by Lauren Hayes
The three-day rally in US equities stalled as weaker-than-expected quarterly results from some popular tech stocks put a damper on market enthusiasm. The local market shrugged off the negative lead from Wall Street overnight, with the S&P/ASX 200 up 0.71 per cent or 48.40 points at 6,859.30 at noon. All sectors are in the green except for Financials.
In tech news, shares of Meta Platforms (NASDAQ:META) are plunging 19.6 per cent in post trading as the social media giant missed quarterly earnings expectations and posted a drop in revenue. The parent of Facebook, Instagram, WhatsApp, and Messenger also predicted current quarter sales will be below forecasts. Meta reported third quarter earnings per share (EPS) of $1.64, less than analysts’ estimates of $1.89. Revenue fell 4 per cent to $27.71 billion, better than expected. It noted that ad impressions were 17 per cent higher, but the average price per ad decreased 18 per cent.
The SPI futures are pointing to a rise of 50 points or 0.74 per cent.
Best and worst performers
The best-performing sector is Materials, up 1.99 per cent. The worst-performing sector is Financials, down 1.12 per cent.
The best-performing stock in the S&P/ASX 200 is Lynas Rare Earths (ASX:LYC), trading 7.47 per cent higher at $8.49. It is followed by shares in Sandfire Resources (ASX:SFR) and Ramelius Resources (ASX:RMS).
The worst-performing stock in the S&P/ASX 200 is Bank of Queensland (ASX:BOQ), trading 5.45 per cent lower at $7.28. It is followed by shares in ANZ Banking Group (ASX:ANZ)and Iluka Resources (ASX:ILU).
Asian news
Shares in the Asia-Pacific are so far mixed Thursday in early trading as investors digest economic data in the region.
Japan’s Nikkei 225 is slightly lower while the Topix has lost 0.29 per cent. The Kospi has added 0.7 per cent, while the Kosdaq has gained 0.57 per cent.
The MSCI’s broadest index of Asia-Pacific shares outside Japan is 0.51 per cent higher.
South Korea’s third-quarter GDP grew 0.3 per cent from the previous quarter, according to official advance data — the slowest growth since the third quarter of 2021. China is due to report industrial profits for September and the Bank of Japan begins its two-day meeting on monetary policy Thursday.
In corporate news, Samsung Electronics announced its third quarter earnings after releasing estimates earlier this month.
Not all bad news
There have been disappointing big tech earnings/guidance and initial overhang, but the positioning is already low going into this week’s flurry of results. In addition, there seems to be some semblance of a cushion from the lower rate backdrop and weaker dollar. Terminal rate expectations are down to ~4.90 per cent after pushing through 5 per cent last week. The dollar index sits around three-week lows. This fits with last Friday’s batch of less hawkish Fed headlines, along with the less aggressive Bank of China 50 basis points rate increase, the UK U-turn, the pickup in speculation Treasury could buy bonds and other interventionist headlines (Japan, China, South Korea). The technical/positioning dynamics are another high-profile tailwind with CTA/systematic fund buying in focus, and retail said to be re-engaging and seasonality and looming ramp in corporate buybacks also increasingly part of the bullish narrative. In addition, the consumer resilience theme remains largely intact. Recent headlines about consumer pushback against higher prices and renter pushback against surging rents also play into peak inflation narrative.
US September new home sales beat, though mortgage rates highest since 2001
Figures have revealed that September new home sales fell 10.9 per cent month-on-month, or 74k, to 603k, though ahead of consensus for 580k. The prior month revised down 8k to 677k. The decline reversed last month’s surprise surge in new home sales, though it’s still holding above July’s cyclical low of 543k. Inventories remain elevated, rising to 9.2-months’ supply from a prior 8.1. While the report was firmer than expected, early economist reads said it continues to reflect big headwinds to the US housing market, particularly from rising interest rates. Bloomberg reported today that US mortgage rates rose above 7 per cent for the first time in two decades in the week to 21 October. The report showed that applications to purchase homes fell 2.3 per cent week-on-week to the weakest level since early 2015. This also comes after yesterday’s August S&P CoreLogic Case-Shiller index showed a 1.3 per cent month-on-month decline across 20 US cities, the second-straight decline and the most since 2009.
Fed almost certain to hike by 75 basis points in November, but some pullback of expectations into 2023
A number of recent press articles all but confirmed the Fed will hike by 75 basis points in November. However, there has been some recalibration of rate path expectations in recent days despite another week of hawkish Fed speak. Reuters said that sentiment is building within the Fed to take a breather, citing admissions by some of the more hawkish members, like St. Louis’ Bullard, that the economy needs time to catch up with the tightening already underway. Bloomberg also cited analysts who see a pullback to 50 basis points in November could give the Fed more room to hike in 2023 if inflation doesn’t come down as quickly as expected. CME’s FedWatch also shows a peak fed funds rate of 4.75-5.0 per cent by February, down by one 25 basis points hike since Thursday, when a WSJ Timiraos article said the Fed will entertain a 50 basis points hike in December. However, some economists still see upside risk to rate path including UBS, who still see a terminal rate of 5.0-5.25 per cent in 2023, citing continuous upside surprises from inflation data and a reaction function that has shifted to reflect more urgency to bring down inflation.
