In an uneventful session, after opening stronger the market drifted sideways and remained in a narrow range. Profit-taking was seen as the overriding theme after the passage of Fed risk events provided an opportunity for position adjustments. Technicals also provided another reason to sell into strength. Still, sentiment was underpinned by the latest US market gains.
At the closing bell, the S&P/ASX 200 was 0.58 per cent or 41.10 points higher at 7105.40.
The Dow Jones futures are pointing to a fall of 2 points.
The S&P 500 futures are pointing to a fall of 3.75 points.
The Nasdaq futures are pointing to a fall of 14.25 points.
The SPI futures are pointing to a rise of 37 points when the market next opens.
Macro Summary: Australia/New ZealandCentral banksRBA closely monitoring household spending as policy is normalised: The August RBA minutes noted members agreed it was appropriate to continue normalising monetary policy, but that policy is not on a pre-set path. It was emphasised that a key source of uncertainty relates to competing forces affecting spending. Members noted incomes are being supported by a tight labour market and large financial buffers, but higher inflation and interest rates are weighing on household budgets. They added that wage and price-setting behaviour presented a material risk to the inflation outlook, but repeated that inflation is expected to peak later in 2022.
Australia-ChinaChina reportedly moving to ban Australian meat exports: The
AFR highlighted confusion around reports of a potential China suspension of Australian agricultural exports. The article reported other sites in China later said that only Australian beef had been suspended due to foot-and-mouth. Several Australian exporters were reportedly wary of the reports, although there did not appear to be any confirmation out of China.
EconomyAustralian household spending rose, but growth expected to slow: CBA's Household Spending Intentions Index rose 1.05 per cent m/m to 114.8 in July. However, the gains were narrowly based, with entertainment, transport, retail and utilities driving the increase, reflecting the impact of higher prices. There was a moderation in spending growth in rate-sensitive sectors, with CBA anticipating consumer spending to slow further in coming months.
PropertyAustralian rental listings fallen to record low: The
Financial Review cited data from SQM Research, which showed residential rental listings fell by 4.5 per cent over the past four weeks to a new record low. Listings in Sydney fell by 5.7 per cent to a more than five-year low and Melbourne listings dropped 3.6 per cent to a three-year low. SQM noted supply was falling as more landlords choose to list their properties in the short-term leasing market. At the same time, international students and returning workers were fuelling a rise in demand.
MiningMiners alarmed by legislation that could give power to bureaucrats: The Australian highlighted industry concerns about secret legislation drafted by the Queensland Environment Department that would give a bureaucrat in the department the power to wind back retrospectively existing environmental approvals, licences and permits. This could force miners and farmers to cut back on production capacity. However, a department spokesman later indicated the department had changed its mind about pursuing retrospective powers.
RBNZ expected to hike by 50 bpThe RBNZ is expected to raise the official cash rate (OCR) by 50 bp to 3 per cent at the 17 August policy meeting (Bloomberg, Reuters). The meeting occurs against a backdrop of still-elevated inflation and a tight labour market, but also a weakening New Zealand economic outlook that has stirred debate over whether the RBNZ intends to slow the pace of tightening. The New Zealand yield has fully inverted, and some analysts predict the RBNZ will pivot to an easing stance in 12 months. Attention will be drawn to the updated OCR track amid thoughts the peak rate forecast will be lowered from a current 4 per cent by mid-2023. The two-year swap rate has fallen to 3.93 per cent after topping out at 4.54 per cent in June, corresponding with a pullback in New Zealand inflation expectations. Growth momentum has also slowed, with house prices registering first y/y decline since 2011, electronic cards spending contracting and business confidence at very depressed levels.
Best and worst performersThe best-performing sector was Materials, up 1.66 per cent. The worst-performing sector was Real Estate Investment Trusts, down 1.24 per cent.
The best-performing stock in the S&P/ASX 200 was Life360
(ASX:360), closing 5.45 per cent higher at $5.80. It was followed by shares in PointsBet Holdings
(ASX:PBH) and Event Hospitality
(ASX:EVT).
The worst-performing stock in the S&P/ASX 200 was Challenger
(ASX:CGF), closing 10.11 per cent lower at $6.40. It was followed by shares in Lake Resources
(ASX:LKE) and Core Lithium
(ASX:CXO).
Asian marketsAsia-Pacific shares are mixed ahead of economic data from Japan and India. Mainland China markets have thrived. The Shanghai Composite has gained 0.37 per cent and the Shenzhen Component is up 0.491 per cent. Hong Kong’s Hang Seng index is also up 0.07 per cent. Japan’s Nikkei 225, however, has fallen 0.13 per cent while the Topix index has dipped 0.19 per cent. The Kospi has traded better, rising 0.3 per cent.
China regulators look to guarantee bond issuance by property developersReuters cited sources with knowledge of the matter who noted state-owned China Bond Insurance Co has been instructed to provide guarantees for onshore bond issuance by developers such as Longfor Group (960.HK) and CIFI Holdings (884.HK). Sources noted that the guarantee provides more protection than credit risk management tools. Financial information provider REDD earlier reported policymakers were considering asking state investors to acquire notes issued by developers. Issuers would have to provide collateral but would retain flexibility on how to use the proceeds. This marks the latest intervention by Chinese regulators to support property developers amid weakening real estate investment, falling sales and construction starts, tight liquidity and widening defaults. Separate reports have noted Beijing was seeking to mobilise up to CNY1T in bailout funds for property developers to complete unfinished projects following mortgage repayment boycotts.
Yuan falls to three-month low with PBOC offering few signs of supportThe offshore yuan fell past 6.8 per dollar for the first time since May Tuesday after the PBOC set its mid-point 0.5 per cent lower from Monday's point. The offshore yuan was 16 pips weaker against the US dollar in lunchtime trade as the US Dollar Index remained flat against major currencies. The onshore yuan was 22 pips higher, taking the offshore discount to onshore to the widest point since May, often seen by economists as a sign of growing pessimism on currency.
