by Peter Milios
The global economic outlook is shaky, as growing protests in the world’s largest manufacturing nation are creating a new level of uncertainty for the economy.
As a result, at noon, the S&P/ASX 200 is 0.07 per cent or 5.20 points lower at 7223.90.
Energy has continued its losses from yesterday, falling a further 1.18 per cent at noon. Woodside Petroleum (ASX:WDS) is down 2.11 per cent, whilst Santos (ASX:STO) has so far fallen by 0.41 per cent at noon.
The SPI futures are pointing to a fall of 6 points.
Best and worst performers
The best-performing sector is Health Care, up 0.60 per cent. The worst-performing sector is Energy, down 1.64 per cent.
The best-performing stock in the S&P/ASX 200 is Fisher & Paykel Healthcare (ASX:FPH), trading 12.34 per cent higher at $21.57. It is followed by shares in Sayona Mining (ASX:SYA) and Nine Entertainment (ASX:NEC).
The worst-performing stock in the S&P/ASX 200 is Collins Foods (ASX:CKF), trading 17.93 per cent lower at $8.24. It is followed by shares in Healius (ASX:HLS)and GrainCorp (ASX:GNC)
Asian news
Shares in the Asia-Pacific mostly slid on Tuesday after a negative start to the week, with investors watching developments in the unrest over China’s Covid restrictions. Major US indexes lost around 1.5 per cent each.
The Nikkei 225 in Japan fell 0.84 per cent and the Topix shed 0.85 per cent as retail sales data missed expectations and the nation’s unemployment rate was unchanged from September.
Weak start to the week
Stocks came under pressure to start the week with a couple of the more bullish talking points from recent weeks under scrutiny. Chinese protests were a widely cited overhang following recent tweaks to zero Covid policy and hope for an accelerated reopening. “Hawkish” Fedspeak was also flagged following some recent focus on the slower tightening pace narrative and the accompanying loosening of financial conditions. Elsewhere, 2023 previews continue to roll in with some focus on downside risks, at least early on in the year, from sticky inflation pressure and the related upside risk to the terminal rate. Strategists also continue to warn about earnings risk with the softer demand and heightened macro uncertainty messaging from corporate management teams on Q3 earnings calls. Not all bad news. Multiple firms continue to highlight potential support from depressed CTA and risk parity positioning. In addition, the next couple of weeks represents the strongest corporate buyback period of the year.
Busy day of Fedspeak includes more calls for “higher-for-longer” policy
In a MarketWatch event, St. Louis’ Bullard (voter) said markets underpricing risk Fed may be more aggressive on policy, and noted risk Fed will have to go higher on rates next year and into 2024. Comments echoed by Richmond Fed President Barkin (voter), who backed a slower pace of tightening but argued Fed will need to do more on rates if inflation stays elevated. New York Fed’s Williams (voter) said he expects inflation to slow to 5-5.5 per cent by year end and to 3-3.5 per cent next year, though said Fed will have to tighten further to slow economic activity in order to reach the 2 per cent target (speech). In an interview with FT, Cleveland’s Mester (voter) said while she thinks inflation will come down next year, the Fed is still nowhere near a pause. Not much from June speech from Fed Vice Chair Brainard released today, where she cautioned protracted supply shocks could call for monetary policy tightening and reiterated importance of avoiding inflation expectations drifting above target.
Chinese Covid protests heat up but easing still in the works
Chinese Covid protests widely blamed for the risk-off trade to start the week. However, comes on the heels of a lot of excitement surrounding some relaxation of zero Covid related control and prevention measures. In addition, while reports have discussed how protests represent most direct challenge to party authority since Tiananmen Square and state media have reiterated the commitment to zero Covid, authorities have still eased anti-virus rules in scattered areas in response to social pressure (AP, SCMP). Goldman Sachs also pointed out that its 30 per cent subjective probability of reopening before Q2 next year includes some chance of a forced and disorderly exit. China driven ramp in risk aversion also comes on the heels of some excitement surrounding a series of measures to support the beleaguered property market. The announcement of such measures was quickly followed by a flurry of credit line extensions to developers. In addition, a heightened emphasis on supporting growth was evident with last Friday’s 25 bp RRR cut.
Company news
Microba Life Sciences (ASX:MAP) announced that medical diagnostics provider Sonic Healthcare (ASX:SHL) has agreed to invest $17.8m to acquire a 19.99 per cent shareholding in Microba. In addition, Sonic is seeking to acquire options for an additional 5 per cent equity position, subject to shareholder approval. Microba’s Chief Executive Officer, Dr Luke Reid, said, “This strategic partnership with Sonic is set to accelerate international distribution of Microba’s microbiome testing into primary and specialist healthcare, and move our testing deeper into routine patient management.” Shares are trading 56.82 per cent higher at $0.345 at noon.
Laybuy Group (ASX:LBY) today released its Half Year Report for the period ended 30 September 2022. The results show that the company increased its income by 22.1 per cent year-on-year, and remains on track to achieve EBITDA profitability in March 2023 as losses declined by more than a third. In response, Managing Director Gary Rohloff says, “Our strategy to achieve profitability is delivering results with our normalised losses nearly halving when compared to the same period last year.” Shares are trading 5.66 per cent higher at $0.056 at noon.
Fisher & Paykel Healthcare (ASX:FPH) announces their results for the first half of the 2023 financial year. For the six months ended 30 September 2022, total operating revenue was $690.6 million, above the $670 million guided by the company in its August trading update. Managing Director and CEO Lewis Gradon said, “Through the first half, there are positive signs that our hospital customers are working through their excess inventory holdings, and total group sales of our hospital consumables have increased sequentially on a month-by-month basis since May.” Shares are trading 11.41 per cent higher at $21.39 at noon.
Australian sustainable rare earths company RareX (ASX: REE) has reported results from a further two diamond drill-holes completed as part of the 2022 drilling program at its 100 per cent-owned Cummins Range Rare Earths and Phosphate Project in the Kimberley region of Western Australia. The holes, CDX0023 and CDX0024, returned exceptional wide intercepts of significant rare earths and phosphate mineralisation, confirming the significant scale and potential of the mineralised system at Cummins Range. Commenting on the results, RareX Managing Director, Jeremy Robinson, said: “The wide intercepts continue to come through for Cummins Range and we expect to see a strong flow of news through until January next year now the program is complete.” Shares are trading 6.38 per cent higher at $0.05 at noon.
Immutep (ASX: IMM; NASDAQ: IMMP), a clinical-stage biotechnology company developing novel LAG-3 immunotherapy for cancer and autoimmune disease, is pleased to announce it has signed a Clinical Trial Collaboration and Supply Agreement with Merck KGaA, Darmstadt, Germany and Pfizer for a new Phase I clinical study in patients with urothelial cancer, called INSIGHT-005. “We are very pleased to be deepening our collaboration with Merck KGaA, Darmstadt, Germany and Pfizer through this new study in patients with urothelial cancer, the sixth most common cancer in the US, who are in need of treatment options,” said Immutep CEO, Marc Voigt. Shares are trading 2.86 per cent higher at $0.36 at noon.
Commodities and the dollar
Gold is trading at US$1741.76 an ounce.
Iron ore is 0.8 per cent lower at US$98.90 a tonne.
Iron ore futures are pointing to a rise of 3.18 per cent.
One Australian dollar is buying 66.53 US cents.
