germany. The SAS CERENERGY battery uses common table salt and ceramic solid-state technology.

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