Broad selling pressure gripping markets once again: ASX down 0.37% at noon

The rally in local markets was short-lived as broad selling pressure gripped markets once again this morning.

At noon, the S&P/ASX 200 is 0.37 per cent or 24.50 points lower at 6530.50.

The SPI futures are pointing to a fall of 25 points.

Best and worst performers

The best-performing sector is Materials, up 1.45 per cent. The worst-performing sector is Information Technology, down 1.98 per cent.

The best-performing stock in the S&P/ASX 200 is St Barbara (ASX:SBM), trading 8.99 per cent higher at $0.76. It is followed by shares in Silver Lake Resources (ASX:SLR) and Capricorn Metals (ASX:CMM).

The worst-performing stock in the S&P/ASX 200 is Pro Medicus (ASX:PME), trading 4.93 per cent lower at $50.54. It is followed by shares in Megaport (ASX:MP1) and Carsales.Com (ASX:CAR).

Asian markets

Shares in the Asia-Pacific are trading lower on Friday, the last day of the third quarter, following another sell-off on Wall Street overnight. China’s factory activity data is due later today.

In Japan, the Nikkei 225 has so far today slipped 1.32 per cent, and the Topix index has fallen 0.87 per cent. The Kospi in South Korea has presently declined 1 per cent and the Kosdaq is trading down 1.13 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan have fallen 0.15 per cent.

US recap

US stocks tumbled in Thursday’s session, with the S&P 500 hitting a fresh low for the year and also reaching a new closing low. The index dropped 2.1 per cent to end the session at 3,640.47. Meanwhile, the Dow Jones Industrial Average slumped 458.13 points, or 1.54 per cent to 29,225.61. The tech-heavy Nasdaq Composite lost 2.84 per cent to 10,737.51.

“Geopolitical and inflation risks are not subsiding, and risk assets are taking the strain as expectations of lower growth and higher funding costs continue to permeate,” analysts at ANZ Research wrote in a note today.

Japan labour market tightest since March 2020

The unemployment rate was 2.5 per cent in August, matching expectations, following 2.6 per cent in the previous month. This marks the lowest reading since March 2020. Sequential employment fell mildly for the second straight month, though regular employment rose for the first time in four months. The main factor was a decline in the labour force. A breakdown of furloughed workers showed accelerating contrast between lower fulltime vs higher non-full time employees. Job offers to applicants ratio was 1.32 (highest since March 2020) vs consensus 1.30 and 1.29 in prior month. Successive growth in job offers combined with decline in applications. Recent reports underscored structural headwinds in terms of low labour force mobility, depressed birth rates amid the pandemic, against the backdrop of a shrinking and ageing population. Immediate attention remains on wage growth, where fragmented evidence indicated employee incomes set for stronger growth this year, spearheaded by government calls on the corporate sector to help achieve economic targets.

Japan industrial production, retail sales firmer than expected

Industrial production rose 2.7 per cent month-on-month in August, compared to a consensus of 0.2 per cent and follows 0.8 per cent vs the prior month. Main drivers were production equipment, metals, and chemicals, outweighing declines in tech components and autos. Slower growth in shipments left inventories higher for the third straight month. Core capital goods shipments extended gains, though at a slower pace. METI survey projections signalled increases of 2.9 per cent in September and 3.2 per cent in October, implying a sharp increase in Q3 as well as a strong start to Q4. However, METI's adjusted guidance sees September output more in the order of a 1.2 per cent decline, pointing to lower quarterly trajectory while remaining firm. Retail sales rose 1.4 per cent month-on-month vs consensus of 0.2 per cent and revised 0.7 per cent in the prior month. But details were soft with most categories lower, led by sharp weakness in autos and apparel followed by appliances. Gains were driven by miscellaneous items.

Japan to confirm size of FX intervention

Reuters highlighted the Ministry of Finance (MOF) is scheduled to announce the amount spent on FX intervention in a regular release at 7 pm local time Friday (06:00 ET). Estimates based on money market brokers showed Tokyo likely spent a record JPY3.6T ($24.9B) on the 22nd of September in its first dollar-selling, yen-buying intervention in 24 years. While initial knee-jerk reactions sparked concerns about MOF selling of US Treasuries, though subsequent discussions clarified the reservoir of $135.5B in deposits would be tapped first before US debt holdings. Still, size of operations remains a concern for markets; if comparable to past episodes, repeated tranches would point to rapid depletion of funds. Press have noted widespread views that pressure on the yen will remain as a function of Japan-US rate differentials.

China takes more steps to lower rates in real economy

The People's Bank of China (PBOC) has announced the relaxation of floor rates on mortgage rates for first home buyers. Eligible city governments will have the discretion to adjust or scrap the lower limit this year. This forms part of a shift to tailor policies to local conditions as directed by the State Council. Stipulated phased relaxation will apply to cities which have seen new house prices fall successively from June to August. Reuters reported a string of small and mid-sized Chinese banks are following their larger peers and cutting deposit interest rates in the first broad-based move since 2015 to ease pressure on margins after successive lending rate cuts. Several Chinese city commercial banks and rural commercial lenders have cut their rates on a range of deposits this week.

Company news

AIC Mines (ASX:A1M) provided an update this morning on its exploration drilling at the Eloise Copper Mine in North Queensland. Recent exploration drilling into an under-explored area has returned significant grades and widths indicative of a new high-grade lode system. Commenting on the drilling results, AIC Mines Managing Director Aaron Colleran said: “The discovery of a new high-grade lens only 150m from underground development is another great example of how underexplored the Eloise mine actually is. The results support our confidence that ongoing exploration will extend the mine life well beyond 2030." Shares are trading 2 per higher at 50 cents.

Alchemy Resources (ASX:ALY) today announced that its wholly owned subsidiary Goldtribe Corporation has won a ballot for a key exploration licence application. The application will now progress through statutory process with title expected to be granted later this year. Chief Executive Officer James Wilson commented: “The acquisition of this tenement builds on our footprint of highly prospective and strategic tenure which sits in proximity to some of the most prolific lithium and gold projects in Western Australia. The new lease has seen limited drill testing with modern exploration methods”. Shares are trading 25 per cent higher at 3 cents.

Winsome Resources (ASX:WR1) today announced high grades of lithium mineralisation have been confirmed from laboratory assay results following the recent field exploration program at the company’s Adina project in Quebec. Winsome’s MD Chris Evans said: “The assay results from these rock chip samples provide the Company with great confidence ahead of the upcoming autumn drilling campaign. These exceptional results demonstrate the extent of lithium mineralisation at Adina is much larger than previously thought.” Shares are trading 7.8 per cent higher to 35 cents.

Commodities and the dollar

Gold is trading at US$1662.27 an ounce.
Iron ore is 0.4 per cent higher at US$95.85 a tonne.
Iron ore futures are pointing to a rise of 0.41 per cent.
One Australian dollar is buying 64.98 US cents.