Australian shares have dropped to their lowest level in two months, ahead of a US Federal Reserve meeting which is likely to result in another large interest rate hike.
It is worth noting that, according to Dow Jones Market Data, the previous four times the Fed raised interest rates in 2022 — March 16, May 4, June 15 and July 27 — the S&P 500 SPX rallied 2.2 per cent, 3 per cent, 1.5 per cent and 2.6 per cent, respectively.
At the closing bell, the S&P/ASX 200 was 1.56 per cent or 106.20 points lower at 6700.20.
FuturesThe Dow Jones futures are pointing to a rise of 33 points.
The S&P 500 futures are pointing to a rise of 3 points.
The Nasdaq futures are pointing to a rise of 7 points.
The SPI futures are pointing to a fall of 127 points when the market next opens.
Best and worst performersThe best-performing sector was Communication Services, up 0.07 per cent. The worst-performing sector was Materials, down 2.64 per cent.
The best-performing stock in the S&P/ASX 200 was Washington H Soul Pattinson
(ASX:SOL), closing 4.96 per cent higher at $27.10. It was followed by shares in Viva Energy Group
(ASX:VEA) and Whitehaven Coal
(ASX:WHC).
The worst-performing stock in the S&P/ASX 200 was Imugene
(ASX:IMU), closing 13.04 per cent lower at $0.20. It was followed by shares in Sayona Mining
(ASX:SYA) and Cooper Energy
(ASX:COE).
Asian marketsShares in the Asia-Pacific are trading, following Wall Street’s negative lead ahead of the Federal Reserve’s expected rate hike.
The Nikkei 225 in Japan has dropped 1.24 per cent, while the Topix index has fallen 1.18 per cent.
Hong Kong’s Hang Seng index has fallen 1.51 per cent, and the Hang Seng Tech index has dropped 2.48 per cent. In mainland China, the Shanghai Composite has lost 0.56 per cent and the Shenzhen Component is 1.166 per cent lower.
South Korea’s Kospi has declined 0.9 per cent. MCSI’s broadest index of Asia-Pacific shares outside Japan has shed 1.13 per cent.
PBOC says rate levels leave more room for actionBloomberg cited a PBOC statement on WeChat that China's current interest rates are "reasonable" and provide room for future policy action. Said real interest rates are "slightly lower" than the pace of potential economic growth, helping to make debt sustainable and providing the government with "extra" policy scope. Sees current levels as "the best strategy that leaves room for the future." Latest MLF/LPR rates were unchanged, which economists viewed as a pause as policy makers assess the impact of previous easing measures. But they still believe more support is necessary given ongoing Covid headwinds, property market weakness, and slowing exports. PBOC added that it will further release the benefits of the LPR reform and let the market-based adjustment of deposit rates "play an important role."
Asian Development Bank cuts 2022-23 Asia growth forecastsAsian Development Bank cut its regional growth forecasts this year and next amid rising rates and China's zero Covid strategy. Warned downside risks, including sharp deceleration in global growth, escalation in Ukraine war, and deeper-than-expected deceleration in China, all loomed large over region. Bank said the region to grow 4.3 per cent in 2022 versus 4.6 per cent forecast made in July, 5.2 per cent in April; 2023 growth 4.9 per cent versus 5.3 per cent estimate in April. Bank warned the global economic downturn would "severely undermine" demand for Asia exports with aggressive Fed hikes currently rattling financial markets already denting global demand. Forecast China to expand 3.3 per cent in 2022 from previous 4.0 per cent in July, 5.0 per cent in April; 2023 growth trimmed to 4.5 per cent from 4.8 per cent. Southeast Asia region 2022 growth at 5.1 per cent from 4.9 per cent, 2023 at 5.0 per cent growth. Regional inflation to hit 4.5 per cent, up from 3.7 per cent in April; 2023 inflation at 4.0 per cent from earlier projection of 3.1 per cent.
Company newsGlobal 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 closed flat at 2.9 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 closed flat at 2.1 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 closed 30 per cent higher at 1.3 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 closed 4.56 per cent higher at $2.75.
Commodities and the dollarGold is trading at US$1670.12 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 2.3 per cent.
Light crude is trading $0.78 higher at US$84.72 a barrel.
One Australian dollar is buying 66.72 US cents.
