by Lauren Hayes
The ASX is trading higher this morning despite the Dow Jones index entering a bear market overnight, and the British pound having fallen to a record low against the greenback as investors worry about the UK’s plan to cut taxes. The US dollar reversing lower against most currencies in Asian trade Tuesday was also helping the Asian markets.
At noon, the S&P/ASX 200 is 0.26 per cent or 16.80 points higher at 6486.20.
The SPI futures are pointing to a rise of 33 points.
Best and worst performers
The best-performing sector is Materials, up 2.10 per cent. The worst-performing sector is Real Estate Investment Trusts, down 1.90 per cent.
The best-performing stock in the S&P/ASX 200 is Brainchip (ASX:BRN), trading 5.72 per cent higher at $0.88. It is followed by shares in Sayona Mining (ASX:SYA) and Megaport (ASX:MP1).
The worst-performing stock in the S&P/ASX 200 is Core Lithium (ASX:CXO), trading 4.37 per cent lower at $1.21. It is followed by shares in Virgin Money UK (ASX:VUK) and Telix Pharmaceuticals (ASX:TLX).
Asian markets
Shares in the Asia-Pacific are higher on Tuesday after sharp falls on Monday.
The Nikkei 225 in Japan has risen 0.65 per cent, and the Topix index has gained 0.66 per cent.
South Korea’s Kospi is marginally up, and the Kosdaq has gained 0.64 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan is about flat. China will be reporting its industrial profits data later Tuesday.
Dollar’s relentless rally increases risk of a pullback
Dollar reversed lower against most currencies in Asian trade Tuesday. Nothing specific cited for the pullback, which follows a relentless run higher that took the dollar index to its highest since May 2002. Some think dollar trade has become too one-sided, increasing risk of a sharp pullback. Morgan Stanley strategists noted net options positioning shows dollar long positions the most stretched ever while fund managers have named “long dollar” the most crowded trade for three straight months according to BofA (Reuters). There has also been growing push back by foreign governments against strong dollar with Japan, South Korea, China, and India all engaging in some form of intervention over recent weeks. Still, strategists argue the longer-term outlook for the dollar will remain bullish until inflation pressures begin to ease or Fed engages in a policy pivot.
Japan likely spent record $21B on FX intervention last week
Nikkei discussed last week’s FX intervention as latest BOJ current account data implied the operation likely amounted to somewhere in the region of JPY2.9T and JPY3.6T, which would trounce the prior record JPY2.62T on 10 April 1998. Noted data remains incomplete given two-day lag in settlements appearing on BOJ accounts, while Friday was a public holiday. Japan’s FX reserves total $1.29T, of which $136.1B in deposits that can be used immediately for intervention. The story reiterated the wide belief that underlying BOJ-Fed policy gap dynamic is still keeping pressure on the yen. While BOJ Governor Kuroda and other commentators saw the operation as effective, many in the market question its sustainability while BOJ easing remains in place. FT editorial published a similar article, also noting the action is unlikely to prompt protests from G7 partners.
Investors turning to cash amid market turmoil
Bloomberg discussed money managers’ growing preference for cash as a haven while other assets falter against Fed-induced volatility. Cited EPFR Global data which showed cash inflows of $30B in the week through 21 September. Another key factor is that cash returns are increasing to respectable levels after having been virtually zero. Also linked to investors coming to terms with an extended Fed tightening cycle. Recounted financial system liquidity in excess with record amounts in Fed overnight reverse repo facility, $18T in US commercial bank deposits. Recalled Fed sees higher usage of RRP facility on a widening rate gap between the Fed and bank deposits. Article discussed upshot of sizable funds poised to return to risk assets after markets finish adjusting to the Fed’s tightening trajectory.
Japan tourism prepares for long-awaited revival
Kyodo tourism minister Tesuo Saito said Monday that a new domestic tourism subsidy program will run from 11 October to late December. The “National Travel Discount” will provide the equivalent of up to ¥11,000 ($77) in discounts and coupons per traveller per day, which can be used for meals, shopping and accommodation expenses. The National Travel Discount program, which is available only to Japan residents, comes in the wake of the “Go To Travel” subsidy program and expands on similar existing programs operating at the prefectural level. This follows plans to remove the current 50K cap on daily overseas arrivals as well as restoring its visa waiver for tourists. Nikkei discussed preparations among businesses for an expected spike in tourist numbers. However, inflows from China, accounting for 30 per cent of arrivals, are apt to remain subdued by its COVID-zero policy.
