ASX pushes higher for second straight day: Aus shares up 0.37% at lunch

The local market is marginally higher this morning, with Materials and Energy dragging down the benchmark, and all other sectors in the green. At noon, the S&P/ASX 200 is 0.37 per cent or 24.80 points higher at 6804.00.

BHP Group (ASX:BHP) released a tepid quarterly activities report this morning. Shares are trading down 0.71 per cent to $39.35. The company stated: “The near tripling of top end royalties by the Queensland Government remains a serious concern and threat to investment and jobs in that state. We see strong long-term demand from global steelmakers for Queensland’s high quality metallurgical coal. In the absence of fiscal terms that are both competitive and predictable, we are unable to make significant new investments in Queensland.” Behind the scenes there still appears to be a lot of lobbying to the Queensland Government over royalties -- so stay tuned for ongoing repercussions.

The SPI futures are pointing to a rise of 14 points.

Best and worst performers

The best-performing sector is Utilities, up 1.60 per cent. The worst-performing sector is Energy, down 1.06 per cent.

The best-performing stock in the S&P/ASX 200 is Chalice Mining (ASX:CHN) following its release to the market this morning confirming the major northern extension of Gonneville Intrusion. Shares are trading 10.33 per cent higher at $4.38. It is followed by shares in Pendal Group (ASX:PDL) and Adbri (ASX:ABC).

The worst-performing stock in the S&P/ASX 200 is St Barbara (ASX:SBM). The stock's downward spiral continues after yesterday’s disappointing quarterly report. Shares are trading 6.67 per cent lower at $0.49. It is followed by shares in Beach Energy (ASX:BPT) and New Hope Corporation (ASX:NHC).

Asian news

The Asia-Pacific has inched higher this morning following a second day of gains in major US indexes.

The Nikkei 225 in Japan has added 0.42 per cent and the Topix has gained 0.3 per cent. The Japanese yen remained above 149 against the US dollar. South Korea’s Kospi ticked 0.14 per cent higher and the Kosdaq has gained 0.43 per cent.

MSCI’s broadest index of Asia-Pacific is fractionally higher this morning.

Hong Kong Exchanges and Clearing is set to report earnings today, while the city’s chief executive, John Lee, will give his first policy address. China was due to release home prices data Wednesday, but the release has been delayed.

Indonesia’s central bank starts a two-day board of governors meeting Wednesday.

Biden administration preparing to release more oil reserves

The press sources have indicated the Biden administration plans to release more oil reserves amid efforts to provide relief from fuel prices ahead of next month's midterm elections (Reuters, FT). An announcement could be made as early as Wednesday, when President Biden makes a public statement about energy prices. It is worth noting that 14 million barrels remain from the previously announced release of 180 million. The administration reportedly spoke with oil companies about selling additional 26 million barrels from a congressionally mandated sale in FY23 starting on the 1st of October. Biden told officials to prepare for additional sales beyond 180 million if needed, signalling to markets the US will attempt to cap crude oil prices. This follows US criticism of OPEC+ latest output cut. However, analysts have been sceptical of meaningful market impact, amid the concerns that SPR levels are running at the lowest since 1984.

The bounce continues

There has been some discussion about bullish hedging from a ramp in put selling (Zero Hedge). Barclays pointed out that with brokers short upside call gamma, their delta-hedging flow could fuel bear market rallies as they are forced to buy SPX futures on the way up. Also, there are thoughts that the market moves have been exacerbated by a ramp in short-term options activity (The Market Ear). In addition, there has been some focus on a Goldman Sachs trading desk estimate from last week, that a 6 per cent jump in the S&P could unleash more than $200 billion of CTA buying. The latest JPMorgan survey put equity exposure/sentiment in the ~38th percentile on average, which the firm said was a record low. Bull-bear spread in the AAII Survey out last Thursday was -35.6 per cent, which the report noted was one of the most negative readings in the survey's history. Morgan Stanley's Mike Wilson pointed out that the 200-week moving average is strong technical support until earnings risk becomes the next shoe to drop for stocks (Bloomberg).

Looking for a few bright spots

With the bounce largely chalked up to technical and sentiment and positioning dynamics, bullish talking points have been relatively few and far between. However, seasonality and looming reopening of corporate buyback windows are mentioned as positives. Seemingly most important, bank earnings continue to play into the strong consumer balance sheet theme. There have been some hints that valuations may be getting to attractive levels, particularly for the wall of the money in the PE space (FT). More anecdotal support for the broader peak inflation narrative via easing supply chain pressures with chip delivery times shrinking by four days in September, the biggest drop in years (Bloomberg).

