by Peter Milios
At noon, S&P/ASX 200 is 0.61 per cent or 41.90 points lower at 6775.60, following a tumultuous day in the US markets, as the Fed signals further moves to crush inflation and traders await payroll data.
While markets were comforted by softer economic data, Minneapolis Fed President Neel Kashkari said the US central bank is “quite a ways away” from being able to pause its aggressive interest-rate hikes.
The SPI futures are pointing to a fall of 49 points.
Best and worst performers
The best-performing sector is Energy, up 0.85 per cent. The worst-performing sector is Real Estate Investment Trusts, down 1.75 per cent.
The best-performing stock in the S&P/ASX 200 is Karoon Energy (ASX:KAR), trading 9.66 per cent higher at $2.27. It is followed by shares in Viva Energy Group (ASX:VEA)and Whitehaven Coal (ASX:WHC).
The worst-performing stock in the S&P/ASX 200 is Iluka Resources (ASX:ILU), trading 4.67 per cent lower at $9.50. It is followed by shares in Megaport (ASX:MP1) and Homeco (ASX:HMC).
Asian Markets
Shares in the Asia-Pacific have fallen in early trading Friday ahead of the monthly US jobs report, which is likely to guide the Federal Reserve’s monetary decision in November.
Payrolls are expected to increase 275,000 in September, and unemployment is predicted to be steady at 3.7 per cent, according to economists surveyed by Dow Jones.
The Nikkei 225 is currently down 1.0 per cent and the Topix index has slipped 1.29 per cent. South Korea’s Kospi is so far down 0.8 per cent and the Kosdaq has dropped 0.93 per cent.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.41 per cent this morning. Markets in mainland China remain closed for a holiday.
Latest Fedspeak continues to emphasise raise-and-hold mantra
Fed Governor Waller said more needs to be done on rates and Fed should not pause on tightening until inflation moderates (Reuters). Also downplayed speculation financial stability concerns could prompt a Fed pivot. Lisa Cook (voter), in her first remarks as Fed governor, stuck largely to the mainline narrative, observing that inflation has been stubbornly persistent and policy should remain tight until there is confidence inflation is returning to the 2 per cent goal. Minneapolis’s Kashkari (nonvoter) said the Fed is “quite a ways away” from pausing hikes and the bar should be high for shifting stances (Bloomberg). Said he is not seeing evidence yet that wage and service prices are moving in the right direction. Chicago’s Evans (nonvoter) said there needs to be a more restrictive policy setting in the face of high inflation and that he sees rates heading to 4.50-4.75 per cent by spring 2023 (Reuters).
Sectors mostly lower, with defensives lagging while energy outperforms (again)
Market saw negative breadth again today, though the market has still not pulled that far off its big Monday-Tuesday run. FANMAGs were mixed. Utilities and REITs were the big sector laggards against the higher-yield backdrop (10Y back above 3.80 per cent). Banks, credit cards were mostly down again as well. Food (CAG-US ), beverages (STZ-US ), HPCs, tobacco all weighed on consumer staples. Biotech and pharma were among the weaker spots in healthcare. Media, telecom, multis, restaurants, containerboard, asset managers, restaurants, rails all underperformed. Not a lot of groups to the upside. Fertilisers doing well. Precious-metals miners were largely up despite flat trading in gold. Select trucking and A&D stocks were better in industries. Apparel- and housing-focused retailers held up better, though department stores and off-priced names were largely down. Homebuilders, auto parts, internet and some other outperformers. Energy led the market again, with oil continuing its recent run higher.
Yesterday’s announced OPEC+ production cut could spark US policy responses
A lot of press discussion around the fallout from OPEC+’s vote yesterday to cut its output targets by 2M bpd to help support prices. WTI crude rallied ~10 per cent in the past few days in expectation, reviving concerns about inflationary pressures. Multiple analysts raised their price targets, while also raising questions about whether prices would be sustainable in an economic slowdown (Bloomberg, Reuters). White House condemned the decision and said it would explore ways to reduce OPEC’s control over energy prices. Steps could range from a ban on US fuel exports to help maintain US supplies (industry groups have voiced opposition) to advocacy for “NOPEC” antitrust regulation (CNBC). Underneath those discussions are political concerns higher gas prices may be a liability to Democrats in the midterm elections (Politico). There was also reporting the Biden administration could propose loosening sanctions on Venezuela to encourage output, but this has been denied (Bloomberg).
Company news
Cannabis stocks were the highlight overnight as President Joe Biden pardoned all prior federal offences of simple marijuana possession. This has flowed through to medicinal cannabis stocks this morning on the ASX with strong performance from the likes of Creso Pharma (ASX:CPH), ECS Botanics (ASX:ECS), Little Green Pharma (ASX:LGP) and Cann Group (ASX:CAN).
Tamboran Resources (ASX:TBN) have announced that their 100 per cent owned and operated Maverick 1V well in the Beetaloo Basin has safely reached its Total Depth of 3050 metres in 18.3 days. The well represents a significant 54 per cent reduction in drilling times compared to other near field wells drilled deeper than 2.5km. The early results exhibited strong gas shows consistent with nearby wells and were in line with expectations — further testing will be done to get detailed information on flow rates. Importantly, the Maverick well shows that Tamboran Resources is bringing significant technological expertise in shale drilling to Australia which, in turn, could drive early than expected lower cost gas production from the Beetaloo Basin. Shares are trading 2.1 per cent lower at 24 cents.
Kula Gold (ASX:KGD) reported this morning its lithium exploration is progressing ahead of expectations at its 100 per cent owned Brunswick Project in the South West of WA. It is making good progress on field mapping and sampling of the numerous pegmatite occurrences. The exploration on ground is showing extensive prospective areas and as a result the scheduled program is being extended to ensure that as many areas as possible are systematically mapped and sampled. With the recent capital raising completed, Kula is now well funded to expedite the lithium exploration programs. Shares are trading 14.3 per cent higher at 4 cents.
Commodities and the dollar
Gold is trading at US$1712.47 an ounce.
One Australian dollar is buying 64.15 US cents.