Chinese consumer caution weighs on outlook for household spendingChina's economic slowdown continues to have a dampening effect on consumer spending. Bloomberg noted cautious consumers accumulated CNY10.3T in deposits over H1 2022, up 13 per cent y/y and the largest increase on record. In comparison, debt grew around 8 per cent, the slowest pace since 2007. Falling house prices, rising unemployment, and Covid lockdown uncertainty are fuelling consumer pessimism, with retail sales contracting almost 1 per cent in H1 as incomes grew just 1.9 per cent vs the 10.7 per cent growth recorded in H1 2021. Beijing's clampdown on debt is a contributing factor to weaker spending, with household debt-to-GDP ratio stagnant at 60 per cent after more than doubling in the decade prior to the pandemic. The scope for large-scale monetary easing to stimulate consumption is limited amid policy constraints from high inflation and the risk of capital outflows, leaving China facing a slow growth economic environment.
China reduces US Treasury holdings for seventh monthReuters reported China's holdings of US Treasuries fell to $967.8B in June from $980.8B in the prior month. This marks the seventh straight drop and the lowest level since May 2010. ING attributed the trend to Chinese FX intervention to keep the USD and CNY stable in a strong dollar environment and believes this will continue after Russia's invasion of Ukraine and the seizure of Russian FX reserves. The article also noted the data precedes a flare-up in US-China tensions over Taiwan, though did not specify thoughts on potential implications for China's FX reserves. In contrast, Japan increased its holdings of Treasuries to $1.236T in June, from a revised $1.224T in May. Total foreign holdings rose to $7.430T in June from a revised $7.426T in May as Treasuries saw net inflows for a second straight month and were generally in line with a decline in benchmark 10-year yields at the time.
Company newsKingston Resources
(ASX:KSN) has reported that assays from the first round of diamond drilling at the SOZ underground have delivered outstanding high-grade base metal and gold results. Drilling transitioned to SOZ following completion of the drill program at Pearse North. The eight-hole program at SOZ has been designed to test and extend the spatial location and tenor of mineralisation, and the geological interpretation within the upper portions of SOZ. Shares in KSN closed up 4.6 per cent at 9.1 cents.
Latin Resources
(ASX:LRS) has provided an update on resource definition drilling and other studies currently ongoing at the company’s 100 per cent owned high-grade Colina Prospect. The exploration team reports a new lithium spodumene discovery, with the recently completed hole approximately 500m west of the Colina Prospect. The drilling has discovered an intersection of a new swarm of spodumene-bearing pegmatites, including one of 18.75m in thickness. This discovery at Colina West has significant scale implications for the Salinas Lithium Project, if drilling confirms the presence of additional parallel mineralised pegmatite systems in close vicinity to the main Colina Prospect. Shares in LRS closed up 8.7 per cent at 12.5 cents.
Junior miner Cobre
(ASX:CBE) today announced the fourth 1km step out hole of the ongoing diamond drill program at the Ngami Copper Project in the Kalahari Copper Belt, Botswana, has returned another significant copper intersection. Cobre Executive Chairman and Managing Director Martin Holland, said: “We’re delighted with the results from the latest drill hole at NCP, which have significantly extended the known footprint of mineralisation over more than 4km. Importantly, all the results so far indicate that the target remains open-ended to the northeast and is larger than previously anticipated." Shares in CBE closed up 66.67 per cent at 25 cents.
BHP Group
(ASX:BHP) will pay record full-year dividends after reporting the second-biggest profit in the company’s history in the year to June 30. The company told the ASX on Tuesday that shareholders will receive a total of US$16.3 billion ($23.2 billion) of dividends for the year to June. The company reported a 26 per cent rise in underlying profit from continuing operations to US$21.3 billion. Even though the final of US$1.75 a share was down from the record US$2 a share a year ago, the total for the year of US$3.25 a share was a record and it, and the underlying profit was better than the market had been forecasting. The interim in February was a record US$1.50 a share. Underlying profit from continuing operations for the year was up from US$16.99 billion a year earlier, topping forecasts around US$20.8 billion. “These strong results were due to safe and reliable operations, project delivery and capital discipline, which allowed us to capture the value of strong commodity prices,” BHP CEO Mike Henry said. “BHP remains the lowest-cost iron ore producer globally, and we delivered record annual sales from Western Australia." Shares in BHP closed up 4.09 per cent at $40.51.
Home furnishing e-commerce company Temple & Webster Group
(ASX:TPW) has topped its margin guidance for FY2022, but profits fell due to reinvestment in technology, its new website aimed at the DIY market, and higher logistics costs. Shares in TPW closed up 29.77 per cent at $5.71.
Gascoyne Resources
(ASX:GCY) today announced the discovery of a substantial new high-grade lode system on the immediate western flank of the company's new Gilbey’s North prospect, located less than 1km from the 2.5Mtpa processing plant at its 100 per cent-owned Dalgaranga Gold Project in Western Australia. Together with other recently reported results from this newly discovered east-west oriented mineralised position, the standout intercepts reported in this announcement confirm the consistent width and continuity of the high-grade “Never Never” lode, part of the exciting Gilbey’s North near-mine discovery. Shares in GCY closed up 25.93 per cent at 34 cents.
Commodities and the dollarGold is trading at US$1781.81 an ounce.
Iron ore is 4.1 per cent lower at US$104.40 a tonne.
Iron ore futures are pointing to a fall of 0.2 per cent.
Light crude is trading $0.66 lower at US$88.19 a barrel.
One Australian dollar is buying 70.29 US cents.
