Market Highlights: Wall Street slumps as Walmart flags tough times ahead; and 5 ASX small caps to watch today
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The ASX looks poised to follow New York stocks lower at the open on Wednesday. At 8am AEDT, the ASX 200 March futures contract was pointing down by 0.55%.
Overnight, Wall Street reopened after the President’s Day break and immediately sold off, with major indexes finishing the day down by 2%.
Traders were spooked after earnings reports from Walmart and Home Depot suggest margin worries are here, and will only get worse if the Fed delivers more tightening.
Walmart notched an 8.3% sales increase in the last quarter, but warns of tighter margins and a tougher year ahead.
Home Depot recorded a profit in the quarter, but also warned of higher wage costs and signalled that full year profits could decline from last year.
Tesla slumped 5% as US safety regulators asked the manufacturer for more information about the deadly collision between one of its vehicles and a fire truck in Contra Costa County over the weekend.
US bond yields rose 13 basis points ahead of the release of Fed minutes from the Feb 1 meeting.
Iron ore prices rallied another 1.2% last night to US$130 a tonne as traders envisage a demand pickup from China.
According to an expert, China represents both major headwinds and tailwinds for global investors for the remaining first half of 2023.
The analysis from deVere Group’s Nigel Green comes after China’s foreign minister called on countries to “stop fuelling the fire” in Ukraine ahead of the first anniversary of the war on Friday.
Green believes these geopolitic spats will ensure the decoupling of China and the US gain steam.
“There remains a deep economic interdependence between the United States and China, which has been growing for decades. But this appears to be slowing,” he said.
The tailwind on the other hand is that China’s faster-than-anticipated reopening after Covid-19 restrictions is going to deliver a major boost to the Chinese economy.
“The reopening will positively impact commodity demand and prices, which will help many net exporters,” he added.
In other markets, crude oil prices fell 1.5% while gold shaved 0.3% last night.
Bitcoin meanwhile was down 1.25% over the last 24 hours to US$24,508.
BTC traders appear to be ignoring a laundry list of bearish macro drivers that include a return of the stronger dollar, more Fed rate hikes, and stablecoin regulation.
“It appears that Bitcoin’s correlation with most risky assets is changing. The crypto winter that saw prices collapse from $68,911 to $15,485 appears to have priced in enough of the bad news,” said Oanda analyst, Edward Moya.
Looking ahead to today’s session on the ASX, earnings season continues and companies to report today include Rio Tinto, Santos, Flight Centre, Woolworths, and WiseTech.
Revenues for the half rose by 83% to $12.4m. The company reported a loss for the half of -$3.3m, an increase of 18% from the pcp. There were no dividends paid.
Avecho Biotech (ASX:AVE)
Avecho expanded its collaboration with the Lambert Initiative, a leading Australian academic centre for the discovery of safe and efficacious cannabinoid therapeutics. Avecho will provide its CBD soft-gel capsule to the Lambert Initiative for use in two further clinical trials. These studies will take place in Q3 2023, with preparatory work underway now.
The workforce and education SaaS company reported a 34.1% increase in first half revenue to $47.9 million vs pcp. Underlying EBITDA was $15.6m, and underlying EBITDA margin of was 35%. The company said it’s on track to achieve full year guidance.
Total revenue for the half was up 32% to $148.9m, with 28% increase in organic growth. Underlying EBITDA was up 89% to $12.6m. The company saw an increase of 42% in its customer base during the half. Superloop says it’s on track to meet the full year EBITDA guidance of $33m-$36m.
Aurora Energy (ASX:1AE)
The final uranium and lithium assays from last year’s 3,414m drill program have been received. Results include: 8.3m at 2,046ppmLi (0.44%) from 120m, and 8.8m at 1,411ppm Li (0.3%)from 136.5m.