by Paul Sanger
At noon, the S&P/ASX 200 is 2.01 per cent or 142.80 points lower at 6961.30.
The SPI futures are pointing to a fall of 154 points.
Best and worst performers
All sectors are in the red. The sector with the fewest losses is Consumer Staples, down 0.95 per cent. The worst-performing sector is Information Technology, down 4.17 per cent.
The best-performing stock in the S&P/ASX 200 is The A2 Milk Company (ASX:A2M), trading 8.76 per cent higher at $5.34. It is followed by shares in Adbri (ASX:ABC) and Inghams Group (ASX:ING).
The worst-performing stock in the S&P/ASX 200 is Life360 (ASX:360), trading 11.39 per cent lower at $4.67. It is followed by shares in Coronado Global Res (ASX:CRN) and Chalice Mining (ASX:CHN).
Asia-Pacific markets
Shares in the Asia-Pacific also traded lower on Monday following Fed Chairman Jerome Powell’s speech at Jackson Hole on Friday. He warned that rising interest rates will cause “some pain” to the U.S. economy, saying higher interest rates likely will persist “for some time.”
The Nikkei 225 in Japan slipped 2.9% and the Topix index declined 2.06%. South Korea’s Kospi fell 2.39% and the Kosdaq index dropped 3%.
Mainland China’s Shanghai Composite Dipped 0.72% and the Shenzhen Component lost 0.68%.
Hong Kong’s Hang Seng index shed 1.07% and the Hang Seng Tech index dropped 1.43%.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.83%, while the Japanese yen traded at 138.47 per dollar.
Central bankers emphasise need to tame inflation, even if it means economic pain: Central bankers at Jackson Hole emphasised the message they will maintain aggressive pace of tightening even in a slowing economic environment. Fed Chair Powell and ECB policymakers acknowledged tightening will hurt households and businesses but that a larger sacrifice will be needed to tame inflation, requiring policy to remain restrictive for an extended time (FT, Bloomberg). Officials warned monetary policy will be a more challenging task over coming years, necessitating costly trade-offs in an environment where supply shocks will be more volatile. Attendees discussed the possibility inflation will remain structurally higher and be more difficult to manage, which may require central banks to eventually reconsider their inflation mandates in order to avoid imposing unnecessary pain on economies.
US and China reach audit deal: Consistent with prior press leaks, Reuters reported SEC chair Gensler announced Friday that US and China signed a pact to allow US regulators to vet accounting firms in China and Hong Kong. Article noted this deal marks a partial thaw in US-China relations amid tensions over Taiwan and will come as a relief for hundreds of Chinese companies, which faced the risk of delisting from US exchanges. Gensler cautioned that it was just a first step and that their view on China’s compliance would be determined by whether they are able to conduct their inspections unobstructed, as the deal promises. Still, PCAOB acknowledged it was the most detailed agreement the regulator has ever reached with China. US officials said they had notified the selected companies on Friday morning and expected to land in Hong Kong, where the inspections will take place, by mid-September. Officials said PCAOB and SEC expect to make a determination on China’s compliance by the end of the year.
China GDP growth expectations continue to weaken: Bloomberg consensus now looks for China GDP growth of 3.5% in 2022, down from 3.9%. Quarterly projections through 3Q next year were shaved though 2023 median remained unchanged at 5.2%. Story highlighted how forecasts were downgraded despite Beijing’s recent stimulus measures, indicating scepticism about its effectiveness amid adverse impacts from Covid-related restrictions and property sector weakness. More recently, record high temperatures and drought have led to power shortages and some factory shutdowns. Story recalled the government has been downplaying its official growth target of around 5.5%, noting Beijing hasn’t missed GDP target by such a large magnitude before. Economists also cited structural challenges in the longer term (demographics) steering perceptions of potential growth lower.
US Markets
US equities finished lower in Friday trading, ending near the worst levels. Stocks plummeted Friday after Federal Reserve Chair Jerome Powell said in his Jackson Hole speech the central bank won’t back off in its fight against rapid inflation. The Fed chair made it crystal clear that Americans will face slower economic growth and a weaker job market as a result of the central bank’s efforts to tame inflation. But Powell argued that the failure to bring down prices would result in even greater hurt for Americans. He called price stability the “bedrock of our economy,” and said that the Fed “must keep at it until the job is done”—“it” being a series of meaty interest rate hikes.
