Market Highlights: Cryptos make their move ahead of Fed; and 5 ASX small caps to watch today

Bitcoin surges as investors anticipate that a potential Fed rate cut will make riskier assets like cryptocurrencies more attractive.

Cryptos make their move ahead of Fed. Picture Getty

• ASX set to drop ahead of US Fed Reserve rate cut decision

• Oil prices rise 1.5pc due to Gulf of Mexico production disruptions

• Bitcoin surges on expectations of lower interest rates

The ASX is set to drop on Wednesday, following a muted session in New York as investors await the US Fed Reserve's policy announcement early tomorrow morning AEST.

At 8am, the SPI ASX200 futures contract was pointing down by 0.5%.

US stocks stayed largely unchanged overnight as Wall Street tries to figure out the size of the rate cut by the Fed.

The S&P 500 finished slightly higher by 0.02%, the Dow Jones was down by 0.04%, and the tech heavy Nasdaq climbed by 0.20%.

The stronger-than-expected retail sales data, however, has thrown a bit of a wrench into the Fed’s plans.

Although CME FedWatch futures are showing a 63% chance of a 50 basis point rate cut, the strong August sales — up 0.1% instead of the forecasted 0.2% drop—has made that prediction less certain.

The data suggests the US economy isn't heading for a recession.

“I’m sticking to my 25bp guns, for now, however, and must admit that I find the whole debate over a 50bp cut a little ridiculous,” said Michael Brown at Pepperstone.

Brown argues that knowing how quickly rates will return to a neutral level is more important than the size of tomorrow’s rate cut. Nevertheless, we can expect some significant market swings around the announcement, he added.

Elsewhere, oil prices jumped around 1.5%, driven by ongoing disruptions in Gulf of Mexico oil production.

As of Tuesday, around 100,000 barrels per day of production in the Gulf were still offline due to Hurricane Francine, according to the Bureau of Safety and Environmental Enforcement.

To stocks news, JPMorgan Chase is reportedly in talks with Apple to take over its credit card program from Goldman Sachs, according to the Wall Street Journal.

Apple wants to end its partnership with Goldman, which started with the credit card in 2019 and included a savings account launched in 2023.

Microsoft rose by 1% after the board approved a US$60 billion share buyback plan and a 10% dividend increase to $0.83 per share, effective November 21.

This decision is part of a broader trend among major tech companies, which have recently been increasing their stock buybacks and dividends to to investors.

Sam's Club, owned by Walmart, announced that it will increase hourly wages for nearly 100,000 workers, boosting starting pay from $15 to $16. Walmart’s shares slumped by over 2%.

And, Hewlett Packard jumped nearly 5% after Bank of America upgraded the stock to a BUY.

The upgrade is based on the expectation that profit margins will improve following the recent US$14 billion acquisition of Juniper Networks.

How will Fed's cut impact cryptos?

Bitcoin surged by up to 6% last night, its biggest intraday gain since early August, on anticipation of lower rates.

Other top 10 cryptocurrencies such as Ethereum, Dogecoin, and Solana also saw gains.

Experts believe the potential rate cut is seen as likely to boost demand for speculative assets like Bitcoin.

When the Fed lowers interest rates, it typically makes riskier investments more attractive.

This is because low rates mean that safer assets, such as bonds or Treasury bills,  are now less attractive, which pushes investors towards higher-risk assets.

The size of the rate cut matters, too – whether it’s a smaller 25 basis points or a larger 50 basis points could significantly impact the price of cyrptos.

“An outsized cut, if accompanied by calming words from the Fed, could support a move higher for the digital asset,” said a note out of FX Street.

To other markets …

Gold price fell by 0.5% to US$2,570.81 an ounce. Yesterday the bullion price reached a fresh record high of US$2,589.50.

Oil prices jumped by around 1% , with Brent crude now trading at US$73.70 a barrel.

The benchmark 10-year US Treasury yield was 3 basis points higher (bond prices lower) to 3.65%.

The Aussie dollar climbed modestly by 0.10% to US67.60 cents.

Bitcoin was up 4% in the last 24 hours to US$60,265, and Ethereum also rose by 3% to US$2,342.

Meanwhile, iron ore lifted by 1.5% to $US92.50 a tonne.

Yesterday, Goldman Sachs cut its iron ore price forecast for the December quarter by 15%, down to US$85 per tonne from US$100.

5 ASX small caps to watch today

Paradigm Biopharma (ASX:PAR)
Paradigm has received positive feedback from the FDA, which paves the way for its Phase 3 clinical trial on knee osteoarthritis. The FDA confirmed that Paradigm’s dosing regimen of 2 mg/kg of injectable pentosan polysulfate sodium, administered twice weekly, is safe and tolerable. The FDA's detailed guidance will help refine Paradigm’s trial protocol. With this feedback, Paradigm is set to submit the updated trial protocol and expects to start enrolling participants soon. Paradigm says this development boosts confidence in the success of its upcoming Phase 3 trial.

Asian Battery Metals (ASX:AZ9)
AZ9 has successfully completed its Phase 1 drilling program at the Yambat Project in Mongolia. The drilling uncovered significant sulphide mineralisation, including an 8.8-metre massive sulphide interval in hole OVD021 and extensions of mineralisation in other drill holes. The mineralisation now spans over 800 metres at the Oval Cu-Ni prospect. The company is also conducting further studies to guide the next phase of drilling planned for late 2024. CEO Gan-Ochir Zunduisuren said these findings are a major breakthrough, indicating potential for high-grade ores and setting the stage for future exploration.

Litchfield Minerals (ASX:LMS)
Litchfield has made progress at its Lucy Creek project in the Northern Territory. Advanced remote sensing has revealed promising areas for manganese, rare earth elements, and base metals. New analysis has identified over 100 exploration targets and potential sub-surface manganese deposits. CEO Matthew Pustahya said these findings boost the project's potential and set the stage for further exploration.

88 Energy (ASX:88E)
88 Energy announced a major increase in estimated resources at its Project Phoenix. Independent verification has boosted the gross contingent resources by over 50%, adding 128 million barrels of oil equivalent. The project now has a total estimated contingent resource of about 378 million barrels. Additionally, there’s significant upside potential with further resources yet to be fully explored. Located in Alaska, the project is well-positioned for future development, with ongoing plans for well testing and potential collaboration with joint venture partner Burgundy Xploration.

Cauldron Energy (ASX:CXU)
Cauldron announced promising drilling results from Manyingee South at its Yanrey Uranium Project. Recent drilling confirms a significant uranium mineralised trend extending at least 2 kilometres and shows strong results, including up to 880 ppm eU3O8 over 3 metres in some drill holes. The area, located 4.5 km south of Paladin’s renowned Manyingee Deposit, exhibits wide mineralisation across a palaeochannel, suggesting a large mineralised system. Further drilling is underway to explore and define the extent of this mineralisation, with the Manyingee South channel being just one of many potential targets within the project area.

Originally published as Market Highlights: Cryptos make their move ahead of Fed; and 5 ASX small caps to watch today