by Peter Milios
Overnight Chris Zaccarelli, Chief Investing Officer at the Independent Advisor Alliance, stated, “Today is another one of those days where you’re really seeing growth outperform value, and you’re seeing a return to optimism in terms of what might happen for the stock market this year.”
However, at noon, the S&P/ASX 200 is 0.32 per cent or 23 points lower at 7,128.40.
This is due to the fact that the Federal Reserve dismantled any hope that Friday’s jobs report could lead it to reduce its rate-tightening cycle.
In Health Care, the likes of large caps CSL (ASX:CSL), Telix Pharmaceuticals (ASX:TLX) and Imugene (ASX:IMU) down 1.23 per cent, 4.22 per cent and 4.41 per cent respectively.
The SPI futures are pointing to a fall of 18 points.
Best and worst performers
The best-performing sector is Financials, up 0.01 per cent. The worst-performing sector is Industrials, down 0.95 per cent.
The best-performing large cap is James Hardie Industries (ASX:JHX), trading 1.91 per cent higher at $28.88. It is followed by shares in Domino’s Pizza Enterprises (ASX:DMP) and South32 (ASX:S32).
The worst-performing large cap is Insurance Australia Group (ASX:IAG), trading 3.38 per cent lower at $4.58. It is followed by shares in QBE Insurance Group (ASX:QBE) and Suncorp Group (ASX:SUN).
Asian markets
Asia-Pacific markets traded higher as Hong Kong and mainland China resumed quarantine-free travel over the weekend, signalling the end of zero-Covid policy which kept borders effectively closed for nearly three years.
South Korea’s Kospi rose 2.63 per cent to end its session at 2,350.19, leading gains in the region and the Kosdaq gained 1.78 per cent to 701.21.
Hong Kong’s Hang Seng index gained 1.77 per cent in its final hour of trade on the first day of trade following the reopening. Technology stocks led gains alongside travel and consumer names.
On the mainland, the Shanghai Composite rose 0.58 per cent to 3,176.08 and the Shenzhen Component rose 0.62 per cent to 11,450.15.
Tech, autos, airlines among the day’s outperformers
Growth was outperforming value early in the session but the factors largely equalized by the afternoon. FANMAG complex was largely higher while large-cap software, profitless tech, and cloud, internet names had a good session. Semis outperformed with Wells Fargo saying the industry may bottom in H123. Autos were higher but EVs were the real standouts, particularly TSLA-US after positive press comments and updates around longer China wait times. Airlines, casual diners, asset managers, chemicals, oil services were among the other outperformers. Retail/apparel was mixed after a raft of updates this morning. M-US , LULU-US weaker though select teen retailers (particularly ANF-US) fared better. To the downside, A&D extended Friday’s weakness amid fears about potential cuts to US defence spending. Large-cap pharma (PFE-US) and biotech (REGN-US) were mostly weaker while hospitals also gave back some Friday strength. Regional banks and insurers were also weaker amid strength across the front end of the yield curve.
Latest NY Fed consumer survey shows nearer-term inflation expectations continue to decline
NY Fed’s December Survey of Consumer Expectations shows median year-ahead inflation expectations dropped to 5.0 per cent from 5.2 per cent in November’s report, hitting their lowest level since July 2021. However, three-year inflation expectations were unchanged m/m at 3.0 per cent, and five-year-ahead expectations increased by 0.1 per cent from November’s report to 2.4 per cent. Respondents also ratcheted up median expectations for year-ahead home-price growth (to 1.3 per cent from 1.0 per cent in the prior report) while expecting lower year-ahead inflation for gas, food, and rent. The survey reflects some increased rise in unease about the possibility of respondents losing their jobs in the next 12 months (hitting the highest reading since November 2021) at the same time the mean perceived probability of finding a new job decreased to 57.5 per cent from 58.2 per cent in November. There was also a sharp drop in median household spending growth expectations, to 5.9 per cent over the next year from 6.9 per cent in November.
Latest Fedspeak continues to highlight higher-for-longer narrative
Speaking to WSJ, San Francisco Fed President Daly (non-voter) said a case can still be made for either a 50 bp or 25 bp hike in February as she hasn’t seen the CPI data yet, and a peak fed funds rate above 5 per cent is absolutely likely. Also cautioned it is too soon to declare victory and stop rate hikes. Daly flagged services inflation driven by labour market imbalance, though said no evidence of a wage-price spiral. Atlanta Fed’s Bostic (non-voter) also flagged persistent services inflation, though also played down wage-price spiral risk, saying he’s not yet seeing wages driving final good prices. Comments kick off a busy week of Fedspeak, including Chair Powell tomorrow (9 ET). Economists continue to note upside policy risk given recent string of hotter economic data (simultaneously raising fears of a policy mistake), though markets continue to price in multiple rate cuts in 2023 on view an economic slowdown will force Fed to start to loosen policy.
Company news
Turaco Gold’s (ASX:TCG) RC drilling program has delivered excellent results, confirming good continuity, with high-grade plunging shoots. In response, Managing Director, Justin Tremain commented: “We look forward to receiving and reporting results from the reconnaissance, which, if positive, would show substantial growth potential at Satama.” Shares are trading 25.9 per cent higher at 7.3 cents at noon.
Calidus Resources (ASX:CAI) is pleased to declare commercial production at their gold project. The processing plant is now operating at nameplate capacity. Calidus Managing Director Dave Reeves said: “We are very pleased to have achieved commercial production and positive cash flow from the operations for the month. We are now focussing on fine tuning operations to increase throughput rates and production and we look forward to releasing guidance later this month.” Shares are trading 8.96 per cent higher at 36.5 cents at noon.
Leaf Resources (ASX:LER) has received a signed non-binding Letter of Intent from Formosa Plastics Group for offtake of 300,000 tonnes per annum of premium wood pellets. Construction of the initial pine chemicals plant to be located at Rotorua, New Zealand is expected to commence in Q1 2023 and targeted to be operational by Q4 2023. Shares are trading 22.7 per cent higher at 2.7 cents at noon.
Clean lithium developer Lake Resources (ASX:LKE) and its direct lithium extraction technology partner, Lilac Solutions, are pleased to announce the on-time achievement of key milestones for Project Kachi. Project Kachi is a world-class lithium development project that is poised to lead the industry in the production of high-quality lithium with a minimal environmental footprint. Lake CEO and Managing Director David Dickson said the achievement of these milestones demonstrated the significant promise of Project Kachi. “Lilac has proven to be an exceptional partner to work with in our joint pursuit of the efficient and cleaner delivery of high-quality lithium, which is in increasingly high demand by battery makers.”
Commodities and the dollar
Gold is trading at US$1782.70 an ounce.
Iron ore is 0.9 per cent lower at US$118.70 a tonne.
Iron ore futures are pointing to a 0.1 per cent fall.
One Australian dollar is buying 0.6922 US dollars.