Company news
Magnis Energy Technologies (ASX:MNS) has completed an update to the 2016 Bankable Feasibility Study (BFS) for its Nachu graphite project in Tanzania and confirms that the Project continues to demonstrate strong financial and technical viability. Commenting on the completion of the BFS update, Magnis Energy Technologies CEO, David Taylor, stated: “The update to the BFS demonstrates that the Nachu Graphite Project represents one of the best graphite production opportunities in today’s market. The project will produce a high quality, sustainable product that requires minimal purification, placing Magnis in a strong competitive position relative to others in the market. Our high purity graphite concentrate will provide lithium-ion battery manufacturers and other industrial customers with an attractive and competitive alternative to current sources in the global graphite market.” Shares are trading flat at 39 cents.
Emerging lithium producer Sayona Mining (ASX:SYA) is advancing the restart of production at its North American Lithium (NAL) operation, awarding a four-year, approximately C$200 million contract to Québec company Fournier & Fils for mining operations. Under the agreement, Fournier will be responsible for the supervision of all stripping and drilling, blasting, loading and transportation of ore and waste rock, the maintenance of mining roads, and all other services related to operations. Sayona Québec CEO, Guy Laliberté, said the agreement marked another important step in the restart of operations at NAL. “We are very happy to have found a partner of the calibre of Fournier & Fils for our mining operations at the North American Lithium site in La Corne,” Mr Laliberté said. “We are thrilled that this commercial agreement is not only a win-win solution for both parties, but that it also allows us to work with a local company. This partnership with Fournier therefore helps fulfil our promise to ensure that the success of our projects deliver genuine benefits to the local community.” Shares are trading 5.5 per cent higher at 23 cents.
Australian clean energy company Pure Hydrogen Corporation (ASX:PH2) has advised that hydrogen fuel cell EV manufacturer H2X Global has confirmed the initial production release of its Warrego All Wheel Drive Pick-Up. The pickup is now undergoing final validation and verification testing procedures in the Netherlands as it heads towards formal certification in Europe and global markets. Australian certification testing will be commenced soon. H2X Global CEO and founder, Brendan Norman, said the completion of the first Warrego pickup was a milestone of success for the company. “It is extremely satisfying that our team now have the Warrego running through the final stages of its engineering, safety and on road verification program,” Mr Norman said. “It is true that we have had some frustrating delays over the past nine months due to supply chain complications.” Shares are trading 4.3 per cent higher at 25 cents.
Ragusa Minerals (ASX:RAS) today advised progress towards commencement of the maiden drilling program at the NT Lithium Project, with completion of site preparation earthworks, including access track and drill pad clearing. Ragusa Chairperson, Jerko Zuvela said, “The Company is very excited as we prepare to commence our maiden drilling program at our strategic and highly prospective NT Lithium Project. This puts Ragusa in a strong position to rapidly accelerate the development of our project within a proven high-quality lithium district. We have a significant opportunity to utilise our exploration and development experience to rapidly progress our NT Lithium Project and realise the massive upside value potential in a Tier 1 jurisdiction close to major infrastructure at a time of record lithium prices.” Shares are trading 26.6 per cent higher at 41 cents.
Copper producer Austral Resources (ASX:AR1) has announced assay results from the diamond drilling hole program, part of the in-progress Lady Colleen drilling program that includes Reverse Circulation drilling. CEO Dan Jauncey said, “These further outstanding results are aligned with our exploration strategy at Lady Colleen, which is to explore for a high-grade core within the large Mineral Resource to exploit through open pit mining. Results continue to confirm and define the continuity and extent of a high-grade core at Lady Colleen.” Shares are trading 4.6 per cent lower at 21 cents.
Critical metals exploration and development company MetalsGrove Mining (ASX: MGA) today announced that a pre-drilling detailed surface mapping program has been completed at the company’s Upper Coondina Lithium Project located 85 km south-west of Marble Bar in the East Pilbara district of WA. Commenting on the confirmation of Upper Coondina’s lithium potential, MetalsGrove’s Managing Director Sean Sivasamy said: “We are delighted with the initial outcomes from our detailed surface mapping program at Upper Coondina which has confirmed several outcropping pegmatite dykes. Given this project has never been systematically explored for lithium, we continue to be highly encouraged by these early works.” Shares are trading 47.6 per cent higher at 16 cents.
Commodities and the dollar
Gold is trading at US$1631.33 an ounce.
Iron ore is 3.6 per cent lower at US$96.05 a tonne.
Iron ore futures are pointing to a rise of 0.56 per cent.
One Australian dollar is buying 64.85 US cents.
