Market Highlights: Oil stocks could rally again on Biden’s comments; and 5 other ASX small caps to watch

Biden’s comments on potential strikes on Iran spooked markets, causing crude prices to rise 5% overnight.

Oil stocks will be on watch again today. Picture via Getty Images

• ASX set to drop on Friday amid Middle East concerns

• Wall Street declines as Biden hints at possible strike on Iran

• China’s stock rally faces skepticism as risks grow

The ASX is expected to drop when the market resumes on Friday as concerns grow over the situation in the Middle East. At 8am AEST, the SPI ASX200 futures contract was pointing down by 0.6%

Overnight, Wall Street fell across the board, with the S&P500 down by 0.17%, the blue chips Dow Jones by 0.44% and the tech heavy Nasdaq by 0.04%.

President Biden spooked markets when he suggested the US might back a potential strike on Iranian oil assets in response to a recent missile attack on Israel.

“First of all, we don’t ‘allow’ Israel, we advise Israel. And there is nothing going to happen today,” Biden said.

Experts say a major attack on Iran's oil facilities could reduce supply by 1.5 million barrels per day, while smaller strikes could take out between 300,000 and 450,000 barrels.

Crude prices jumped by another 5% on Biden’s comments, bringing this week’s total rise to 9%.

Energy stocks on Wall Street outperformed the broader market last night,  while Wall Street’s VIX index, sometimes called the fear index, jumped 8%.

“The VIX is signalling that we are still in the midst of the ‘iffy October’ period, but we ultimately expect investors to buy this dip,” said Fundstrat’s Thomas Lee.

But with limited market-moving data, all eyes are now on Friday’s US payrolls report, which will influence the Fed Reserve’s next decision on interest rates.

“We continue to expect more aggressive easing as the Fed confronts a rapidly softening labour market,” said Andrew Hollenhors at Citigroup.

To stocks, Nvidia rose by 3.4% on no specific news, taking its market cap back above the US$3 trillion mark.

Tesla shares keep falling, down by another 3.4% last night after reporting disappointing delivery numbers on Wednesday.

Most retailers, like Walmart, Amazon and Target were sold off as the the US East and Gulf coast ports strike hits day three.

The ongoing chaos caused by the US dockworkers strike could cost the US economy up to US$4.5 billion daily, say experts.

Is China on the cusp of boom or doom?

Investors should be cautious as China’s recent stock rally, the biggest in 16 years, could fizzle out, according to Nomura’s analysts.

They warned that a boom might be followed by a crash, much like what happened in 2015.

China’s benchmark stock index saw its largest gain since 2008 earlier this week, entering a bull market after the government introduced various measures aimed at boosting the struggling economy.

Since then, the onshore markets have been closed for holidays.

While there’s a buzz that this rally is different from past short-lived recoveries, Nomura remains skeptical.

“While investors might still be OK to indulge in the boom for now, a more sober assessment is required,” the bank told Bloomberg.

However, other banks like Morgan Stanley see potential for a 10% to 15% gain in Chinese stocks, especially if the government rolls out more fiscal measures.

HSBC has also upgraded Chinese stocks to overweight, and said it’s “not too late to enter the rally.”

In other markets …

Gold price fell slightly by 0.15% to US$2,656.07 an ounce.

Oil prices surged by 5% on the back of Biden’s comments, with Brent crude now trading at US$77.58 a barrel.

The benchmark 10-year US Treasury yield climbed a further 6 basis point (bond prices lower) to 3.85%.

Bitcoin traded flat in the last 24 hours at US$60,755, while Ethereum tumbled by 1% to US$2,347.

Meanwhile, iron ore climbed by 0.5% to $US108.75 a tonne.

5 ASX small caps to watch today

Control Bionics (ASX:CBL)
CBL has reported a significant rise in NDIS approvals for its Trilogy system , totalling nearly $400k over the past eight weeks, surpassing the previous five months. The team is optimistic about ongoing support, with nearly $1 million pending approval. Additionally, a new long-term leasing programme for the Trilogy system has been launched in Australia, allowing individuals with neurodegenerative conditions to access vital communication technology at a lower cost. The Trilogy system enables users with disability to interact and express themselves using advanced technology, often incorporating features like eye-tracking or other assistive inputs to facilitate communication. CBL is also currently conducting a rights issue to raise up to $2.1 million, offering one new share for every seven held at 7 cents each.

Black Cat Syndicate (ASX:BC8)
BC8 has provided an update on the Kal East Gold Project. The first gold doré from the Myhree site has been poured ahead of schedule, following the start of ore production on 26 July. Open pit mining is progressing well, with about 78,000 tonnes of ore mined so far and a focus on waste removal to expedite operations. The first ore parcel has been processed at Paddington, and the company expects to receive $30 million in cash flow after covering start-up costs, with profits shared thereafter.

Frontier Energy (ASX:FHE)
Frontier has announced its funding strategy for the Stage One development of the Waroona Renewable Energy Project. The company has identified various non-dilutive financing options and is in discussions with potential partners. With all necessary approvals in place, Frontier is well-positioned to advance the debt process once the updated Definitive Feasibility Study (DFS) is completed. The updated DFS, expected in Q4 2024, should show significant reductions in capital costs, the company said. Financing options under consideration include bonds, equipment supplier financing, and sale and leaseback arrangements for its landholdings.

New World Resources (ASX:NWC)
NWC has reached an important milestone in the permitting process for the Antler Copper Project, with its Air Quality Permit application now considered technically complete. Submitted to the Arizona Department of Environmental Quality (ADEQ) on 10 September, the application will now undergo a substantive review, including a 30-day public comment period. The ADEQ has 120 days to review the application, with approval expected in the first half of 2025. Additional permit applications for underground mining will be submitted throughout 2024, and the Antler Definitive Feasibility Study (DFS) is continuing.

Rox Resources (ASX:RXL)
Rox has reported encouraging drill results from the Youanmi Gold Project in Western Australia, with high-grade assays from the Paddy’s Lodes prospect showing up to 3 metres at 16.71 grams per tonne gold. These results confirm that high-grade mineralisation extends down-dip and along strike, suggesting an extension within the broader structural corridor of the historical Youanmi mine. The company has begun an 11,000-metre growth drilling programme, with ongoing drilling at multiple deposits as part of its resource definition and metallurgical efforts.

At Stockhead we tell it like it is. While Control Bionics, Frontier Energy and New World Resources are Stockhead advertisers, they did not sponsor this article.