Market Highlights: Wall St's big rally, Budget week, and 5 ASX small caps to watch on Monday

Wall St surged after a media report signalled the Fed might be slowing down its rate hikes from December
Snap Inc plunged 28% on a bad quarter
Tuesday’s Federal Budget will be the market’s focus this week

Local shares are set to open sharply higher on Monday, tracking the rally in New York. At 8am AEST, the ASX 200 Dec futures contract was pointing up by 1.40%.

On Friday, Wall St surged after reports that the Fed would soon be ready to debate on how to slow the pace of tightening after the November FOMC meeting (on November 2).

The report, published on the Wall St Journal, signalled that after another 75bp in November, the Fed would consider smaller hikes.

The Fed is barreling towards a fourth straight 75-basis-point rate rise at the November FOMC meeting.
⁰That meeting could serve as a critical staging ground for future plans, including whether and how to step down to 50 basis points in December https://t.co/vPMSXDjHL8

— Nick Timiraos (@NickTimiraos) October 21, 2022

The S&P 500 rose by 2.37% on the news, while the Dow was up 2.47% and tech heavy Nasdaq by 2.31%.

US Treasury yields, which are at the highest level since 2008, fell while major currencies appreciated against the USD after the report was published – with the Aussie dollar jumping to US64c.

In company news, Snap Inc collapsed by 28% as it posted the slowest quarterly revenue growth in five years. The result weighed on other social media platforms like Meta and Pinterest.

American Express also fell by 2% after saying that bigger provisions were needed to cushion bad debts as an economic downturn looms.

US Energy stocks meanwhile had a huge boost after Schlumberger rose 10.3% following a 65% increase in net income to US$907 million in the third quarter.

In other markets, Bitcoin was up 1.5% in the last 24 hours to US$19,533, while gold popped 2% to US$1,675 an ounce.

“Gold’s outlook could turn bullish if Treasury yields become anchored,” said OANDA analyst, Edward Moya.

Crude prices also finished the week on a high note as risk appetite returns. Brent crude is now trading at US$93.50 a barrel.

“As the war in Ukraine persists, it looks like we might see escalating sanctions on not just Russia but also Iran,” said Moya.

“The risks of supply disruptions remain elevated and that should keep prices trending higher as long China’s outlook doesn’t take a turn for the worse.”

Closer to home, the focus this week is on tomorrow’s Federal Budget.

CBA’s chief economist Stephen Halmarick said he expects the Budget to result in a deficit of approximately $30bn-$40bn, or 1.2%-1.5% of GDP.

Looking ahead today, we expect to see Australian manufacturing and services PMI data released, along with a speech from RBA assistant governor Christopher Kent.

5 ASX small caps to watch today

Memphasys (ASX:MEM)
The cell separation devices company says its Felix System will be trialled with in vivo studies in Japan and Canada. The Felix System is a patented, automated device for quickly and gently separating high quality sperm from a semen sample for use in human IVF procedures. Meanwhile, the company said its regulatory approval process in China and USA is proceeding as per plan.

Bioxyne (ASX:BXN)
The health and wellness company said it will divest 49% in Direct Selling Group to a Singapore based private equity group for $1m. Bioxyne says it will use the funds to “take advantage of other business opportunities which will build shareholder wealth”.

ECS Botanics (ASX:ECS)
The cannabis company has executed a binding contract for the sale of its Tasmanian business and assets owned by 100% subsidiary Tasco for $3m. Net proceeds are expected to fund continued expansion at its Victorian medicinal cannabis facility.

Neometals (ASX:NMT)
The Vanadium Recovery Project in Pori, Finland has been granted an Environmental Permit by the Regional State Administrative Agency for Southern Finland. The permit authorises the construction and operation of a vanadium recovery plant to produce supply constrained vanadium pentoxide in Europe.

Gascoyne Resources (ASX:GCY)
New results received from diamond drilling at the Never Never Gold Deposit, intersecting visible gold mineralisation down-plunge, include 12m @ 34.5g/t gold from 397m, and 39m @ 4.60g/t gold from 233m.