by Lauren Hayes
US stocks closed the previous week lower after a University of Michigan survey showed inflation expectations were increasing. This rattled markets as equities sold off and Treasury yields rose, following the report of the latest data suggesting stickier inflation than expected. Local markets have been weighed down by negative global sentiment with the S&P/ASX 200 down 1.60 per cent or 108.10 points at 6,650.70 at noon.
The SPI futures are pointing to a fall of 122 points or 1.8 per cent.
Best and worst performers
All sectors are trading in the red. The sector with the fewest losses is Real Estate Investment Trusts, down 0.37 per cent. The worst-performing sector is Materials, down 2.88 per cent.
The best-performing stock in the S&P/ASX 200 is Liontown Resources (ASX:LTR), trading 6.12 per cent higher at $1.74. It is followed by shares in Core Lithium (ASX:CXO) and Sayona Mining (ASX:SYA).
The worst-performing stock in the S&P/ASX 200 is Adbri (ASX:ABC) off the back of their trading update released this morning, trading 19.29 per cent lower at $1.49. It is followed by shares in Costa Group Holdings (ASX:CGC) which also announced revised earnings guidance today and Pinnacle Investment (ASX:PNI).
Asian markets
Shares in the Asia-Pacific have so far fallen in early Monday trading as recession fears weigh in over expectations of a continued tightening of monetary policies around the world.
The Nikkei 225 has fallen 1.53 per cent while the Topix has lost 1.07 per cent. The US dollar continued to hover at 32-year highs against Japan’s yen, last trading at 148.55 per dollar.
South Korea’s Kospi has fallen 1.35 per cent and the Kosdaq has dropped 1.33 per cent. MSCI’s broadest index of Asia-Pacific shares is so far 0.6 per cent lower.
Later in the week, several countries in the region are slated to report inflation data and China will announce its loan prime rate decision.
Over the weekend, Chinese President Xi Jinping gave a speech at the opening ceremony of the ruling Communist Party of China’s 20th National Congress, where he warned against “interference by outside forces” in Taiwan — a self-ruled island that Beijing sees as a runaway province. He also said China “will never promise to renounce the use of force” for reunification.
Michigan consumer sentiment stronger than expected but one-year inflation expectations rise
The October preliminary Michigan Consumer Sentiment is up 1.2 points month-on-month to 59.8, ahead of consensus estimates for 59.0, which is the highest since April. However, the biggest focus was on inflation expectations, with one-year inflation expectations up 0.4 percentage points month-on-month to 5.1 per cent, which was also the first rise since March and the highest since July. Five-year inflation expectations increased by 0.2 percentage points to 2.9 per cent, returning to August levels though unchanged from levels a year ago. The current index of 65.3 is up 5.6 points month-on-month. This is the highest since April. However, the expectations index fell 1.8 points to 56.2, which was the lowest since July. Equities sold off and Treasury yields rose, following the report of the latest data, suggesting stickier inflation than expected. This also runs somewhat in contrast with the narrative around stable inflation expectations, which was seen as one of the factors playing into the peak Fed narrative.
September headline retail sales flat, though control-group sales better than expected
September retail sales were little changed month-on-month, weaker than consensus for a 0.2 per cent monthly rise and August’s upwardly revised 0.4 per cent increase (was up 0.3 per cent). Headline sales are still up 8.2 per cent year-over-year. Sales ex-autos were up 0.1 per cent, better than forecasts for a 0.1 per cent drop. Control-group sales were a bright spot, up 0.35 per cent against consensus for a 0.1 per cent rise and August’s 0.2 per cent pace. Lower gasoline prices were a drag on the headline. Sales were very mixed by grouping, with increases seen at department stores, online, food/drinking places, clothing stores, personal care retailers, and at food/beverages stores. Some month-on-month declines were seen in autos/parts, furniture, electronics/appliances, and sporting goods/hobbies. Results were broadly consistent with an increase in consumer caution amid inflationary pressures and rising slowdown concerns.
UK’s Truss reverses parts of economic plan; Kwarteng replaced by Hunt
Fast-moving developments in the UK continue to hold the US market’s attention. The FT reported today that after weeks of pressure, UK PM Truss announced a partial reversal of her economic plans including cancellation of plans to freeze the corporation tax next year, with Truss admitting that last month’s “mini budget”, which contained £45bn of unfunded tax cuts, went further and faster than expected. Developments came as finance minister Kwarteng was dismissed and replaced by Jeremy Hunt. At the same time, elements in the Conservative party are reportedly holding talks about replacing Truss with a “unity candidate”, with a joint ticket of Sunak and Mordaunt being mooted. Despite the announcement, gilts sold off with the FT article noting that investors remained concerned that the £18bn tax cut wasn’t enough to put the UK back on a sustainable fiscal path.
