by Peter Milios
Last week’s rally for US equities ground to a halt overnight ahead of this week’s Federal Reserve decision on interest rates, as tech stocks weighed on the major indexes. At noon, the S&P/ASX 200 is 0.28 per cent or 18.90 points higher at 6882.40.
Local markets await the RBA’s rate hike decision this afternoon, with consensus expectations that the Central Bank will increase interest rates by 25 basis points. Larger than expected headline inflation accelerated 1.8 per cent in the September quarter and pushed the annual rate to 7.3 per cent — well above the RBA’s targeted 2-3 per cent.
All of the big four retail banks opened lower, led by a 2 per cent decline by NAB.
The SPI futures are pointing to a rise of 8 points.
Best and worst performers
The best-performing sector is Utilities, up 1.83 per cent. The worst-performing sector is Communication Services, down 0.42 per cent.
The best-performing stock in the S&P/ASX 200 is Nextdc (ASX:NXT), trading 7.33 per cent higher at $8.93. It is followed by shares in Imugene (ASX:IMU) and Pinnacle Investments (ASX:PNI).
The worst-performing stock in the S&P/ASX 200 is Brambles (ASX:BXB), trading 2.40 per cent lower at $11.40. It is followed by shares in Brickworks (ASX:BKW) and Domino Pizza Enterprises (ASX:DMP).
Asian news
Hong Kong’s third-quarter GDP has shrunk 4.5 per cent. The business hub’s economy contracted for the third consecutive quarter, recording its worst performance since 2020.
EU inflation
EU inflation has hit a record high. October consumer prices rose 10.7 per cent year on year as the bloc continues to face soaring food and energy costs.
Pivot narrative gets some pushback
The market was helped over the last couple of weeks by a new policy “pivot” narrative that revolves around a slowdown in the pace of tightening. It also embeds expectations for a move to the sidelines in the next few months, with more acknowledgement of the lagged effects of policy tightening and the downside risks to growth from doing too much, along with the potential for some hints of flexibility on the inflation target. However, there is some pushback on this front, including by Nick Timiraos, chief economics correspondent for the Wall Street Journal, whose article played into the new pivot narrative by noting that some Fed officials could be entertaining dialling down to a 50 basis point rate hike in December amid concerns that moving too fast could cause a sharp slowdown in the economy. However, Timiraos has flagged the upside risk for the Fed’s terminal rate from strong consumer and corporate balance sheets that have been underpinned by pandemic-fuelled savings. Over the weekend, Goldman Sachs also raised its terminal rate projection by 25 basis points to 5 per cent (Bloomberg).
Quiet Monday, but things get a lot busier
It was a quiet Monday coming off a big two-week rally though things get a lot busier as week progresses. This is another peak week of Q3 earnings season with 167 S&P companies reporting their earnings. The Fed policy decision on Wednesday is widely expected to be the highlight of the week. Fed is on track for another 75bp rate hike though the bigger issue is what kind of guidance Powell will provide for December. This week also brings policy decisions from the RBA on Tuesday and BoE on Thursday. Labour market is the key area of focus on the US economic calendar with the JOLTs report on Tuesday and official BLS employment data on Friday. In addition, Tuesday brings October ISM manufacturing, which is expected to slip to the breakeven 50.0 level from 50.9 in September. ISM services come out on Thursday and are expected to ease to a still elevated 56.5 from 56.7 in September.
Company news
Antilles Gold (ASX:AAU) reported their Quarterly Activities Report for the period ending 30 September 2022. During the quarter Antilles Gold advanced its strategy for the near-term development of a series of mid-sized mines in mineral rich Cuba to produce gold, silver, antimony, copper, and zinc concentrates. Antilles Gold is uniquely positioned to participate in these opportunities through its joint venture with a subsidiary of the government’s mining company, GeoMinera SA. Shares are trading 4.17 per cent lower at 5 cents at noon
Shree Minerals (ASX:SHH) announced that as part of its business development activity pursuing the strategy of building a portfolio of quality assets and advancing them using modern exploration techniques, mine development and process of continuous evaluation and prioritisation of its project portfolio, the company has been able to secure highly prospective tenements within the Laverton Province. This province is known to contain some 30 million ounces of gold, making it the second highest endowed gold district in Western Australia behind Kalgoorlie. Shares are trading 14.29 per cent higher at $0.008 at noon.