The Dow Jones Industrial Average dropped 1,008.38 points, or 3.03 per cent, to 32,283.40, with losses accelerating into the close. The S&P 500 fell 3.37 per cent to 4,057.66, and the Nasdaq Composite slid 3.94 per cent to 12,141.71.
The stock market’s worst month – September – will soon be upon us. The S&P 500 index has averaged a 1 per cent loss in September dating back to 1928, says Dow Jones Market Data. The Dow Jones Industrial Average has notched a similar September loss going back to 1896. It’s clearly a bad month for both indexes. Last year, stocks fell 4.8 per cent in September. The sell-off on Wall Street was broad-based, with just five stocks in the S&P 500 posting gains on Friday.
Semis, homebuilders, retail/apparel, asset managers, building products, trucking among were the notable underperformers. Defensive sectors and energy held up best, but still ended down.
Once again across the globe rising energy prices are having a more detrimental impact on European investors than rising interest rates.
Asian and European gas prices hit record highs again on Friday driven by different factors, though with one common source – the continuing ripples from the Russian invasion of Ukraine.
Europe’s benchmark gas price has soared by almost a third in the past week as traders and utilities rush to secure supplies ahead of the winter. Asia’s gain has been similar – around 31 per cent.
In the UK gas price rises combined with rising interest rates are hitting investors hard.
In addition drought has been declared across the globe, from the Horn of Africa, to China and England, as climate change continues unabated – drought means more than just a water shortage.
It is having a major impact on electricity generation, shipping delays on the Rhine, with China on the verge of a water catastrophe. Water shortages could also induce global food and industrial material shortages on a far greater scale than those wrought by the COVID-19 pandemic and the war in Ukraine.
Given China’s overriding importance to the global economy, potential water-driven disruptions beginning in China would rapidly reverberate through food, energy, and materials markets around the world and create economic and political turbulence for years to come.
Of course unlike other commodities, water does not have any viable substitutes
Today’s global supply chains are woefully unprepared for a Chinese drought that could disrupt grain trade patterns and key industrial materials production across multiple continents.
Company News
Galileo Mining (ASX:GAL) today provided a drilling update from the Callisto palladium discovery which has intersected massive sulphide mineralisation displaying the potential for high-grade zones within the mineralised system. Galileo’s Managing Director Brad Underwood commented; “Intersecting massive sulphides at the shallow depth of 190 metres downhole is an exceptional result from our first program of diamond drilling at Callisto. It demonstrates how much there is to learn about the larger mineralised system and the up-side opportunities that may present themselves as we continue with our extensive drill campaigns. Shares are trading 32.8 per cent higher at $1.31.
RAS Technology (ASX:RTH) has announced record financial year 2022 results this morning with accelerated revenue growth of $8.33 million, up 57% year on year as the company escalated global expansion plans.The company also announced a series of major partnerships and contracts in the last six months including, an expanded five-year contract with Entain, one of the world’s largest sports betting and gaming groups, valued at $5 million. It also partnered with wagering powerhouse Flutter (the owner of BetEasy, BetFair, Paddy Power, SkyBet, SportsBet, and Timeform) via the group’s advanced-deposit wagering. Shares are trading 4.4 per cent lower at 76 cents.
Petratherm (ASX:PTR) is pleased to report Batch 2 rare earth drill results from the Comet Project located in the Northern Gawler Craton of South Australia . Drilling has defined a major REE occurrence named here the Meteor Prospect. Commenting on these results, PTR’s Exploration Manager Mr Peter Reid said: “These are encouraging results with a significant rare earth zone found with high grades. We see compelling evidence that the Northern Gawler Craton of South Australia is shaping up as a major new province for rare earths. Shares are trading 5.6 per cent higher at 8 cents.
Commodities and the dollar
Gold is trading at US$1726.29 an ounce.
Iron ore is 3.5 per cent higher at US$105.80 a tonne.
Iron ore futures are pointing to a fall of 1.1 per cent.
One Australian dollar is buying 68.55 US cents.
