No safe havens in overnight markets

Market Reports

by Tim McGowen

Its going to be ugly today with markets falling heavily on both Friday & Monday nights in the US. 

ASX futures are set to shed 294 points or 4.24 per cent when trading opens after the three-day break.

Overnight in the US, equities close sharply lower: Dow dropped 2.79 per cent, S&P 500 fell 3.88 per cent, Nasdaq plunged 4.68 per cent.

In combination for the two trading days - the DOW has fallen 5.50 per cent, the S&p500 6.8 per cent and the NASADAQ falling 8.18 per cent.

Big moves included, shares of Boeing, Salesforce and American Express fell more than 9%, 6% and 4%, respectively. Beaten-up tech shares also took a hit with Netflix, Tesla and Nvidia down more than 6 per cent as the Nasdaq touched a fresh 52-week low and its lowest level since November 2020.

Across the sectors last night, the energy segment, the only one of the S&P 500’s 11 sectors in positive territory this year, fell 5.1 per cent, a steeper decline than that of the broad index. The utilities group, the second-best performer in 2022, also lagged behind the market with a daily drop of 4.6 per cent.

The major issue is that global central banks have been behind the curve in terms of how they are to manage red hot inflation throughout the global economy.

The Risk-off atmosphere dominated the session amid further deterioration of peak Fed inflation themes following Friday's hotter-than-expected May CPI report. This Report sparked a ramp up in tightening expectations, with market pricing a ~33 per cent chance of 75bp hike this week against well-telegraphed Fed suggestions for a 50bp move.

Some analysts warned of upside risks as the Fed tries to re-establish inflation fighting credentials. Economists also increasingly skeptical of the Fed engineering a soft-landing, with latest surveys showing an accelerating pickup in US recession expectations and core inflation outlook.

Beyond Fed and recession dynamics, markets were further pressured by latest updates around mass testing and rising Covid infections in China just days after opening, as well as elevated geopolitical tensions around Russia/Ukraine and (increasingly) Taiwan.

The next catalyst could be the potential for falling earnings estimates to act as the next headwind on equities amid elevated and persistent inflationary pressures and the $US dollar at 20-year high.

Also the ongoing focus around the consumer headwind from record average national gas price of $5 a gallon for the first time ever, with few expectations around easing anytime soon given firming China demand outlook, shale dynamics, and refinery bottlenecks

There were no safe havens, treasuries a came under significant pressure with the curve flattening with the 10Y yield hitting highest level since 2011.

Gold finished down 2.3 per cent. Bitcoin is down 18 percent over the last 24 hours, falling to about $23,000, its lowest value since December 2020 The price tumble was accelerated over the weekend by an announcement from Celsius, an experimental crypto bank, that it was halting withdrawals “due to extreme market conditions.” At one point this year, Celsius held nearly $20 billion in assets. WTI crude settled up 0.2 per cent, off some early weakness.

In Australia today, the $600m Pointsbet (ASX:PBH) has knocked back a $220m offer the their Australian division from News Corp, led by Australian-born media mogul Rupert Murdoch, and renowned Australian bookmaker Matthew Tripp. News Corp is still expected to launch into sports betting to offset its decling media advertising revenues.

There are two companies set to trade without the right to its dividend.

Cimic Group (ASX:CIM) is paying 36 cents unfranked
KMD Brands (ASX:KMD) is paying 2.3721 cents fully franked


There are three companies set to pay eligible shareholders today

Amcor (ASX:AMC)
Kkr Credit Income Fund (ASX:KKC)
Whitefield (ASX:WHF)


There is one company set to make its debut on the ASX today. Keep an eye out for Kingsland Minerals (ASX:KNG) after raising $5.5 million at 20 cents per share.

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