PropTech Group (ASX:PTG) recently announced that it has entered into a binding Scheme Implementation Deed with a wholly owned subsidiary of MRI, under which it is proposed that BidCo will acquire 100 per cent of the shares of PropTech Group by way of a Scheme of Arrangement. Under the Scheme, PTG shareholders will be entitled to receive A$0.60 cash per share, equating to an implied equity value of approximately A$93.4 million on a fully diluted basis. The Scheme Consideration represents an attractive premium of 131 per cent to the last closing price of PropTech Group shares. The Board of PropTech Group unanimously recommends that PropTech Group shareholders vote in favour of the Scheme in the absence of a Superior Proposal. Shares are trading 111.11 per cent higher at 57 cents at noon.
In other potential takeover news, ReadyTech Holdings (ASX:RDY) has addressed recent media speculation suggesting that ReadyTech may be party to discussions in relation to a potential transaction. ReadyTech confirms that it has received a conditional, non-binding indicative proposal from funds managed or advised by Pacific Equity Partners Pty Limited and its affiliates, a leading Australian private equity firm, to acquire ReadyTech by way of a Scheme of Arrangement at an offer price of $4.50 per share. Shares are trading 27.16 per cent higher at $4.12 at noon.
GME Resources (ASX:GME) has announced that it has entered into an engineering partnership with Ausenco Services Pty Ltd to deliver the process and non-process infrastructure studies for the NiWest Nickel Cobalt Project Definitive Feasibility Study. Following a competitive tendering process for the role, Ausenco has been selected and its team brings a depth of knowledge in nickel heap leach and downstream processing operations. This experience is directly applicable to the NiWest development pathway. Commenting on the engineering partnership with Ausenco, GME Managing Director and CEO, Mr Kopejtka stated, “Following the successful updated Pre-Feasibility Study, we are now rounding out an expert group of top tier consultants to capture the opportunities we believe exist to materially lower the NiWest capital costs and deliver a world-class battery-grade nickel and cobalt sulphate operation.” Shares are trading 7.59 per cent higher at 9 cents at noon
Zuleika Gold (ASX:ZAG) has provided an update to the market regarding its successful litigation against Vango Mining (ASX:VAN) and its wholly owned subsidiary, Dampier (Plutonic) Pty Ltd. Some highlights include: Zuleika’s beneficial interest of 4.1 per cent of the K2 Project has been confirmed and that Vango has been found to have breached the terms and wrongfully repudiated the Binding Terms Sheet, in which the quantum of damages against Vango will be determined at the next stage of litigation. In response, Zuleika Gold’s Managing Director, Jonathan Lea commented: “This is an excellent outcome for Zuleika. The ruling agreed with Zuleika Gold’s position on all material aspects of the litigation.” Shares are trading 5.56 per cent higher at 2 cents at noon.
Immutep (ASX:IMM) have today released their annual report. Some features from the report include that their total asset base increased by roughly $20 million from last year’s figure, with this, their liabilities increased by roughly $2 million. However, their total comprehensive loss for the year totalled to approximately $33 million, whilst their cash and cash equivalents increased to $80 million. Immutep also outlined how no significant changes occurred since the date of the annual financial statements. Shares are trading 1.72 per cent higher at 30 cents at noon.
Kazia Therapeutics (NASDAQ:KZIA; ASX:KZA) provided an update on the ongoing development of its product candidates for the quarter ending 30 September 2022. Kazia CEO, Dr James Garner, commented: “The last few months have impressively demonstrated the breadth of opportunity inherent in the paxalisib program. In particular, the interim data from the study at Memorial Sloan Kettering in combination with radiotherapy for brain metastases is extremely exciting. This is an enormous potential indication, with very high unmet need, and we look forward to working with our advisors and collaborators to prospect it more deeply. It is difficult to fully assess recent news from the GBM AGILE study, but we continue to view the study as a promising potential path to registration for paxalisib. The patients recruited in Stage 1 are likely to provide a richer data set than that used for the approval of temozolomide. The study remains ongoing, and we are entirely blinded to data, so we look forward to seeing the results of the study in 2H CY2023, at which time we anticipate discussing potential approval strategies with FDA.” Shares are trading flat at noon.
Commodities and the dollar
Gold is trading at US$1633.83 an ounce.
Iron ore is 2.9 per cent lower at US$79.50 a tonne.
Iron ore futures are pointing to a fall of 0.4 per cent.
One Australian dollar is buying 64.05 US cents.
