by Peter Milios
The ASX 200 headed directly downward from the open, after overnight news that CPI data came in higher than expected. At noon, the S&P/ASX 200 is 0.91 per cent lower at 7,363.60.
Sectors are mixed, with Financials the biggest laggard by far, down more than 3 per cent. Consumer Discretionary is up, with large-cap Wesfarmers (ASX:WES) up 2.3 per cent.
The SPI futures are pointing to a fall of 59 points.
Best and worst performers
The best-performing sector is Consumer Discretionary, up 1.0 per cent. The worst-performing sector is Financials, down 3.1 per cent.
The best-performing large cap is Cochlear (ASX:COH), trading 6.3 per cent higher at $222.24. It is followed by shares in James Hardie Industries (ASX:JHX) and Seven Group Holdings (ASX:SVW).
The worst-performing large cap is Treasury Wine Estates (ASX:TWE), trading 5.79 per cent lower at $13.50. It is followed by shares in Commonwealth Bank of Australia (ASX:CBA) and Bendigo and Adelaide Bank (ASX:BEN).
Asian news
Asia Pacific markets traded mixed on Wednesday after the release of US inflation data that came in hotter than expected.
The Nikkei 225 opened the day 0.36 per cent higher, while the Topix gained 0.28 per cent in its first hour of trading.
This comes after Japan announced its nomination of Kazuo Ueda for the next Bank of Japan governor on Tuesday. He will succeed current central bank chief Governor Haruhiko Kuroda.
In South Korea, the Kospi climbed marginally, while the Kosdaq gained 0.56 per cent as investors await the release of the country’s unemployment data for January.
January headline CPI in line
January headline CPI up 0.6 pp to 0.5 per cent from December’s downwardly revised -0.1 per cent print (was 0.1 per cent), in line with 0.5 per cent consensus. Annualised CPI down 0.1pp to 6.4 per cent, hotter than consensus 6.2 per cent. Core CPI (ex food and energy) up 0.1pp at 0.4 per cent m/m from December’s downwardly revised print (was 0.4 per cent), in line with consensus. Annualised core of 5.6 per cent down 0.1pp from prior 5.7 per cent, though slightly above consensus 5.5 per cent. Early analysts read the report better than feared despite some downward surprises in areas like medical care and airfare. Housing inflation continues to add upward pressure, accounting for nearly half of the monthly increase, though Fed officials have played down housing impact given lag of data. Used cars also showed 1.9 per cent contraction though previews flagged upside risk. Markets volatile after the print, though the policy-sensitive 2Y Treasury little changed, suggesting investor expectations for minimal changes to the Fed rate path. However, some noted Fed insistence on data dependence and not relying on a single data point, particularly with payrolls and another CPI report before next month’s FOMC meeting.
Moving pieces post CPI
Still a lot of moving pieces following a largely in-line January CPI print that fits with the dampened momentum behind the disinflation narrative. However, previews had flagged potential for an even hotter print, Powell has talked about how the broader disinflation process will be choppy and peak and year-end rate expectations had already seen a meaningful reset, up 40 and 60 bp, respectively, since early February lows. Despite the hawkish reset in rate expectations, the equity market has been fairly resilient in terms of sustaining early 2023 strength. This has led to more pushback from the bearish sell-side strategist camp, where there has also been scepticism about the sustainability of a positioning tailwind and continued concerns that earnings estimates for 2023 and 2024 are too high. However, positive macro surprise momentum (Citi US Economic Surprise Index back in positive territory and highest since late October 2022 while Goldman US MAP index of economic surprises has jumped to +1.6, levels not seen since late 2021) has driven a pickup in “no landing” expectations, which also fits with some of the more sanguine earnings outlooks. Citi recently discussed how the earnings reset may further along than realised.
Company news
Petratherm (ASX:PTR) announced exceptional rare earth drill results from the Meteor Prospect, in South Australia. Commenting on these results, Petratherm’s CEO Mr Peter Reid said: “The Meteor Prospect results are highly encouraging. The mineralisation starts at just a few metres below surface in the soft weathering profile allowing the potential for low-cost free dig mining.” Shares are trading 11.4 per cent higher at 7.8 cents at noon.
Legacy Minerals (ASX:LGM) announced a significant new discovery at their project in NSW. In response, CEO & Managing Director, Christopher Byrne said “The Bauloora Project has the potential to be a very large gold-silver epithermal system and presents a great opportunity to deliver shareholder value through discovery.” Shares are trading 21.9 per cent higher at 19.5 cents.
Castillo Copper (ASX:CCZ) has announced impressive diamond core TREO assay results across the central part of the BHA Project’s East Zone. In response, Castillo Copper’s MD Dr Dennis Jensen commented: “The Board is delighted with the latest results, as it increases confidence in the underlying REE system. The Board looks forward to receiving the remaining assays and charting the next phase of the exploration campaign.” Shares are trading 6.7 per cent higher at 1.6 cents at noon.
White Cliff Minerals (ASX:WCN) announced the highest grade REE results to date at their Rare Earths Project. Commenting on the results, White Cliff Technical Director Ed Mead said: “The assay results build on our understanding of [the project], and the sampling in December did not have the benefit of results and targets generated from the recent high resolution magnetic and radiometric survey.” Shares are trading 9.1 per cent higher at 1.2 cents at noon.
Commodities and the dollar
Gold is trading at US$1782.70 an ounce.
Iron ore is 1.6 per cent higher at US$123.75 a tonne.
Iron ore futures are pointing to a 1.7 per cent rise.
One Australian dollar is buying 69.77 US cents.
