Macquarie's top Budget-inspired tech picks + Pilbara Minerals cops two downgrades

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.

MARKETS WRAP

S&P 500 TECHNICALS

MAJOR HEADLINES

• As central banks hike to fight inflation, major economies headed for recession albeit with strong labor markets 
• Poor corporate report cards from US and Asian tech giants point to economic pain
• Inflation worries hurt US consumer confidence while house price gains decelerate
• Goldman Sachs says conditions for market bottom not visible as prices don't reflect latest rise in real yields and recession odds
  
• The US now has just 25 days of diesel supply - the lowest since 2008
  
• Wuhan locks down one of its central districts in response to rising Covid cases
  
• Chinese state banks sold dollars to support yuan late on Tuesday
  

CENTRAL BANK WRAP

The Bank of Canada hiked rates by less than expected to 3.75% (from 3.25%). And yes, the move has (once again) sparked hopes of a pivot from other major central banks including the US Federal Reserve.

Tonight, all roads lead to the ECB. All expectations are the committee will increase the policy rate by an unprecedented 75 basis points to 2%. 

THE CHART

This time next week, we'll be discussing the results of the US Midterm Elections. Yes, that is actually next week. But if you want an indicator of how the stock market might perform next year, you'll love our chart of the day.

This year is obviously the second year of a four-year cycle but history suggests next year will be far better for risk assets. The S&P 500's performance in the third year of a presidential cycle averages over 13%! In fact, the only year where it wasn't a positive year was 1931. 

Conclusion: History suggests things will turn around next year. But will things be different this time? 

STOCKS TO WATCH

Fresh off the Budget, Macquarie has analysed three of their top stock picks in the tech space - Xero (ASX: XRO), Megaport (ASX: MP1), and NextDC (ASX: NXT). Most mentions relating to technology in the Budget were related to energy environment and skills. But that also meant something had to be left out. In this case, small businesses were left without much in the way of subsidies or plans to deal with the rising cost of operating in this environment. That's not good news for Xero, given it works with workplaces.

For Megaport and NextDC, it all comes down to the additional funding for cybersecurity. For NextDC, it's all about data centre fleet while. Megaport will be hoping the funding means greater takeup of its secure access service.

And finally, on an unrelated note, Pilbara Minerals (ASX: PLS) copped downgrades at Citi and Ord Minnett on valuation grounds. Perhaps of greater interest, Citi predicts a sharp rise in spodumene prices of 40% and 60% across FY23 and FY24 respectively. Talk about punchy!

THE QUOTE

"This cybercrime event continues to evolve and at this stage, we are unable to predict with any certainty the impact of any future events on Medibank including the quantum of any potential customer and other remediation, regulatory, or litigation related costs."

The quote from Medibank CEO David Koczkar takes out our quote of the day. Weeks after saying it was confident no major data was accessed, Medibank's investigation has finally revealed the exact opposite. No wonder its share price was down 15% yesterday. 

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