All sectors lower with only a few pockets of upside
All sectors finished lower on Friday’s day of trading. The growth factors underperformed value by over 125 basis points. Most investment banks were down following Morgan Stanley earnings. Grocers were lower after the announcement of Kroger and Albertsons merger. E&Ps, oilfield services were among the worst performers on oil weakness. Commodity groups outside energy also went down, this included: ag chemicals, industrial metals, and precious metals miners. FANMAG complex, semiconductors, software also gave back some of yesterday’s big gains. Only a few groups were higher in Friday trading. Moneycenter banks on well received earnings from JPMorgan, Wells Fargo, and Citi. Hospitals and MCOs outperformed with tailwind from UNH-US earnings. Airlines, hotels, cruise lines, HPCs, telecom were also among the better performers.
Company news
Dreadnought Resources (ASX:DRE) announced today that REE mineralised carbonatite intrusions have been confirmed at the C3 and C4 carbonatites. The company has intersected thick rare earth mineralisation in both C3 and C4 in both fresh and weathered material. Dreadnought’s Managing Director, Dean Tuck, commented: “The initial fence line drilling at C3 and C4 was designed to confirm the extent and complexity of the interpreted carbonatite intrusions. The results have already exceeded expectations, we are already off to a good start so the next few months should be extremely exciting.” Shares are trading 5.3 per cent higher at 1 cent.
Patrys (ASX:PAB), a therapeutic antibody development company, released this morning new preclinical data for its full-sized IgG antibody, PAT-DX3. Results from a new study support the potential to use deoxymabs to deliver small molecule therapeutics and gene editing technologies across the blood-brain barrier to treat various neurological targets and conditions. Patrys CEO and Managing Director, Dr James Campbell, said: “This is an important result that opens up a range of potential applications for Patrys and its development partners. As we advance PAT-DX1 towards the first clinical trial in cancer patients, it is very exciting for Patrys to be able to identify additional applications for PAT-DX3 that may open up new development or partnering opportunities for the Company.” Shares are trading 10.5 per cent higher at 2 cents.
Strickland Metals (ASX:STK) this morning provided an update on its flagship Millrose gold project located in WA. Andrew Bray, CEO, said: “The assay result is one of the most impressive assays returned to date from our flagship Millrose gold project. The oxide mineralisation we are seeing at Wanamaker is arguably more impressive than what has been historically intersected at Millrose, particularly if it continues opening up to the north. The results from the Wanamaker drilling will feed into an updated Mineral Resource, which the Company plans to release to the market in Q1 2023.” Shares are trading 5 per cent higher at 4 cents.
Australian Rare Earths (ASX:AR3) have signed a non-binding Memorandum of Understanding with international rare earths producer Neo Performance Materials Inc (TSX:NEO) to accelerate AR3’s Koppamurra rare earth project. AR3 Non-Executive Chairman, Professor Dudley Kingsnorth, said: “AR3 is delighted to partner with Neo, a world-leader in the rare earths industry, to accelerate the development of our world-class Koppamurra project. Koppamurra has the potential to be a significant near-term source of strategically important heavy rare earths as well as Neodymium and Praseodymium and it is pleasing to see Neo identify the significance of our project.” Shares are trading 14.5 per cent higher at 36 cents.
Melbana Energy (ASX:MAY) announced that their Zapato-1 exploration well in Cuba is being drilled. Given the light crude oil that existed in the shallow section of the project, the company believes there is a hydrocarbon zone underneath the volcanics that they are drilling through. Melbana Energy’s Executive Chairman, Andrew Purcell, commented: “We chose the Zapato structure for our second exploration well not just for its potential in its own right but because establishing the validity of this thesis unlocks the potential for similar and multiple very large plays in adjustment structures.” Shares are trading down 3.2 per cent at 6 cents.
Commodities and the dollar
Gold is trading at US$1648.89 an ounce.
Iron ore is 2.1 per cent higher at US$96.15 a tonne.
Iron ore futures are pointing to a fall of 1.5 per cent.
One Australian dollar is buying 62.27 US cents.
