by Paul Sanger
Australian shares have dropped in morning trade, ahead of a US Federal Reserve meeting which is likely to result in another large interest rate hike.
At noon, the S&P/ASX 200 is 1.38 per cent or 93.90 points lower at 6712.50.
The SPI futures are pointing to a fall of 104 points.
Best and worst performers
All sectors are in the red. The sector with the fewest losses is Energy, down 0.51 per cent. The worst-performing sector is Materials, down 2.36 per cent.
The best-performing stock in the S&P/ASX 200 is Viva Energy Group (ASX:VEA), trading 4.94 per cent higher at $2.76. It is followed by shares in Washington H Soul Pattinson (ASX:SOL) and New Hope Corporation (ASX:NHC).
The worst-performing stock in the S&P/ASX 200 is Imugene (ASX:IMU), trading 7.61 per cent lower at $0.21. It is followed by shares in Sayona Mining (ASX:SYA) and Evolution Mining (ASX:EVN).
Asian markets
Shares in the Asia-Pacific opened lower Wednesday, following Wall Street’s negative lead ahead of the Federal Reserve’s expected rate hike.
The Nikkei 225 in Japan has dropped 1 per cent in early trade, while the Topix index has fallen 0.94 per cent.
South Korea’s Kospi has declined 0.35 per cent.
MCSI’s broadest index of Asia-Pacific shares outside Japan has shed 0.17 per cent.
RBA says bond buying program was successful in lowering rates, but resulted in a sizable cost
RBA’s review of its bond purchase program (BPP) concluded it lowered longer term yields by ~30 bp and, together with other policy measures, was successful in achieving the objective of reducing borrowing rates. However, RBA also noted that BPP resulted in a sizable direct financial cost given the ensuing surge in interest rates. Said future deployment of the program would occur only in “extreme circumstances” when the cash rate target has been employed to the fullest extent possible. In absence of a yield targeting policy RBA noted future use of a BPP could include purchases of both short- and long-term bonds, though highlighted risk of impaired market functioning given lack of new issuance at shorter maturities. Also noted costs of the program would need to be carefully assessed at the outset.
Japan residential land prices rise for first time in 31 years
Kyodo cited an official annual report showing average residential land prices rose 0.1 per cent y/y as of July, marking the first increase in 31 years. Overall land prices climbed 0.5 per cent, rebounding for the first time in three years. Noted nascent recovery in the wake of a downtrend since the bubble era was disrupted by the pandemic, cited as the overwhelming drag in 2021. Residential segment gains were narrowly based geographically, with 14 out of 27 prefectures contributing positively as regional markets remained soft, though up from seven last year. Commercial segment saw similar improvements in breadth as a pickup in private consumption led to increased demand for stores, while demand for apartments and offices was also firm. Some tourist spots and shopping districts were boosted by eased pandemic restrictions.
BOJ meeting commences, spotlight to remain on yen
Bloomberg survey showed economists unanimously expect the BOJ to maintain current policy settings as the MPM begins today. Focus will be on any changes to guidance as board members are widely expected to end the remaining part of its Covid funding program. Even if the language is tweaked, most BOJ watchers don’t expect a shift in the long-held easing bias of keeping rates at the current level or lower. FX the big theme as a function of policy divergence relative to other central banks. Decisions from Fed and SNB expected to further widen US-Japan rate differentials, and leave BOJ as the lone central bank maintaining a negative short-term rate policy. Kuroda has pushed back against speculations over an early tightening by citing a lack of momentum for sustainable inflation. He argued after the July meeting that the magnitude of rate hikes necessary to stop the yen’s slide would also end up breaking the economy.
Company news
Global semiconductor developer BluGlass (ASX:BLG) today advised that its Silicon Valley production fab now has several operational manufacturing processes for GaN laser diode development and is contributing to the company’s technical roadmaps. GaN wafers shipped from BluGlass Silverwater facility have commenced front- and back-end processing steps in the Silicon Valley fab, complementing and accelerating the company’s contract manufacturing development. Executive Chair James Walker commented: “This will enable us to speed development and iteration testing of core components of our laser diode products, while reducing our reliance on third party contract manufacturers. Faster development turns are essential for BluGlass to meet our reliability targets ahead of launching beta products to market.” Shares are trading 10.3 per cent higher at 3 cents.
Alchemy Resources (ASX:ALY) has received assay results for its infill soil sampling at the 100 per cent owned Karonie Project in Western Australia. Chief Executive Officer Mr James Wilson commented: “This latest round of results continues to validate our exploration strategy at Karonie. It demonstrates the excellent potential for further success in lithium focussed exploration. The soil anomalies remain open in all directions so there’s excellent upside to grow the scale of this target.” Shares are trading 4.8 per cent higher at 2 cents.
Avenira (ASX:AEV) has signed a non-binding MOU with world leading LFP battery manufacturer Advanced Lithium Electrochemistry (Aleees) and the Northern Territory Government to investigate and work towards the development of a lithium iron phosphate battery cathode manufacturing plant in Darwin leveraging the company’s flagship Wonarah Phosphate Project. It is expected that the MOU will open the door for Avenira to learn about LFP battery cathode manufacturing technology and leverage the experience to optimise the production of phosphoric acid and develop downstream assets to produce Australia’s first LFP pre cursor cathode material. Shares are trading 40 per cent higher at 1 cent.
Viva Energy Group (ASX:VEA) today announced plans to create a leading integrated fuel and convenience business through agreement to acquire Coles Express’s retailing capability and infrastructure, which will result in an early conclusion of fuel and convenience Alliance Agreement with Coles Group. This transaction will create the largest single-branded Australian fuel and convenience network under a single retail operator, with 710 sites nationally, providing the platform for Viva Energy to accelerate plans to further grow its retail network and the fuel and convenience business. By bringing together the two businesses now, rather than at the natural end of the Alliance in 2029, Viva Energy can more efficiently optimise the network and is in a better position to make the investments necessary to keep evolving the convenience offer at a point where sales are recovering and consumers are increasingly seeking greater convenience offers. Viva Energy CEO and Managing Director, Scott Wyatt, said: “We have enjoyed a strong partnership with Coles over the last 20 years and this is an exciting next step for our business and our relationship. The acquisition means we will be able to accelerate our plans to grow the integrated fuel and convenience business while our customers continue to enjoy the excellent customer service provided by the dedicated Express team, the extensive product range in-store and the loyalty programs we know they love.” Shares are trading 4.94 per cent higher at $2.76.
Commodities and the dollar
Gold is trading at US$1664.67 an ounce.
Iron ore is 1.1 per cent lower at US$96.65 a tonne.
Iron ore futures are pointing to a fall of 3.0 per cent.
One Australian dollar is buying 66.86 US cents.