Company news
Weebit Nano (ASX:WBT), a developer of next-generation memory technologies for the global semiconductor industry, announced today that it has successfully completed full technology qualification of its Resistive Random-Access Memory (ReRAM) module manufactured by its R&D partner CEA-Leti. This is the first full qualification of Weebit ReRAM technology, a key step that must be completed for every semiconductor product on each new target process. Coby Hanoch, CEO of Weebit Nano, stated, “Successfully completing full qualification of our technology is a major milestone. As is customary for NVM qualification and semiconductors devices in general, tests are based on industry standards, providing confidence in the quality, repeatability and reliability of Weebit’s ReRAM.” Shares are trading 16.8 per cent higher at $2.75.
Koba Resources (ASX:KOB) has staked mining claims covering approximately 145 square kilometres at its new “Whitlock Lithium Project” in southern Manitoba. The Whitlock Project is located immediately along strike from the Tanco Mine — Canada’s only operating lithium mine. In response to the news, Koba Managing Director and CEO, Mr Ben Vallerine, said: “The addition of a lithium project to our portfolio of high-grade cobalt assets is a logical progression as we continue to focus on battery metals to support the EV revolution and the electrification of the global economy.” Shares are trading 136.4 per cent higher to 26 cents.
Horseshoe Metals (ASX:HOR) provided an update today on further encouraging results received from a recently completed review of historic Reverse Circulation and diamond drilling targeting the Main Zone within the company’s Horseshoe Lights Copper-Gold Project in WA. Commenting on these latest results, Director and CFO Kate Stoney said: “We continue to redefine the potential scale and grade of the Horseshoe Lights mineralised system with more high-grade zones of broad copper mineralisation confirmed. These latest results highlight broad zones of copper mineralisation at Main Zone which are in addition to the significant widths recently confirmed at Motters.” Shares are trading down 4.2 per cent at 2 cents.
Trek Metals (ASX:TKM) announced a following expanded field exploration program at its 100 per cent-owned Tambourah Lithium Project (E45/5839 & E45/5484) in the Pilbara region of Western Australia, Trek confirmed the presence of spodumene within an extensive pegmatite system which has never been drill tested. Trek CEO Derek Marshall said: “The Tambourah Project is an exceptional greenfields lithium exploration opportunity, located in the heart of one of the world’s premier mining districts. Despite its Tier-1 location, the Project has never had a single drill hole into it – a remarkable opportunity for Trek!” Shares are trading up 15.3 per cent at 7 cents.
Emerging lithium producer Sayona Mining (ASX:SYA; OTCQB:SYAXF) has further advanced the restart of production at its North American Lithium (NAL) operation in Québec, with construction, procurement, recruitment and other activities progressing amid growing demand for lithium. NAL’s restart is on track for Q1 2023, with permitting applications and procurement both 96 per cent complete as at the end of September. Sayona’s Managing Director, Brett Lynch comments, “Lithium demand from North America and globally continues to increase and Québec is well placed to deliver, with NAL set to become the first North American local producer next year and with further value adding planned as we move into downstream processing.” Shares are trading up 3.9 per cent to 27 cents.
The Board of Ionic Rare Earths (ASX:IXR) advised this morning that Uganda’s National Environmental Management Authority has approved the Environmental and Social Impact Assessment for the Makuutu Rare Earth Project. This paves the way for development of the mine which will unlock significant stakeholder value. IonicRE Managing Director Mr Tim Harrison stated: “This Project will set its sights on becoming Uganda’s flagship sustainable mine. Our vision is that Makuutu will provide global customers with an alternative supply of magnet and heavy rare earth elements needed for a Net-Zero Carbon world for 50 years and beyond.” Shares are trading up 7 per cent to 5 cents.
Graphite producer and battery material developer Volt Resources (ASX:VRC) announced that it has entered into a Memorandum of Understanding with 24M Technologies, Inc. to collaborate on qualifying Volt’s battery anode material and cathode conductive additive products for use in 24M’s SemiSolid manufacturing platform. Volt Managing Director Trevor Matthews says: “We are very pleased with the progress made by our battery material business – Volt Energy Materials. We have the right entrepreneurial team in place for VEM and with the recent implementation of the Inflation Reduction Act, the US is already witnessing a dramatic growth of LIB and associated component manufacturing.” Shares are trading 7.7 per cent higher at 3 cents.
Elmore (ASX:ELE) has provided an update on the development of the Peko magnetite, copper, cobalt, gold and bismuth project in the Northern Territory. Some key points from the update include: Elmore has achieved the major milestone of loading first ore from 100 per cent owned Peko operations, and the ship is currently being loaded with magnetite in the Port of Darwin and is anticipated to depart early next week. The shipment will hold around 25,000t of product, which will provide both revenue and vital learnings to enable future shipments to carry the target of 30,000t of product. Elmore’s Managing Director, Mr David Mendelawitz, comments: “Loading the first shipment of magnetite from Peko is another significant milestone for both Elmore and the Peko project. It represents the end of the first chapter of the Peko story for Elmore and the beginning of the company’s path as business focussed on cash generation.” Shares are trading 14.3 per cent higher at 2 cents.
Commodities and the dollar
Gold is trading at US$1667.10 an ounce.
Iron ore is 1.9 per cent lower at US$87.80 a tonne.
Iron ore futures are pointing to a fall of 1.0 per cent.
One Australian dollar is buying 64.88 US cents.
