by Paul Sanger
At noon, the S&P/ASX 200 is 0.37 per cent or 26.20 points lower at 7101.50.
The SPI futures are pointing to a rise of 18 points.
Australian employment shrank 40.9K in July against expectations for a 25.0K increase and June’s 88.4K increase. This marked the first contraction in jobs since October 2021, although it is likely driven by temporary factors such as recent school holidays, Covid-related employee absenteeism and disruption from New South Wales flooding. The unemployment rate fell to 3.4 per cent versus expectations of an unchanged 3.5 per cent, demonstrating a continued tightening of Australia’s labour market that the RBA anticipates will translate into stronger wage growth. The RBA noted fewer unemployed people than job vacancies in July, which indicates continuation of acute labour shortages that are keeping business costs elevated. Recall that the RBA expects the jobless rate to fall to 3.25 per cent by year-end before unemployment begins to rise due to the cumulative effects of rising inflation and interest rates on economic growth.
Australia’s largest retirement funds are pivoting to bonds as a hedge to recession risk (Bloomberg).
US contracts edged lower after Wall Street shares declined for the first time in four days, including a more than 1 per cent drop in the tech-heavy Nasdaq 100 index.
Best and worst performers
The best-performing sector is Energy, up 2.01 per cent. The worst-performing sector is Utilities, down 2.11 per cent.
The best-performing stock in the S&P/ASX 200 is IPH (ASX:IPH), trading 13.75 per cent higher at $10.01. It is followed by shares in Whitehaven Coal (ASX:WHC) and New Hope Corporation (ASX:NHC).
The worst-performing stock in the S&P/ASX 200 is Regis Resources (ASX:RRL), trading 7.81 per cent lower at $1.62. It is followed by shares in Blackmores (ASX:BKL) and Xero (ASX:XRO).
Asian markets
Asian equities also opened weaker Thursday, retreating as investors assessed a parlous Chinese economic outlook and the Federal Reserve minutes signalled the central bank faces a delicate balancing act to quell inflation while averting recession.
The Nikkei is down 1.05 per cent and the Kospi is down 1.08 per cent.
Asian macro headlines
Economy
China is racing to alleviate drought and power cuts as the heatwave continues, and its fiscal revenue growth is decelerating as economic growth slows. European investment into China is rising as US companies draw contingency exit plans for a possible US-China conflict.
Commodities are firming with downstream investments most likely to benefit from Indonesia’s budget.
Corporates are set raise wages to combat a chronic worker shortage in Japan and Australia.
Central banks
July FOMC minutes are highlighting a concern about over tightening, with members noting it is appropriate to slow the pace of tightening at some point.
The PBOC is under pressure to ease, but is facing worries over inflation and capital flight.
The RBNZ chief says inflation is heading in the “right direction”.
Geopolitics
The US and Taiwan will begin formal trade talks this autumn.
China will participate in joint military exercises with Russia, marking the latest demonstration of their partnership.
Next, North Korea nuclear tests may lead the US to deploy “strategic assets” to South Korea.
Corporate
Tencent says a report it wlil sell its Meituan stake is not accurate as the company records its first-ever revenue decline.
Renewed PBOC easing expectations still don’t extend to RRR cuts
Reuters has discussed the recent recalibration of PBOC policy expectations. According to policy insiders and analysts, the central bank is set to take more easing steps, pressured by a shaky economy that is undercutting jobs, but it faces limited room to manoeuvre due to worries over rising inflation and capital flight. In the near term, analysts expect cuts in benchmark lending rates as early as Monday, after the PBOC unexpectedly lowered two key rates this week. While the move prompted calls for more easing to shore up economic growth momentum, an RRR cut is seen as unlikely any time soon given the abundance of liquidity. The PBOC may instead use structural policy tools, such as low-cost loans, to give targeted support to ailing small firms and sectors favoured by state policies. Inflation pressures are beginning to emerge, although most economists don’t believe this is a major concern for now, given weak demand.
Company news
VRX Silica (ASX:VRX) today announced the Mineral Resource Estimate (MRE) for its Boyatup Silica Sand Project. The MRE is based on a drilling program of 46 hand-held auger and 160 vacuum drill holes to a depth of 3-4m for a total of 312m conducted in March 2022. The estimate has utilised a comprehensive collation of assays and Particle Size Distribution on the drill samples collected. VRX Silica Managing Director Bruce Maluish said: “The Boyatup mineral resource has confirmed our belief that this is a significant silica sand project for VRX. This maiden mineral resource estimate has added significantly to our current inventory, bringing our total silica sand resources to 1.12 billion tonnes.” Shares are trading 6.1 per cent higher at 18 cents.
Andromeda Metals (ASX:ADN), a near-term producer of the halloysite-kaolin industrial mineral, today announced progress for its Great White Kaolin Project in South Australia, with the signing of land purchase agreements and the lodgement of the company’s Program for Environment Protection and Rehabilitation. The agreements and lodgement of the PEPR significantly de-risk the project’s development and increase confidence for the approaching investment phase. Andromeda has signed agreements to acquire all the required freehold land from relevant freehold landowners for the project to proceed. Andromeda’s Managing Director James Marsh said, “The Agreements and submission of the PEPR signify important milestones achieved in progressing the Great White Kaolin Project. They follow months of extensive stakeholder consultations with landholders and the broader Eyre Peninsula community. “These positive outcomes demonstrate Andromeda’s ability to work collaboratively to deliver win-win solutions that progress the Project while also delivering benefits to the surrounding communities.” Shares are trading per cent to $2.1 per cent higher at 10 cents.
Ai-Media Technologies (ASX:AIM), a global provider of technology-driven captioning, transcription and translation services, today announced it has signed a multi-year agreement with Google. The company believes the agreement with Google is material due to the strategic importance of a leading global technology company adopting Ai-Media’s products in the corporate market. Ai-Media Co-founder and CEO Tony Abrahams said: “We are incredibly excited to be partnering with Google, one of the world’s leading technology companies, to improve the interconnectivity of its employees through our product offerings. This is an important agreement for Ai-Media as it highlights our position as a trusted market leader, and it validates our ability to deliver high-quality and secure captioning services to a variety of global customers across different industries.“ Shares are trading 11.4 per cent at 39 cents.
IPH (IPH) has reached an agreement to acquire the IP agency practice of Smart & Biggar, which will hold an interest in the legal practice of Smart & Biggar as permitted by Canadian regulation. Smart & Biggar joining IPH will significantly extend the group’s international secondary markets network, for the first time beyond the Asia Pacific region. This is consistent with IPH’s vision to be the leading IP services group in secondary IP markets and provides a platform for IPH to participate in further growth opportunities. Shares in IPH are currently trading up 13.75 per cent at $10.01.
Commodities and the dollar
US natural gas prices are trading near their highest in 15 years amid concerns winter reserves won’t be enough.
Gold is trading at US$1766.50 an ounce.
Iron ore futures are pointing to a fall of 2.4 per cent.
One Australian dollar is buying 69.37 US cents.
