Market Highlights: Wall Street snaps 4-day losing streak; and fundie says it's time to get back into small caps

Local shares to snap losing streak and open higher
Berkshire Hathaway jumped 3.5% to a record high
DNR Capital says now is the time to buy small caps

The ASX 200 is set to open higher on Tuesday, bolstered by gains in New York after a four-day slide. At 8am AEST this morning, the ASX 200 index futures was pointing up by +0.45%.

Overnight, the blue chips Dow Jones index led Wall Street higher, up by 1.16%, while the tech-heavy Nasdaq rose by 0.61%

Warren Buffet’s Berkshire Hathaway jumped 3.5% to a record high after reporting a 7% increase in earnings to US$10.04 billion vs a year earlier.

Tesla dropped 1% after its chief financial officer Zachary Kirkhorn, who was seen as a possible successor to Elon Musk, resigned suddenly.

In late trading, Beyond Meat Inc fell more than 10% after revealing it won’t meet guidance of becoming cashflow positive in the second half.

To Fed speak, board member Michelle Bowman said additional rate hikes “will likely be needed”, while Fed Bank of New York President John Williams also urged the necessity to keep policy restrictive “for some time”.

Meanwhile, Goldman and JP Morgan said the Treasury selloff resulting from the US credit downgrade has been overdone, and told clients to buy US 10-year and 30-year bonds.

Goldman analysts added that bonds should not have been sold off that much because the Fitch downgrade did not matter, and that it contained “no new information”.

Time to get back into small caps – fundie

Australian equities investment manager DNR Capital says now is the time for investors to be positive on opportunities in the Australian small caps space.

Sam Twidale, portfolio manager at DNR Capital, says the fund is changing its view of the sector and moving from a defensive bias, to embracing more positive positions.

“Across the Emerging Companies Fund, we are back in some of the companies that we sold out of several years ago, and see de-rated quality opportunities in consumer discretionary, financial, industrial, and tech sectors,” Twidale said.

He explained that fear and uncertainty around high quality businesses is causing dislocations between price and value.

“..I think investors will be rewarded taking a longer term view for many stocks in this sector.”

Twidale explained that his fund has been investing in Breville and Lovisa stocks in recent months.

“They are leaders in their industries and generate high returns. These companies are well managed with strong balance sheets to get through a bit of a trickier period in the short term.”

On the other hand, Twidale said he’s been actively reducing exposure to the mining sector.

“That’s been a key overweight for us for several years now. But I think conditions have changed and we are not seeing the contrarian opportunities and the mispricings that we saw several years ago.”

In other markets …

Overnight, gold traded -0.25% lower to US$1,936.80 an ounce.

“Gold prices are struggling here on a strong dollar, and as global bond yields rise and after an early round of Fed speak are still supporting the case for one more hike by the Fed,” said Oanda analyst, Edward Moya.

Crude prices slipped by -0.5%, with WTI now trading at US$82.42 a barrel.

“Crude prices are lower following a surge in the US dollar and as Saudi Arabia anticipates a bumpy road for the crude demand,” Moya said.

Iron Ore 62% fe also fell -0.5% to $US104.73/ a tonne.

Bitcoin meanwhile was higher by +0.2% in the last 24 hours to US$29,149.

5 ASX small caps to watch today

Universal Biosensors, Inc. (ASX: UBI)
UBI said that since its last market update, it has signed an additional 5 distribution deals with partners in 3 countries for Petrackr, UBI’s blood glucose monitoring product for dogs and cats with diabetes. The company now has 8 distribution deals in total and received purchase orders of $480k in the first two months since launch. First year sales value from these 8 deals is expected to exceed $4 million with sales growth expected in the following years.

Olympio Metals (ASX:OLY)
Over 400 pegmatite bodies have been interpreted from recently acquired detailed LiDAR and heli-magnetic survey data at the Cadillac Project in Quebec. These numerous pegmatite targets share similar geological context to the spodumene bearing Wells-Lacourcière pegmatite Prospect.

Empire Energy (ASX:EEG) and APA Group (ASX:APA)
Empire and APA Group have executed an initial agreement for the establishment of exclusive midstream gas infrastructure early works, and proposed long-form agreements. APA is set to spend up to $5 million under a proposed early works agreement on gas infrastructure facilities associated with Empire’s Carpentaria Pilot Project for the potential construction of midstream infrastructure to transport up to 25 terajoules per day to market.

Janison Education (ASX:JAN)
The company achieved record group revenue of $41 million, an increase of +13% compared to pcp. This growth was driven by a 21% increase in Janison Assessments and a 17% increase in Janison Solutions. EBITDA grew by +111% to $4 million compared to last year, driven by improved operational leverage and strong gross margins.

VHM Limited (ASX:VHM)
VHM announced new discovery of high-grade rare earth, zircon, and titania ore body at Nowie, 22km north of the proposed Goschen treatment plant. Significant total rare earth oxide, zircon and high value titanium minerals of rutile and leucoxene have been returned. Geophysics and drilling data supports a near-surface target up to 11km long and up to 3 km wide, with multiple high-grade zones yet to be tested.