by Paul Sanger
The ASX was weaker in morning trading following a weaker Wall Street overnight.
At noon, the S&P/ASX 200 is 0.49 per cent or 34.30 points lower at 7012.60.
The SPI futures are pointing to a fall of 27 points.
Best and worst performers
The best-performing sector is Energy, up 1.36 per cent. The worst-performing sector is Consumer Staples, down 2.19 per cent.
The best-performing stock in the S&P/ASX 200 is Altium (ASX:ALU), trading 18.38 per cent higher at $35.43. It is followed by shares in Ansell (ASX:ANN) and Breville Group (ASX:BRG).
The worst-performing stock in the S&P/ASX 200 is Endeavour (ASX:EDV), trading 10.16 per cent lower at $7.43. It is followed by shares in EML Payments (ASX:EML) and Credit Corp Group (ASX:CCP).
Asian markets
Asia-Pacific markets are trading lower early Tuesday morning after major indexes on Wall Street finished their worst day since June amid mounting rate hike concerns.
Japan’s Topix is trading 0.82 per cent lower, and the Nikkei 225 has fallen 1 per cent, while South Korea’s Kospi is down 0.4 per cent.
China to add lending support following LPR cuts
Bloomberg sources said China will offer CNY200B ($29.3b) in special loans to ensure stalled housing projects are delivered to buyers, which would be the biggest financial commitment so far from policymakers to contain the property market crisis. This comes in response to homebuyers’ boycotts of mortgage repayments as developers struggle to complete construction in a market where most homes are presold. The People’s Bank of China (PBOC) and the Finance Ministry will channel the money through policy banks such as the China Development Bank and the Agricultural Development Bank of China. Separately, the PBOC said banks need to increase loans to the real economy, specifying areas such as small business, green development, science and technology, real estate and platform economy.
Calls for China to go further on rate cuts, but capital outflows remain a concern
Chinese policy-easing measures have failed to gain any meaningful traction so far, spurring calls for authorities to do more. The Securities Times column said not to rule out further RRR cuts given the large amount of MLF funds expiring from September to December, and the need to support the real estate market as part of broader efforts to stabilise economic growth. Speaking to Bloomberg, ex-PBOC adviser Liu Daokui noted the central bank has space to cut benchmark rates by another 50 bp through to mid-2023. Liu argued China’s strong trade surplus and capital controls will mitigate capital outflows. However, there is also a view that more aggressive Fed rate hikes will widen US-China yield differentials, lead to further yuan depreciation and increase capital outflow pressures (SCMP). According to S&P Global, China’s net financial outflows are estimated to have reached $108b in Q2, up almost $38b from a year earlier.
Japan PMIs soften in August
Flash manufacturing PMI was 51.0 in August, compared with 52.1 in the previous month. This marks the slowest in the current 19-month expansion streak. Details were broadly softer: output, new orders and exports all registered stronger declines. Employment showed weaker growth. Input and output prices rose at a slower pace, albeit anecdotal evidence suggested this was caused mainly by weaker demand. The finished goods inventory accumulation also slowed. The services PMI fell to 49.2 from 50.3 in the prior month, marking the first contraction since March. New orders fell for the first time in four months — which, in combination with manufacturing activity, led to a negative swing in aggregate demand as well as output. Overall outlook prospects waned while remaining net optimistic, as firms cited the impact of the Ukraine war, inflationary pressures due to rising raw material and energy costs and a global economic slowdown.
China formulating “employment first” policies as welfare costs grow
Xinhua has reported that the Standing Committee of the Chinese People’s Political Consultative Conference (CPPCC) National Committee convened on Monday to discuss measures to be included in a so-called “employment first” policy. Vice Premier Hu Chunhua has called on relevant authorities to adopt detailed and effective policies and measures to stabilise employment. Specific measures were not mentioned.
The Nikkei has reported that unemployment insurance costs have reached a monthly record in June on increased benefits to the jobless and payments to employers that kept workers on the payroll. Contribution inflows have increased 20 per cent, but were overshadowed by large payouts, resulting in the biggest funding shortfall since March 2020 amid the initial Covid shock. Funding demand has increased after the government increased refunds for businesses that keep workers on payroll. There are harsh conditions in the younger demographic, with youth unemployment at record highs.
Company news
Pilbara Minerals (ASX:PLS) has announced its FY22 results this morning. The mineral exploration company announced significant growth in its top and bottom lines, along with positive guidance posted over the long term. Revenue is up 577 per cent year-over-year (YoY) to $1.2 billion. Earnings before interest, taxes, depreciation and amortisation is $814.5 million, up from $21.4 million in FY21. Statutory net profit after tax is $561.8 million, up from a loss of $51.4 million loss in FY21. Pilbara has shipped 361,305 dry metric tonnes of spodumene concentrate. The company announced its performance for top and bottom lines was buoyed by strong demand for lithium and spodumene concentrate. Results were also accelerated by the performance of its Pilangoora lithium-tantalum operation in Western Australia. Other catalysts included the restart of the Ngungaju plant, capacity improvements for the Pilgan plant and more favourable international prices for lithium. The average price per dry metric tonne stood at approximately US$2,605 for the year. Shares in PLS are currently trading up 3.31 per cent at $3.275.
American West Metals (ASX:AW1) has announced a discovery at the Storm Copper Project on Somerset Island in Canada. Over 68 metres of copper sulphide mineralisation have been intersected. Managing Director Dave O’Neill has called the find “game-changing”. He comments that the discovery has “hugely positive” implications, since it is evidence of a major copper system. Shares are trading 36 per cent higher at 17 cents.
In further copper news, Culpeo Minerals (ASX:CPO) has released mapping results from Lana Corina in Chile. Four priority drill targets have been identified, and the project’s footprint has increased to 500m by 400m. Managing Director Max Tuesley says the company is only just beginning to appreciate the size of the copper system. Shares are trading 12.5 per cent higher at 18 cents.
Strike Energy (ASX:STX) has provided an update on the WE3 well at the West Erregulla gas field. The venture is a 50/50 joint project with partner Warrego Energy (ASX:WGO). The gas has been measured to be high-quality and low in impurities, and is consistent with other West Erregulla wells. Shares in Strike Energy are trading 3.7 per cent higher at 28 cents while shares in Warrego Energy are up 3.6 per cent to 14 cents.
Commodities and the dollar
Gold is trading at US$1742.36 an ounce.
Iron ore futures are pointing to a rise of 2.32 per cent.
One Australian dollar is buying 68.93 US cents.
