Market Highlights: Wall Street’s losing streak continues, and 5 ASX small caps to watch on Wednesday

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  • ASX 200 set to open lower on Wednesday
  • Wall Street sinks for 4th straight day
  • Oil prices down 5%

Local shares are set to open lower today. At 8am AEST, the ASX 200 September futures contract is pointing down by 0.85%.

There were broad losses on Wall Street overnight amid concerns of further rate hikes from the Fed after some strong sets of economic data.

The JOLTs survey showed that new job openings in the US rose from 11.04 million in June to 11.239 million in July, compared to consensus of 10.45 million. Consumer confidence also rose from 95.3 to 103.2 in August, versus consensus of 97.7.

It was the fourth day in a row US stocks finished in the red, having fallen since last Thursday.

New York Fed Reserve Bank President John Williams added to investor nervousness when he told the WSJ the Fed was “absolutely committed” to achieving the 2% inflation goal.

“The situation is very challenging. Inflation is very high. The economy has a lot of crosscurrents. I do think it will take a few years, but we’re going to get that done,” Williams said.

The Fed has increased rates four times this year, including two 75bp hikes in June and July.

“Over the next few months, if the labor market doesn’t break and the consumer remains resilient, Wall Street might start pricing in rate hikes for February and March,” said OANDA analyst, Edward Moya.

Short-term rates continued to climb as investors bet on more rate hikes. The 2-year Treasury yield is now at 3.46%, topping its highest in nearly 15 years.

Retailer Best Buy’s earnings report showed that consumers are indeed pulling back on spending, confirming the trend of a weaker economy.

Best Buy’s share price rose 1.6% after reporting that its revenue for the quarter was down 12.8% to $10.33 billion, but a smaller drop than the consensus of $12.27 billion.

Oil prices fell by more than 5% after Iraq said that it can redirect more crude oil exports to Europe if required.

Iraq’s state-owned marketer SOMO said it wants to pivot from selling in Asia due to tougher competition after India and China stepped up Russian oil purchases.

“The oil market is still tight, so this downward move should not last much longer,” said Moya.

Gold prices are also declining as investors continue to see a wrath of elevated inflation data, trading now at US$1,722.5 an ounce.

“Gold’s rough patch seems like it will continue a little while longer as gold-backed ETFs continue to see outflows,” Moya said.

To cryptos, where Bitcoin has fallen back below US$20k, and is now trading at US$19,836.

Looking ahead today, Australian private sector credit data for July will be released, along with construction work done for the June quarter.

5 ASX small caps to watch today

TinyBeans (ASX:TNY)
The social media app company reported record revenue of US$10.9m for the full year, up 34% pcp. The bottom line loss for FY22 was $4.5m, up 40% vs pcp, versus FY21 loss of $3.2m. In FY23, TinyBeans said it will be launching an array of new product upgrades that should support acceleration in its consumer revenues.

NobleOak Life (ASX:NOL)
The life insurer has exceeded key FY22 prospectus forecasts. In-force premiums were up 40% to $254.6 million. Insurance premium revenue was up 46% to $248.4 million. Underlying NPAT was up 35% to $9.5 million. In FY23, the company said its strong brand and low lapse rates are expected to drive continued above market growth in in-force premiums.

Mesoblast (ASX:MSB)
Total revenue increased 37% to US$10.2 million for FY22 compared to US$7.5 million for FY221. The increase was due to growth in royalties, and US$1.2 million of milestone revenue from Takeda. Loss after tax for FY22 was US$91.3 million, compared to US$98.8 million for FY21. At June 30, 2022, cash-on-hand was US$60.4 million.

De.Mem (ASX:DEM)
The water tech company reported record H1 revenues of $9.2m, 1% above pcp. Recurring revenue segments now account for more than 90% of total revenue. EBITDA loss was significantly reduced to $800k in the first half, and the company is now looking at a potential EBITDA breakeven in the first half of 2023.

Silex Systems (ASX:SLX)
The first full-scale laser system module developed for deployment in GLE’s commercial pilot demonstration facility in the US has successfully completed an extensive testing program at Silex’s Lucas Heights facility in Sydney. The technology is now expected to be utilised by GLE under the Silex uranium enrichment technology license agreement.

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