ASX tumbles as energy and mining stocks lead losses

Market Reports

by Paul Sanger

Australian shares have started the day lower, taking cues from Wall Street as traders assess fresh US economic data in volatile trading.

At noon, the S&P/ASX 200 is 1.33 per cent or 90.60 points lower at 6735.90.

The SPI futures are pointing to a fall of 102 points.

Best and worst performers

All sectors are in the red. The sector with the fewest losses is Health Care, down 0.24 per cent. The worst-performing sector is Energy, down 2.46 per cent.

The best-performing stock in the S&P/ASX 200 is Virgin Money UK (ASX:VUK), trading 4.29 per cent higher at $2.56. It is followed by shares in Lake Resources (ASX:LKE) and Novonix (ASX:NVX).

The worst-performing stock in the S&P/ASX 200 is Chalice Mining (ASX:CHN), trading 8.70 per cent lower at $3.99. It is followed by shares in Insignia Financial (ASX:IFL) and Viva Energy Group (ASX:VEA).

Asian markets

Markets in Asia-Pacific also traded lower on Wednesday as investors anticipate the Federal Reserve to give its summary on current economic conditions, also known as the Beige Book.
The Nikkei 225 in Japan traded 1.2 per cent lower and the Topix was also 1 per cent lower. In mainland China, the Shanghai Composite was 0.44 per cent lower and the Shenzhen Component fell 0.5 per cent lower. The Hang Seng index was 1.38 per cent lower and the Hand Seng Tech Index was down 1.79 per cent. In South Korea, the Kospi traded 1.44 per cent lower.

US bond yields surged overnight, with the 10-year U.S. Treasury yield jumping to its highest level since June. The rate on the 30-year Treasury closed at its highest level since 2014. Bond yields move inversely to prices.

Japan stimulus plan will likely add to existing schemes

Nikkei reported Japan could distribute JPY50K ($350) cash handouts to low-income households as early as fall under a new relief package for those hurt the most by surging food and energy prices. Cash assistance would apply to households that can't afford to pay local income taxes. Significantly more than 10M are expected to qualify for the payments, which would be funded by the government's budget reserves for FY22. Compared to JPY100K checks handed out in FY21 in a prior package in response to pandemic impacts. The government will continue to subsidise oil distributors in October and beyond to curb the rise in gasoline prices. It will consider funding the extension through December out of its budget reserves. To slow the increase in food prices, the government will also maintain its current pricing for imported wheat sold to flour-milling companies.

Yen extends selloff on higher US yields

Yen is now well in the 143 range vs dollar, renewing 24-year lows, amid continuation of dollar strength and a notable rise in US long yields. Fed-BOJ policy gap remains the primary dynamic though rate hikes among other central banks further exposing Japan as the outlier, promoting speculative yen selling (Kyodo). Selloff began late in the Asia session Tuesday, in reaction to perceptions that Finance Minister Suzuki's toned down verbal intervention (Reuters). Reiterated that sharp yen moves were "undesirable" and that he was watching rising volatility in the exchange market with a "great sense of urgency." Follows Friday's comments that Tokyo will take "appropriate" action as needed after the yen hit preceding 24-year lows last week. Some analysts said the fact that Suzuki did not use the word "concerned" suggested intervention in the currency market may not be imminent.

US Markets

US stocks slumped on Tuesday in a volatile trading session as investors weighed what strong economic data and rising rates mean for the Federal Reserve’s aggressive tightening campaign.

The Dow Jones Industrial Average fell 0.55 per cent, but was off the lows of the day, boosted by defensive stocks such as Johnson & Johnson and Coca-Cola. The S&P 500 slipped 0.41 per cent. The Nasdaq Composite slid 0.74 per cent notching its seventh day of losses, its longest since 2016.

At the same time, bond yields surged, adding to the rout in stocks. The yield on the US 10-year Treasury jumped to 3.353 per cent at one point in the day.

The move came after August ISM data Tuesday morning was stronger than expected, coming in at 56.9 versus expectations of 55.5. The ISM monthly survey is considered to be a key indicator of the state of the US economy. Better-than-expected economic data may mean that the central bank continues to act aggressively in hiking interest rates.

In the holiday-shortened week, investors are looking ahead to speeches from Federal Reserve presidents and a fresh rate hike decision from the European Central Bank due out later this week.

Across the sectors, defensive sectors performed well with real estate the standout. Weaker industries included software, Chinese internet, media and entertainment, homebuilders, housing retail, travel and leisure underperformed.

A brief summer rally in the prices of industrial metals has sharply reversed as the worsening energy crisis in Europe and signs of a slowdown in manufacturing behemoth China spook traders. The S&P GSCI index of industrial metals has dropped more than 9 per cent since mid-August

The gauge, which tracks the spot price of metals including copper, nickel and aluminium, is down 17 per cent in 2022. Goldman Sachs said commodities were pricing a recession more than any other asset class writing “Excessive recession fears continue to grip commodity markets

The fear of recession is being felt across the globe, Britain is the most likely to enter into recession, and has the highest inflation rate among that group, according to Deutsche Bank. A difficult job for new Britian Prime Minister Liz Truss . Her country is seeing a flight of foreign investment with a deteriorating financial outlook pushing the pound to 1980s-era lows.

Company News

Antisense Therapeutics Limited (ASX:ANP) today announced that it intends to conduct a double-blind, placebo controlled six month dosing trial of ATL1102 followed by a six month open label phase in non-ambulant boys with Duchenne’s Muscular Dystrophy (DMD). Dr Charmaine Gittleson, the Chair of ANP said: “The Board, management and the Company’s clinical advisors remain focused on bringing ATL1102 to the non-ambulant DMD population. We believe that the study provides a valuable and significant de-risking step toward achieving this outcome. We believe this represents significant value to the DMD community and our shareholders.” Shares are trading 10 per cent higher at 11 cents.

Euro Manganese Inc. (ASX:EMN) today confirmed that two shipments, comprising 12 containers and including all modules of the Demonstration Plant, have now arrived at the Chvaletice Project site in the Czech Republic. The Demonstration Plant is expected to operate for up to three years and will be available for testing of potential additional feedstock for the commercial Chvaletice plant, as well as testing production of potential alternative manganese end products requested by the market Shares are trading 6.7 per cent higher at 32 cents.

Lake Resources NL (ASX:LKE) (Lake) today announced the appointment of Mr David Dickson to the role of CEO and Managing Director. Mr Dickson is an industry leader with over 30 years’ experience in process technology, engineering, construction, and EPC cost management, across the energy sector and has a proven track record in successfully delivering multibillion dollar resource projects. Lake Executive Chairman Mr Stuart Crow said“This is a major achievement to have secured a CEO like David as Lake goes from project development to construction to become a major lithium producer “ Shares are trading 2.1 per cent higher at $1.23.

Commodities and the dollar

Gold is trading at US$1696.38 an ounce.
Iron ore is 0.7 per cent lower at US$97.30 a tonne.
Iron ore futures are pointing to a fall of 1.5 per cent.
One Australian dollar is buying 67.09 US cents.

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