by Paul Sanger
Australian shares have clawed back some of yesterday’s heavy losses despite another slump in global markets over the possibility of more aggressive US and European interest rate hikes ahead.
At the closing bell, the S&P/ASX 200 was 0.47 per cent or 32.80 points higher at 6998.30.
Futures
The Dow Jones futures are pointing to a rise of 69 points.
The S&P 500 futures are pointing to a rise of 10.50 points.
The Nasdaq futures are pointing to a rise of 48.50 points.
The SPI futures are pointing to a rise of 40 points when the market next opens.
Best and worst performers
The best-performing sector was Information Technology, up 1.84 per cent. The worst-performing sector was Materials, down 0.04 per cent.
The best-performing stock in the S&P/ASX 200 was Mineral Resources (ASX:MIN), closing 6.20 per cent higher at $67.96. It was followed by shares in The A2 Milk Company (ASX:A2M) and Paladin Energy (ASX:PDN).
The worst-performing stock in the S&P/ASX 200 was Ramelius Resources (ASX:RMS), closing 5.23 per cent lower at $0.82. It was followed by shares in Domino Pizza Enterprises (ASX:DMP) and Sandfire Resources (ASX:SFR).
Asian markets
Shares in the Asia-Pacific are mixed on Tuesday after sharp falls to start the week following Fed Chair Jerome Powell’s hawkish speech in Jackson Hole.
Japan’s Nikkei 225 has risen 0.87 per cent and the Topix index has gained 1 per cent. The Kospi in South Korea has added 0.3 per cent and the Kosdaq has increased 0.85 per cent.
Hong Kong’s Hang Seng index has declined 1.52 per cent, with the Hang Seng Tech Index trading 2.3 per cent lower, while mainland China markets are mixed. The Shanghai Composite is fractionally higher, and the Shenzhen Component has shed 0.246 per cent at the open.
MSCI’s broadest index of Asia-Pacific shares outside Japan is 0.37 per cent lower.
Downward pressure on yen and offshore yuan following hawkish Powell remarks
Japan and China’s currencies have been under pressure lately after hawkish commentary from Fed Chair Powell renewed focus on policy divergence with the US. PBOC fixed yuan midpoint with second strongest bias on record, aiming to stem a 3 per cent slide since mid-August that reflects a widening rate discount to US, China’s economic weakness and recent PBOC easing measures (Bloomberg). Meanwhile, yen’s slide towards 140 per dollar has stirred more speculation about verbal intervention (Bloomberg). Strategists say the Ministry of Finance, BOJ and Financial Services Agency could hold another meeting if the yen reaches a fresh 24-year low, similar to what happened in June when officials pledged to act if necessary. However, actual intervention considered unlikely given scepticism such an action will make a meaningful difference given BOJ is sticking with its easing bias.
Japan jobless rate remains steady
Unemployment rate was unchanged at 2.6 per cent in July, matching expectations. Total unemployed fell sequentially for the first time in three months, offset by a decline in labour force. Total employment edged lower, driven mainly by regular labour. Job offers to applicants ratio was 1.29, compared to consensus and prior month’s 1.27. Remains the highest level since April 2020 (1.31). Offers grew for the fifth straight month and helped by a decline in applications. Attention remains on wage growth as a key factor the BOJ has repeatedly cited as necessary for sustaining inflation. While anecdotal evidence has pointed to upward pressure on wages, macro data have yet to show a meaningful acceleration. Elevated CPI inflation also erodes real incomes. Recent Reuters survey found a strong majority of economists do not see nominal wage growth catching up to inflation over the coming year.
