ASX starts week weaker, following Wall Street's pullback on Friday

Market Reports

by Paul Sanger

At noon, the S&P/ASX 200 is 0.78 per cent or 55.40 points lower at 7059.10.

The SPI futures are pointing to a fall of 47 points.

Best and worst performers

The best-performing sector is Communication Services, up 0.03 per cent. The worst-performing sector is Consumer Discretionary, down 1.50 per cent.

The best-performing stock in the S&P/ASX 200 is EML Payments (ASX:EML), trading 10.14 per cent higher at $1.17. It is followed by shares in NIB Holdings (ASX:NHF) and Whitehaven Coal (ASX:WHC).

The worst-performing stock in the S&P/ASX 200 is Adbri (ASX:ABC), trading 18.42 per cent lower at $2.17. It is followed by shares in Magellan Financial Group (ASX:MFG) and Reliance Worldwide (ASX:RWC).

Asian markets

Shares in the Asia-Pacific region have fallen as concerns over aggressive Fed hikes reemerge.

Chinese markets have fallen after China cut its benchmark lending rates. Hong Kong’s Hang Seng index is down around 1 per cent. The Shanghai Composite is 0.25 per cent lower, and the Shenzhen Component has lost 0.324 per cent.

In Japan, the Nikkei 225 pared some losses, but is down 0.59 per cent and the Topix index has slipped 0.26 per cent.

South Korea’s Kospi has shed 0.73 per cent and the Kosdaq has lost 0.94 per cent.

MSCI’s broadest index of Asia-Pacific shares outside of Japan is 0.74 per cent lower.

Later this week, Chinese tech giants JD.comand Meituan will be reporting earnings, while Singapore will be releasing inflation data.

RBNZ Deputy Governor Hawkesby says OCR could rise to as high as 4.25%

In an interview with Bloomberg, RBNZ Deputy Governor Hawkesby said the central bank is open to raising the official cash rate (OCR) to as much as 4.25 per cent, higher than the 4.1 per cent peak rate in mid-2023 modelled in the August Monetary Policy Statement. Recall that RBNZ last week signalled a more aggressive tightening path, noting inflation pressures were stronger than it assumed in May. Hawkesby said the RBNZ is being deliberately ambiguous to reflect uncertainty around where the OCR will end. He added he wants the OCR comfortably above neutral to slow the economy and cool inflation pressures. The RBNZ noted last week it is debating whether the neutral rate is higher than its previous estimate of 2.00 per cent, and Hawkesby said members have discussed a range of 2-3 per cent. He also acknowledged the RBNZ is getting closer to a point where policy decisions are becoming more finely balanced.

Sichuan extends power cut order as drought persists

Bloomberg reported that Sichuan has extended its power cut order, activating the highest emergency response Sunday as severe heatwave and drought continued. The order curtailed power supply to some industrial users till 25 August from a previous end date of 20 August as power usage surged 25 per cent higher y/y amid high temperatures. The lack of rainfall means hydropower generation has plunged 51 per cent in the same time as reservoir water levels stand at 1.2 billion cubic metres, 4 billion below last year's levels. Toyota Motor (7203.JP) and CATL (300750.CH) have already closed factories for several days, with other companies operating at reduced output. Reuters added that 66 rivers in Chongqing region have dried up, with the region's rainfall down 60 per cent from seasonal norm. Emergency ministry data Thursday said high temperatures in July alone caused direct economic losses of CNY2.73B ($400 million), affecting 5.5 million people and 457,500 hectares of land.

China media downplays inflation risk

Xinhua cited officials and analysts with the view that China can keep inflation contained despite global pressures and volatility in food prices. NBS said recent bumper harvests have provided an abundance of domestic supply. Efforts have been made to ensure grain output in autumn. Thinktank researchers see the impact from elevated import prices on CPI inflation as limited, and expect to see easing going forward. The article discussed progress in stabilising domestic energy prices to insulate against international volatility. NDRC said there is ample energy storage and supply despite some regions experiencing relatively tight supply during peak hours due to economic recovery and continuous high temperatures. NBS noted monetary policy is not conducive for price hikes given avoidance of "flood-like stimulus". Recalled that the PBOC reaffirmed confidence in achieving its inflation target of around 3 per cent for the year, though warning that monthly readings might top that level in a few months. NBS echoed the possibility of some overshoot in monthly readings, although China has the conditions to keep prices generally stable for the whole year.

Copper shortfall a serious threat to global economy and net-zero emissions goals

The potential supply-demand gap in copper is expected to place unprecedented strain on supply chains as the energy transition intensifies. S&P mentions that unless massive new supply comes online in a timely manner, the goal of Net-Zero Emissions by 2050 will be short-circuited and remain out of reach. According to S&P, copper demand is projected to grow from 25 million tonnes today to about 50 million tonnes by 2035, and expected to further grow to 53 million tonnes by 2050. The shortfall between copper supply and demand is expected to reach as high as 9.9 million tonnes in 2035 based on a continuation of current trends in capacity utilisation of mines and recycling of recovered copper.

Company news

Anson Resources (ASX:ASN) today announced a major upgrade to its JORC mineral resource estimate for the Paradox Lithium Project in Utah, USA. The delivery of the mineral resource upgrade represents a significant achievement in the development pathway of the project, and it will now be incorporated into the project’s detailed feasibility study, which is being finalised by global engineering group Worley for release in the near future. Shares are trading 17.2 per cent higher at 17 cents.

Dreadnought Resources (ASX:DRE) has announced that infill RC drilling has continued to intersect thick, mineralised, rare earth elements within its 100 per cent owned Mangaroon Project. Dreadnought’s Managing Director, Dean Tuck, commented: “With over twelve thousand metres of drilling now complete at Yin, our understanding of the petrophysical properties has significantly improved." He further added that this understanding has led to the identification of the Yin trend extending for 16km, of which only 3km has been drill tested. Shares are trading 4.8 per cent higher at 11 cents.

Australian Pacific Coal (ASX:AQC) has received a non-binding alternative proposal to the sale of the Dartbrook Project to Nathan Tinkler and his backers, who are understood to be proposing a 30c a share takeover offer, and would also refinance debts worth about $60 million. Shares are trading 96.3 per cent higher at 27 cents.

Commodities and the dollar

Gold is trading at US$1746.91 an ounce.
Iron ore is 0.9 per cent lower at US$99.70 a tonne.
Iron ore futures are pointing to a rise of 1.98 per cent.
One Australian dollar is buying 68.85 US cents.

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