by Paul Sanger
Around $60 billion has been wiped off the value of Australian shares after US inflation rose faster than expected in August, prompting fears of more aggressive interest rate rises by the US central bank.
At 2pm, the S&P/ASX 200 is 2.45 per cent or 171.40 points lower at 6838.30.
The SPI futures are pointing to a fall of 180 points.
Best and worst performers
All sectors are in the red. The sector with the fewest losses is Health Care, down 1.62 per cent. The worst-performing sector is Real Estate Investment Trusts, down 3.84 per cent.
The best-performing stock in the S&P/ASX 200 is Computershare (ASX:CPU), trading 0.45 per cent higher at $24.55. It is followed by shares in Ramsay Health Care (ASX:RHC) and Whitehaven Coal (ASX:WHC).
The worst-performing stock in the S&P/ASX 200 is Lake Resources (ASX:LKE), trading 15.35 per cent lower at $1.07. It is followed by shares in Megaport (ASX:MP1)and Clinuvel Pharmaceuticals (ASX:CUV).
Asian markets
Shares in the Asia-Pacific have dropped sharply on Wednesday after indexes on Wall Street plunged following a higher-than-expected US consumer price index report for August.
Japan’s Nikkei 225 has dropped 2.46 per cent, and the Topix index has fallen 1.81 per cent. The Japanese yen is trading at 144.38 per dollar, hovering around its weakest levels since September 1998.
The Hang Seng index in Hong Kong has dipped 2.55 per cent, and the Hang Seng Tech index has fallen 2.96 per cent. The Kospi in South Korea has lost 1.65 per cent and the Kosdaq has declined 1.9 per cent. The South Korean won has passed the 1,390-mark against the greenback and was last trading at 1,391.98 against the dollar, around the weakest levels since March 2009.
Mainland China’s Shanghai Composite has lost 1.02 per cent and the Shenzhen Component has fallen 1.496 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan has fallen 2.28 per cent.
Analysts downgrade Asia earnings forecasts
Reuters cited Refinitiv data showing Asia large and mid-cap forward 12-month earnings estimates revised down 2.8 per cent from last month and 5 per cent over the past three months. South Korea and Taiwan led downgrades over the past month, followed by Japan and China. Weakness concentrated in manufacturing, particularly in Taiwan. Cited a Goldman Sachs report warning Taiwan may see further downward revisions with manufacturing PMI in contraction and semiconductor sales declines, and South Korea susceptible to biggest downgrades given its sensitivity to global growth. Analysts expect the slowing Chinese economy would further weaken the region’s earnings in the coming months. Bright spots came in slight upgrades to Vietnam and Indonesia.
US considers China sanctions to support Taiwan
Reuters sources said the US is considering options for a sanctions package against China to deter it from invading Taiwan, with the EU coming under diplomatic pressure from Taipei to do the same. US discussions began after Russia invaded Ukraine in February, but took on fresh urgency after the Chinese reaction to Pelosi’s visit. Noted discussions were at an early stage and there were no details but some analysts suggested China’s military could be the focus. FT discussed a US Senate foreign relations committee vote Wednesday on the Taiwan Policy Act (TPA) that would finance weapons exports to Taiwan for the first time and dramatically reshape relations with Taipei. TPA would boost weapons and security assistance and compel US to impose sanctions on big Chinese financial firms in response to any “escalating hostile actions in or against Taiwan”.
Mainland China sees steady fall in new Covid cases, Hong Kong surge may have peaked
NHC reported China saw 958 new Covid cases Tuesday, a handful more than Monday but below 1K for the third consecutive day. New case count has been steadily falling from around 3.4K mid-August. Beijing officials found 18 new infections, all of which were already in quarantine. Sichuan, Guizhou and Tibet continue to be provinces with most new cases, an outbreak in Chengdu falling with new cases below 50 for the past three days although authorities eased only minor restrictions. SCMP reported Hong Kong health experts divided on whether the latest surge has plateaued with some seeing decline in reproductive rate and new case numbers indicating peak while others say too early to tell given reduced social distancing and lower number of administered tests. SCMP also noted the city will tighten vaccine pass rules given to travellers but will also stop moving Covid-positive travellers to quarantine camps.
