by Lauren Hayes
Overnight, US inflation hit a 40-year high, solidifying a huge rise in another interest rate hike. However, surprisingly, the markets rallied to recover the losses.
In Australia, the rise in the price of oil caused the energy sector to soar. Up 3.43 per cent at noon.
Barrenjoey also upgraded their Qantas (ASX:QAN) valuation, after the company announced that they will make better than expected earnings this year. Based on forward bookings, and current fuel prices, the company expects profits to be between $1.2 billion and $1.3 billion for the first half of FY 2023.
Overall, the S&P/ASX 200 is 1.72 per cent or 114.50 points higher at 6757.10.
The SPI futures are pointing to a rise of 116 points.
Best and worst performers
The best-performing sector is Energy, up 3.43 per cent. The sector with the fewest gains is Materials, up 1.27 per cent.
The best-performing stock in the S&P/ASX 200 is Virgin Money UK (ASX:VUK), trading 10.24 per cent higher at $2.31. It is followed by shares in Domino Pizza Enterprises (ASX:DMP) and Cochlear (ASX:COH).
The worst-performing stock in the S&P/ASX 200 is Harvey Norman Holdings (ASX:HVN), trading 3.61 per cent lower at $4.00. It is followed by shares in Ramelius Resources (ASX:RMS) and Pilbara Minerals (ASX:PLS).
Asian Markets
Today, shares in the Asia-Pacific have jumped so far, taking the lead from Wall Street overnight as investors shook off a strong inflation report. The Nikkei 225 in Japan is 2.37 per cent higher in early trade, while the Topix has gained 1.74 per cent. Japan’s yen has plunged to its lowest levels against the U.S. dollar since 1990 overnight before paring losses, and still trading at 147-levels. South Korea’s Kospi has advanced to 1.74 per cent and the Kosdaq climbed 2.53 per cent. China will be reporting inflation and trade data later Friday. Singapore’s GDP grew 4.4 per cent in the third quarter and is expected to further tighten its monetary policy.
September CPI hotter than expected
Headline September CPI up 0.4 per cent month on month is hotter than consensus for 0.2 per cent and highest since June. Core CPI (ex-food and energy) of 0.6 per cent is also higher than 0.4 per cent consensus, while annualised core of 6.6 per cent is also a bit hotter than 6.5 per cent estimates. Energy prices dropped 2.1 per cent in September, a shallower decline than the August 5.0 per cent. Services continued to add upward pressure. Shelter index held at 0.7 per cent m/m (6.6 per cent y/y), with owners’ equivalent rent up 0.7 per cent m/m, highest since Jun-90, while annualised growth of 6.7 per cent is the highest on record. Medical care services up 1.0 per cent m/m, which is the largest since Feb-1984. Used cars have a bigger drag, falling by 1.1 per cent. Print steepened Fed rate path expectations, with market now pricing in near 100 per cent chance of 75 bp hike in November, while peak fed funds rate up 25 bp to 4.75-5.0 per cent by Feb-23. Elsewhere, initial jobless claims rose 9K m/m to 228K vs 225K consensus. Continuing claims of 1.368M up 3K w/w though below 1.380M consensus.
Banks kick off earnings season on Friday
Big day of bank earnings on Friday with JPMorgan, Citi, Morgan Stanley, Wells Fargo and US Bancorp all reporting. Q3 results are expected to feature meaningful NIM expansion and higher NIIon the back of the higher rate environment. Loan growth is expected to be solid but not as robust as seen in Q2. IB is a widely discussed weak spot across the board with big declines in fees and volumes. However, trading is expected to be cushioned by volatility, particularly in terms of FICC. Fee revenue expected to be hit on multiple fronts, with mortgage banking a key area of scrutiny. Buybacks are less of a tailwind with regulatory constraints. Asset quality remains elevated on the back of strong consumer and corporate balance sheets. However, previews also flagged an outsized interest in capital build commentary given the expected normalisation in credit trends and heightened macro headwinds from the tightening of financial conditions.
Market rebound drives all sectors higher
All sectors were higher in a session that saw the S&P rise by ~5 per cent after hitting a fresh YTD low not long after the opening bell. Integrateds, refiners, E&Ps, and oil services names were all higher alongside crude. Banks were broadly higher ahead of tomorrow’s start to earnings season (JP Morgan, Citi Group, Wells Fargo & Co, and Morgan Stanley among Friday’s premarket reporters). Asset managers outperform as well. BlackRock Inc. was up after its report. Insurers were better despite Progressive Corp’’s release flagging Hurricane Ian losses. Dominos was a standout in restaurants with strong comps. Airlines boosted by robust Delta Airlines guidance. Semis were higher, paring sharp WTD losses after US tech-export restriction headlines. Very few groups are on the downside.
Precious-metals miners followed gold lower.
Company News
Recharge Metals Limited (ASX:REC) announced an update on the Company’s diamond drilling activities at the Brady Hill South Project located within the Archarean Gullewa Greenstone Belt in Western Australia. Some key highlights were that both drill holes intersected zones of massive sulphides and that the first diamond drill holes west of the Salt Creek Shear show significant sulphide mineralisation. In response to the next step, Managing Director Brett Wallace stated, “we now look forward to completing three further diamond holes testing the remaining DHTEM conductor and receiving the assay results from the eight pre-collar holes.” Shares are trading 35.5 per cent higher at 21 cents.
Bulletin Resources (ASX:BNR) announced that they confirmed the Mt Farmer tenement application, which hosts the Aldoro Resources (ASX:ARN) Niobe project. Bulletin’s application has along strike potential from Aldoro’s project. The Company will update shareholders once the tenement application is granted. They remain well funded, and will commence on ground exploration works as soon as possible. Shares are trading 8.3 per cent higher at 13 cents.
Today, Ragusa Minerals Ltd (ASX:RAS) announced that it received a notification from the Northern Territory’s Mineral Titles office that the Company’s 100 per cent owned lithium project tenement had been granted. The tenement comprises 28 blocks and was granted on the 11th of october this year for a period of 6 years. In response, the chair, Jerko Zuvela stated, “This is another positive milestone that puts Ragusa in a strong position to rapidly accelerate the development of our project within a proven high-quality lithium district.” Shares are trading over 7 per cent higher at 30 cents.
Commodities and the dollar
Gold is trading at US$1663.26 an ounce.
Iron ore is 2.4 per cent lower at US$94.20 a tonne.
Iron ore futures are pointing to a fall of 1.4 per cent.
One Australian dollar is buying 63.04 US cents.
