ASX to track Wall Street and drop sharply today
This comes as US retail sales date came in much stronger than expected
Gold price climbs 2pc more, while VIX index has spiked
Aussie shares are set to drop again on Tuesday after a volatile session on Wall Street. At 8am AEST, the ASX 200 index futures contract was pointing down sharply by -0.80%.
Overnight, the S&P 500 fell by -1.20%, the blue chips Dow Jones index was down -0.65%, and the tech-heavy Nasdaq plunged by -1.79%.
Stocks were dumped as US traders came back from a weekend where tensions in the Middle East had escalated several notches.
A much stronger than expected US retail sales data, which rose by +0.7% in March following an increase of 0.9% in February, also shot down expectations of more than two Fed rate cuts this year. The retail sales data significantly beat expectations of +0.4%.
Gold meanwhile continues to consolidate, up +2% overnight to US$2,390 an ounce.
Caroline Bain, chief commodity economist at Capital Economics, says she’s maintaining her year-end gold price target of US$2,100 an ounce.
“Other safe-havens, such as the Swiss Franc, have not been performing strongly, and there have been persistent outflows from European gold ETFs,” she said in a note.
Bond yields meanwhile jumped following the hot retail data, with the benchmark US 10-year treasury yield rising by 7 basis points (bond prices lower) to 4.61%.
To stocks, tech megacaps dragged down stocks with Microsoft, Apple and Nvidia all suffering declines.
Tesla slipped over -5.5% after two top execs quit the company in the midst of the carmaker’s largest-ever round of job cuts.
American Airlines dropped -1.6% after its workers’ union told members to be vigilant following a “significant spike” in safety related problems at the carrier.
Wall Street’s “fear gauge” — the VIX — has spiked by +11% after jumping +14% on Friday. The index, which essentially predicts how volatile S&P 500 stock prices could be in the next 30 days, is at levels unseen this year.
What’s next for oil?
Citigroup’s base case is for tensions in the Middle East to remain “extremely high”, in a note it sent via Bloomberg.
“What is not priced into the current market, in our view, is a potential continuation of a direct conflict between Iran and Israel, which we estimate could see oil prices trade up to $US100/bbl, depending on the nature of the events,” said Citigroup.
Goldman Sachs meanwhile estimate that oil prices already reflect a US$5-to-US$10-a-barrel risk premium from downside supply risks.
“The potential Israeli response to Iran’s attack is highly uncertain, and will likely determine the extent of threat to regional oil supply,” Goldman said.
Meanwhile, ANZ said the fact that the attack was so well-telegraphed suggests any further escalation is unlikely.
“The geopolitical risk premium is also elevated, so it doesn’t warrant any further gains until Israel’s response to this attack is clear,” ANZ said in a note.
In other markets …
Gold price rose by +2.08% to US$2,390.30 an ounce.
Brent crude rallied by another +0.4%, with Brent crude now trading at US$90.69 a barrel.
The benchmark 10-year US Treasury yield rose by 7bp (bond prices lower) to 4.61%.
Iron ore price climbed +1.2% to S$112.35 a tonne.
The Aussie dollar fell -0.3% to US64.45 cents.
Bitcoin meanwhile was down -3.5% in the last 24 hours to US$62,835.
5 ASX small caps to watch today
Tambourah Metals (ASX:TMB)
TMB has commenced work on the Neptune Cu-Au project. Neptune and Neptune East have reported significant copper and gold anomalies in drilling, including: Neptune – 24m at 0.12% Cu from 88m, and Neptune East – 20m at 0.11% Cu from 85m.
Artemis Resources (ASX:ARV)
Artemis’ internal project review has uncovered historical gold and copper targets. Multiple prospects have been identified across Carlow, Silica Hills and Osborne tenements. Peak rock chip assay results have hit 23g/t Au at the Orpheus prospect. Priority targeting is currently underway to expand gold exploration program, in addition to drilling at the Lulu Creek prospect.
Adavale Resources (ASX:ADD)
Adavale says all approvals are now in place for the maiden exploration program to commence on EL6821 and EL6957, Mundowdna and Mundowdna South, within the company’s expanding uranium portfolio in South Australia. Due diligence reviews and discussions to acquire additional ground from Kilonova have progressed well with formal acceptance of the deal expected soon, subject to shareholder approval.
Legacy Minerals (ASX:LGM)
First-phase, 1,100m diamond drilling program has commenced at the Sugarbag Hill Prospect located in NSW. Legacy has identified coincident Induced Polarisation (IP) and geochemical targets that were not recognised by previous explorers and remain untested by drilling. Recent rock chip samples collected along the resistivity trend have confirmed altered lithologies to be gold and silver bearing with assays up to 2.27g/t gold and 29.6g/t silver.
Everest Metals (ASX:EMC)
Multiple large uranium anomalies and paleochannel uranium targets have been identified at the Georgina and Amadeus Northern Territory package. Georgina contains a 50km radiometric anomaly target corridor as defined from reprocessing of radiometric data. EMC is set to prioritise targets in coming months for follow up in Q3-2024.
At Stockhead we tell it like it is. While Adavale Resources and Legacy Minerals are Stockhead advertisers, they did not sponsor this article.
The post Market Highlights: Rout on Wall Street as gold, Fear Index spike sharply higher; and 5 small caps to watch appeared first on Stockhead.