Japan machinery orders unexpectedly strong
Core machinery orders rose 5.3 per cent m/m in July, countering expectations of a 0.8 per cent decline and adds to 0.9 per cent increase in the previous month. Main driver was non manufacturing sector, which was mixed overall though skewed by triple digit surge in logistics and real estate. Manufacturing demand fell with most sub-sectors negative led by chemicals and ship building. Topically, Reuters cited Shinkin Central Bank Research Institute noting recent yen weakness would take about two years to affect investment decisions. Recall the outlook for capital spending is seen generally positive on numerous fronts — cyclical recovery, post pandemic pent-up demand, ageing capital stock — and supported by survey evidence, though actual momentum hasn’t been strong enough to provide much economic growth impetus. Yesterday’s MOF survey found large firms are prioritising investment in software and tools.
BOJ boosts JGB purchases again
Newswires cited a BOJ announcement that it would increase outright JGB purchases to JPY550B ($3.8B) in the 5~10y zone, up from JPY500B scheduled previously. Adds to a similar operation last week. Central bank also conducted another fixed-rate purchase operation targeting current issues and cheapest to deliver. Benchmark 10y yield reached BOJ’s 0.25 per cent upper limit for the first time since July (intraday basis) following US Treasury reaction to stronger than expected CPI data. However, JGB activity remains light with no trades in 10y as of 11:00 am local time. Actions remain consistent with BOJ rhetoric, which has repeatedly reinforced commitment to low rates while Japan’s economic recovery remains gradual, and rejected the notion of tightening to address FX volatility.
Hotter-than-expected US CPI sees Treasury yield gap over Japan and China widen further
Yen back towards 24-year low, prompting another warning from Japan’s top FX official Masato Kanda, who reiterated that the government will respond appropriately and is not ruling out any options (Bloomberg). However, barrage of verbal intervention by Japan officials over the past week has failed to meaningfully stem depreciation pressures, underscoring the extent to which Fed dynamics are influencing yen. Separately, offshore yuan retreated to a one-week low, leading PBOC to set Wednesday’s daily midpoint with the strongest bias on record. May also bolster expectations PBOC will leave the MLF rate unchanged Thursday following last month’s surprise cut. Emerging Asia currencies noticeably weaker as the dollar’s surge plays into capital outflow dynamic, exacerbating downside pressures from weakening external demand (Bloomberg).
Company news
Altech Chemicals (ASX:ATC) today announced that it has executed a Joint Venture Shareholders’ Agreement with world-leading German battery institute Fraunhofer IKTS to commercialise IKTS’ revolutionary CERENERGY Sodium Alumina Solid State Battery. Altech, inclusive of associated entity Altech Advanced Materials AG, will be the majority owner at 75 per cent of the JV company, which will commercialise a 100 MWh project to be constructed on Altech’s land in Germany. Shares are trading 33.75 per cent higher at 10.7 cents.
IVE Group (ASX:IGL) today announced that it has completed the acquisition of substantially all of the printing and finishing assets of Ovato for a net purchase consideration of $16m. The net purchase consideration was funded from existing facilities. Integration and associated capital expenditure costs of approximately $22m are expected to be incurred progressively over an 18-month integration period. Commenting on acquisition, IVE CEO Matt Aitken said: “IVE has a strong track record of successfully integrating businesses and optimising operating leverage to deliver synergies. When fully integrated, the Ovato acquisition is expected to generate meaningful shareholder value, and today results in IVE becoming the only large scale heat set web offset print producer in Australia.” Shares are trading 8.8 per cent higher at $2.48.
Global semiconductor developer BluGlass (ASX:BLG) has joined the University of California, Santa Barbara’s Solid-State Lighting & Energy Electronics Centre (SSLEEC) consortium. The SSLEEC is an invitation-only collaboration between industry leaders and the University of California, Santa Barbara’s gallium nitride researchers, including blue-LED inventor and Nobel Laureate, Professor Shuji Nakamura, and industry luminary Professor Steven DenBaars. The consortium focuses on the development of new semiconductor technologies for energy-efficient lighting, disinfection, advanced mobile displays, augmented and virtual reality, communication, and power electronics. It is one of the most successful business models between universities and industry partners in the sector, producing more than 150 patents over the past six years. Consortium membership provides BluGlass with access to UCSB’s world-class faculty, facilities, and specialist GaN researchers, which will be invaluable in accelerating product development roadmaps for its novel blue and green laser diodes. Professor Shuji Nakamura said: “We are thrilled to be working with BluGlass, the world leader in RPCVD technology. I believe that RPCVD technology has huge advantages for the next generation of GaN advanced semiconductor devices.” Shares are trading flat at 3 cents.
Commodities and the dollar
Gold is trading at US$1699.48 an ounce.
Iron ore is 2.3 per cent higher at US$104.25 a tonne.
Iron ore futures are pointing to a fall of 1.0 per cent.
One Australian dollar is buying 67.26 US cents.