South Korea 2023 budget to see slowest growth in spending in six years
South Korea government proposed a KRW639T ($473.5B) budget for 2023, 5.2 per cent increase from the 2022 budget and the slowest increase in spending in six years. Represents 6 per cent decline in spending from full spending this year once two extra rounds of extra spending included, first time final spending smaller than previous year since 2010 (Yonhap). Fulfils promise of new Yoon Suk-yeol government to firm up public finances post expansionary years of predecessor, aims to cap yearly growth of fiscal spending to average 4.6 per cent for next four years. Budget includes KRW5.5T set aside to fight inflation with subsidies for low-income families. Reduced expenditure will result in fiscal deficit shrinking to KRW58.2T (2.6 per cent of GDP) from KRW110.8T in 2022 (5.1 per cent). Separately, BOK chief Rhee said there was no change in banks’ stance following US Fed Chair’s statement last week that US economy will need tight monetary policy for “some time” (Reuters)
US businesses more worried about China Covid than bilateral tensions
Reuters cited an annual survey from US-China Business Council showing strict COVID-19 control measures in China have overtaken sour US-China relations as the top concern of US companies in the country. More than half of its firms reported the issue as a reason to cancel or delay investments. Most of the companies surveyed said negative effects of Beijing’s COVID measures were reversible, but 44 per cent said it would “take years to restore business confidence.” In the past year, 24 per cent of companies have moved parts of their supply chains out of China, compared to 14 per cent in the 2021 survey. Optimism in five-year business outlook for China has dropped from 88 per cent in 2013 to 51 per cent in 2022. Still, the report noted companies overwhelmingly remain profitable in China with 63 per cent of respondents saying profitability increased in the last year.
US-China audit deal met with caution
Discussion articles since the US-China audit deal was announced reverted to caution after initially positive headline effects. Pundits highlighted the lack of details in the agreement with already some inconsistencies when comparing statements from the two sides (FT). As China works out how it wants to strike the balance of maintaining US listings and safeguarding political and national security, they may be more involved in the process than what the PCAOB envisaged, and there will still be a high chance of Chinese firms delisting from US markets. Reuters noted questions remain over China’s level of compliance, leaving the deal open to potential clashes. Reuters also discussed the backdrop of broader concerns about China’s economic slowdown, sharply rising US interest rates, and strained US-China relations as factors discouraging investors from returning to the market.
Company news
Cobre (ASX:CBE) continues to kick goals, announcing that its fifth step out drill hole of the ongoing diamond drill program at the Ngami Copper Project in the Kalahari Copper Belt, Botswana, has returned another significant copper intersection. Cobre Executive Chairman and Managing Director, Martin Holland, said: “We’re delighted with the results from the latest drill hole at NCP. Given the significant copper results and strong exploration potential of the project, the Company has mobilised a second drill rig to site with plans underway to deploy additional rigs to the project by year end in order to unlock this exciting copper discovery at Ngami.” Shares closed 8.85 per cent lower at 51.5 cents.
Immutep (ASX:IMM), a biotechnology company developing novel LAG-3 related immunotherapy treatments for cancer and autoimmune disease, has announced the grant of a new Japanese patent. Immutep CEO, Marc Voigt, noted: “We are pleased to see continued progress in building our global patent estate around efti. This Japanese patent, along with the equivalent patents granted in other key global markets, underpin the investments we have made to develop this unique candidate and give Immutep important strategic options.” Shares closed 1.8 per cent higher at 28.5 cents.
AD1 Holdings (ASX:AD1), a technology company with a growing portfolio of market-leading software businesses, has entered into a share sale agreement for the acquisition of Scout Talent Group for a total consideration of $65m. Scout is the market leader in talent acquisition software. AD1 CEO Brendan Kavenagh commented “AD1’s strategy has been focused on delivering new and attractive SaaS verticals, specifically in the global online HR talent acquisition and staff development markets.” Shares closed 47 per cent higher at 2.5 cents.
Woodside (ASX:WDS) today reported a five-fold increase in net profit to US$1.64 billion ($2.4 billion) for the half year powered by a war-fuelled doubling of oil and gas prices that added US$2.5 billion to its revenue. Woodside chief executive Meg O’Neill said the result came from higher prices and better operational performance. Shareholders will also receive US$2.07 billion via a fully franked dividend of US$1.09 a share made up of 76c from an allocation of 80 per cent of the net profit after tax and 33c from cash payments from BHP after the sale of its assets was completed. Shares closed 1.47 per cent higher at $35.87.
Commodities and the dollar
Gold is trading at US$1736.88 an ounce.
Iron ore futures are pointing to a fall of 3.2 per cent.
One Australian dollar is buying 68.98 US cents.
