Facebook owner annihilates Wall St on earnings miss: ASX to tumble

The Meta meltdown spurred a broad sell-off on Wall St. ECB is no longer ruling out an interest-rate hike this year while BoE hikes its interest rate again vs “patient” RBA. Arctic blast across Texas pushes crude higher. RBA's Statement of Monetary Policy slated today to cap off the week.

The Australian sharemarket is set to tumble after a sell-off on Wall St.

Facebook owner annihilates Wall St on earnings miss

Tech troubles pummelled US stocks as investors reacted to disappointing results from Meta platforms. After a four-day buy-the-dip rally, sell-the-news activity sparked a contagious rout amid surging bond yields, creating headwinds on Wall St.

ECB no longer ruling out an interest-rate hike this year

This comes after European Central Bank (ECB) president Christine Lagarde said that the ECB is no longer ruling out an interest rate hike this year, pivoting towards the tightening stance of its global peers.

So, we saw a change in tone, which didn’t come as a surprise after the Eurozone's inflation rate rose to a fresh record high to over 5 per cent for 2021, coming in sharply more than policy makers had expected, and double the ECB’s target.

BoE hikes interest rate again vs “patient” RBA

Meanwhile, the Bank of England (BoE) hiked its interest rate, which was expected, and signalled that it will start the process of shrinking the balance sheet.

Back home, this week the Reserve Bank announced its plans to also start unwinding its balance sheet. Governor Philip Lowe then emphasised that the end of quantitative easing did not mean that interest rate lift-off was imminent, and that they were prepared to be “patient”.

Reflecting on the week, it’s been very interesting. The US Federal Reserve hogged the spotlight, which saw the greenback rally. Now, after the rate outcomes from the ECB and the BoE, the Euro and the British pound popped, while the Aussie dollar has fizzled since the news, as market participants recalibrate, after a change in tone from the central banks.

As we see a tightening, the next hurdle will be to see how the central banks ensure that the system doesn’t get hurt. It’s been risk-off for some time, so these swings that we have seen will continue as we move to a path of normalisation.

Facebook unveils first ever drop in daily users

Onto the Facebook parent, Meta. Shares tanked 26.4 per cent at US$237.76 after weak revenue earnings, wiping off US$200 billion from its market value. The biggest one-day loss in US stock history. The social media giant said that Apple’s recent iOS privacy changes are set to give a US$10 billion blow to its revenue this year due to the impact on the ad industry. Meanwhile, daily active users fell for the first time ever. Also, it’s the first time that the company has reported on its meta division which lost US$10 billion last year. Multi-layer hits there to the results.

The results have triggered a ripple effect to other social media stocks with shares in Twitter, Snap, and Pinterest also tumbling amid the news.

Arctic blast across Texas pushes crude higher

Meanwhile, WTI crude surged over the US$90 level after a super cold blast descended across Texas, disrupting oil production in the Permian Basin, as icy roads disrupted critical trucking operations.

What a week, and we have the big US jobs report coming out in the next 24 hours. A closely watched report by the Fed. Didn’t we say that volatility is going to be around for some time?

Numbers on Wall St

At the closing bell, the Dow Jones lost 1.5 per cent to 35,111, the S&P 500 fell 2.4 per cent to 4,477 while the Nasdaq dropped 3.7 per cent to 13,879.

Across the S&P 500 sectors, there were two winners with utilities up 1.5 per cent, and consumer staples adding 1.2 per cent lifted by companies that posted profit results. There were a few bright spots. Communication services sank 6.9 per cent weighed by your social media giants, followed by consumer discretionary, down 3.6 per cent, and information technology. Energy shed the second least by 1.1 per cent.

The yield on the 10-year treasury note surged 6 points to 1.83 per cent, gold dipped on a weaker greenback.

Figures around the globe

Across the Atlantic, European markets closed lower. Paris lost 1.5 per cent, Frankfurt fell 1.6 per cent and London’s FTSE closed 0.7 per cent lower.

On the London Stock Exchange, Rio gained 0.4 per cent, BP added 0.7 per cent and Shell gained 1.4 per cent.

In Asian markets, Tokyo’s Nikkei fell 1.1 per cent, while Hong Kong’s Hang Seng and China’s Shanghai Composite were closed.

Yesterday, the Australian sharemarket closed 0.1 per cent lower at 7078 with tech leading the drag by almost 6 per cent with the tech sell-off spilled over into other sectors with gains in utilities, materials and communication services eclipsed by broader losses.

The best-performing stock was Nufarm (ASX:NUF), closing 20.2 per cent higher at $5.59. It was followed by shares in Insignia Financial (ASX:IFL) and Fortescue Metals Group (ASX:FMG), while the worst-performer was Novonix (ASX:NVX), closing 14.7 per cent lower at $6.57. It was followed by shares in Block (ASX:SQ2) and Zip Co (ASX:Z1P).

For coverage on yesterday’s action, join me for “Tech tumble sparks sell-off contagion” here.

SPI futures

Taking all of this into the equation, the SPI futures are pointing to a 1.1 per cent fall.

Local economic news

We have more from the Reserve Bank today with the central bank set to release its quarterly Statement of Monetary Policy to close off the week. This is going to capture a bit of attention as market participants eye down the RBA’s forecast on economic growth, inflation, employment, and wages.

Ex-dividend

There is one company trading ex-dividend today, Boral (ASX:BLD) is paying 7 cents unfranked.

Dividend-pay

There are five companies set to pay eligible shareholders today

Aventus Group (ASX:AVN)
Dexus Convenience Retail REIT (ASX:DXC)
Dexus Industria REIT (ASX:DXI)
PRT Company (ASX:PRT)
Select Harvests (ASX:SHV)

Trading updates

REA Group (ASX:REA) is set to report their half year financial 2022 results today.

Commodities

Iron ore was unchanged at US$141.75 a tonne due to the Chinese New Year holiday.

Gold has lost $4.20 or 0.2 per cent to US$1806 an ounce. Silver is down $0.32 or 1.4 per cent to US$22.39 an ounce.

Oil has added $1.82 or 2.1 per cent to US$90.08 a barrel. Let’s see if it can hit the US$100 mark amid growing pressure for OPEC+ to increase output.

Currencies

One Australian Dollar at 8:25 AM has strengthened since Thursday (71.35 US cents), buying 71.42 US cents, 52.51 Pence Sterling, 82.10 Yen and 62.44 Euro cents.