Market Highlights: Fresh US banking crisis, UK rate at 15-year high, and 5 ASX small caps to watch today
- The ASX is set to fall today on renewed US banking crisis
- The BoE raised its rates to highest in 15 years
- Gold was down despite Wall Street selloff
The ASX is poised to open lower on Friday as the US banking crisis reared its ugly head again. At 8am AEST, the May ASX 200 futures contract was pointing down by 0.1%.
Overnight, US indices were mixed – with the S&P 500 down by -0.17%, the Dow by -0.66%, and tech heavy Nasdaq rising by +0.31%.
Regional lender PacWest Bank plunged 23% on renewed fears after 10% of its customers deposits were withdrawn over the last week. It was not immediately known how much that amounts to in dollars, but PacWest had around US$28 billion in deposits at end of March.
JPMorgan boss Jamie Dimon said it’s time for regulators to put their foot down and end to this turmoil.
“We need to finish the bank crisis,” Dimon said.
“Whatever the FDIC, the OCC, the Fed — whatever they need to do to make it better they should do.”
Walt Disney share price also dropped 9%, its biggest decline in six months, after reporting quarterly earnings per share that missed estimates. Its streaming division Disney+ also shed 4 million subscribers in the quarter.
Alphabet Inc shares rose another 4% after Google rolled out more artificial intelligence products to take on competition from Microsoft.
Meanwhile, fresh data showed that US jobless figures rose to 264,000 for May, the highest since 2021.
The US Labor Department Producer Price Index (PPI) rose 2.3% YoY, which was slightly below expectations of 2.4%.
Traders believe the two reports provided further evidence that the US economy was losing steam.
US bond prices rose (yields down) after the releases.
BoE hikes rates again
The Bank of England (BoE) has raised its key interest rate to the highest level in 15 years.
The BoE hiked the rate by 25bp to 4.5% last night in order to bring CPI inflation down to 2%. UK inflation had earlier been revised higher for 2023 from 4% to 5%.
But BoE governor Andrew Bailey predicts the UK will not suffer a recession this year.
Bailey also criticised his chief economist, Huw Pill, for saying that British people need to accept they are worse off due to rising energy prices.
“I don’t think Huw’s choice of words was the right one in that sense, I have to be honest, and I think he would agree with me,” said Bailey.
In other markets..
Crude prices were down by -1.5%, with WTI trading at US$71.50 a barrel.
This comes after another round of Chinese data confirmed that its economic reopening from Covid has continued to disappoint.
“Debt ceiling drama will eventually play a larger driver for oil prices, but right now whatever downside we are seeing with prices appears to be limited,” said Oanda analyst, Edward Moya.
And despite a selloff on Wall Street, gold was also down by -0.7% to US$2,015.50 an ounce.
“Gold’s weakness could be attributed to optimism that global recessionary fears are seeming less likely,” said Moya.
“Gold bulls need to see a fresh catalyst that triggers market stress.”
To cryptos where Bitcoin was down -2% in the last 24 hours to US$27,033.
SEC Commissioner Hester Pierce supported the US taking notes over the crypto regulation set forth in Europe.
“I think we’re shooting ourselves in the foot by not having a regulatory regime in the US,” Pierce said.
5 ASX small caps to watch today
Trek Metals (ASX:TKM)
Trek has entered into an Option Agreement with Rio Tinto Exploration (RTX) to explore Trek’s Jimblebar Nickel-Copper Project in the Pilbara region. During the initial option period, RTX may elect to farm-in to the Project with the right to earn an 80% Joint Venture interest by sole funding $5 million in exploration expenditure. Upon completion of the 80% earn-in sole funding period, an 80/20 Joint Venture will be established whereby RTX will free-carry Trek until the earlier of delivery of an “Order of Magnitude” study, or expenditure of a cumulative $40 million.
AVITA Medical (ASX:AVH)
The regenerative medicine company said total revenue for Q1, which includes BARDA revenue, was $10.6 million, a 40% increase compared to $7.5 million on the pcp. Gross profit margin was 84% compared to 76% in the pcp. As of March 31, AVITA has $77.6 million in cash, cash equivalents, and marketable securities, with no debt.
Propel Funeral Partners (ASX:PFP)
PFP announced it has executed a binding agreement to acquire two funeral service businesses and related assets for up to $41.2 million, which will materially expand and broaden the company’s network into Sydney and Southland, NZ. The company has also expanded its senior debt facilities with Westpac by $55 million to $255 million.
Cosmo Metals (ASX:CMO)
RC drilling intersected significant VMS-related Cu-Zn-Pb-Ag mineralisation at Minjina, with Ag grades up to 123g/t Ag within: [email protected]% Zn, 0.22% Pb,0.15% Cu, 33.50g/t Ag from 212m. A downhole EM survey of MIRC012 (drilled 80m east of MIRC013) has also identified a new high conductance target (MJ1) around 150m to the south which lines up with massive sulphides in MIRC013.
Encounter Resources (ASX:ENR)
Preliminary Falcon airborne gravity survey data has outlined major, new targets in the central and eastern areas of the +100km wide Aileron Cu-Au-REE project in the West Arunta in WA. Survey has defined a large, high amplitude gravity anomaly that encompasses Encounter’s Caird target and the adjacent Luni discovery by WA1 Resources, which is interpreted as a major alkaline intrusive complex prospective for carbonatite hosted critical minerals and base metals.
At Stockhead we tell it like it is. While Encounter Resources is a Stockhead advertiser, it did not sponsor this article.