October NAHB home builder sentiment lowest since 2012 excluding pandemic lows

October NAHB housing market index fell eight points month-to-month to 38, missing the forecasted estimates of 43.5. It was a tenth-straight decline and the lowest since August 12 excluding the spring 2020 pandemic lows. The current sales conditions index fell nine points to 45, while the sales expectations index fell 11 points to 35. The traffic index also fell six points to 25. The report said building material bottlenecks, elevated home prices were the key drivers, with mortgage rates around 7 per cent continuing to weaken demand, particularly for first-time buyers. NAHB also expects the first decline for single-family starts since 2011 this year, while tighter Fed policy is likely to continue to weigh on demand into 2023. The report also validated recent industry data. Applications for home purchase loans were down 39 per cent year-on-year, according to MBA data last week. Black Knight also said US prices were down by nearly 1 per cent in August after July's 1.05 per cent decline, the largest monthly declines since January 2009 (Bloomberg).

Company news

Lepidico (ASX:LPD) announced today that all test-work associated with the demonstration and pilot scale trials that started in November 2021 has successfully completed and reported on by Strategic Metallurgy, with excellent results received that confirm the Phase 1 L-Max and LOH-Max design. The two final reports, lithium hydroxide refining and by-product manufacture, have been reviewed by Lepidico. These are now being provided to Behre Dolbear Australia Pty Ltd (BDA), Independent Engineer to lender International Development Finance Corporation (DFC), along with the latest Karibib mine schedule, allowing it to complete its technical review. This represents a major gating item for closing out due diligence and finalising Project lending. Managing Director Joe Walsh said, “Final data from these most recent extensive pilot trials provide enormous confidence in Lepidico’s process technologies and further reduce Phase 1 risk, as the learnings have been progressively included into the process design criteria. It is most gratifying that independent third-party test-work has demonstrated that LOH-Max can produce a “more pure” lithium hydroxide than the conventional sodium sulfate process and result in high quality crystal morphology. We now look forward to taking our project debt initiatives to the finish line.” Shares are trading up 16.7 per cent to 2 cents.

Azure Minerals (ASX:AZS) announced that the company has received further high grade lithium assay results from the pegmatite exploration program on the Andover Project, located near the town of Roebourne in the West Pilbara region of Western Australia. In response, Azure’s Managing Director, Mr Tony Rovira said, “The latest batch of assays returned high grades of lithium up to 3.32 per cent Li2O, which is the highest lithium grade reported to date. Encouragingly, our geological mapping is identifying the presence of the preferred lithium-bearing mineral, spodumene, in many of the outcropping pegmatites.” Shares are trading 30.2 per cent higher at 28 cents.

Grand Gulf Energy (ASX:GGE) announced an update on the Red Helium project. Downhole gas samples analysed at the Jesse#1A well returned 0.89 per cent to 0.96 per cent helium, providing further upside to helium concentrations at Jesse versus the previously announced 0.8 per cent which exceeded pre-drill expectations. Given the sampling procedure these samples are considered most representative of reservoir gas. Shares have added 13.3 per cent to 2 cents.

AuKing (ASX:AKN) has today announced that they have acquired a 100 per cent interest in six projects in Tanzania - four prospective for uranium (Mkuju, Manyoni, Itigi and Magaga) and the other two prospective for copper (Mpanda and Karema). In response, AuKing CEO, Paul Williams stated, “The company now has the ability to pursue and develop uranium assets in a stable African jurisdiction at a time when there is significantly renewed interest in the development of uranium projects.” Shares are trading 18.3 per cent higher at 11 cents.

United States focused Clean Technology Carbonxt Group (ASX:CG1) announced the renewal and extension of its longstanding partnership with the US utilities provider, Wisconsin Public Service (WPS) for the supply of AC Pellets to 2030. The agreement confirms a continuation of a highly successful partnership to develop an engineered pellet solution for emissions reductions. Managing Director of Carbonxt, Warren Murphy, stated, “This long-term contract extension marks a major step forward for Carbonxt and locks in higher margin revenue for the next eight years. As well, it sets the company up with a strong platform for additional sales growth in the US market. We are delighted to continue our partnership with WPS, which is a great example of how Carbonxt combines its leading R&D initiatives with operational expertise in manufacturing, to build scalable solutions that comply with industrial emission regulations and offer commercial benefits to both the Company and our clients. With the extension of our existing contract through to 2030, we will continue to support WPS and its long term emissions reduction goals.” Shares are unchanged at 11 cents.

MinRex Resources (ASX:MRR) announced last night after the close its preliminary geological data from the completed RC drill program over the Sisters Lithium Project in the East Pilbara of WA. In conjunction, 3 rock chip samples were taken over newly identified pegmatites away from the firstly discovered spodumene rich pegmatites in the south-eastern portion of the E45/5871. These new identified highly anomalous lithium pegmatites have demonstrated more potential for pegmatites discoveries on the ground. The extensive floodplain covering the area has the potential to yield further untested pegmatites. MinRex Resources Managing Director Mr Karageorge commented: “We are delighted in the very early stage of drilling to have intersected stacked pegmatites sheets that have extensions at depth from the outcropping high-grade lithium samples delineated earlier in the year. This has confirmed the geological model which supports the stacked sheeted pegmatites are continuing at depth from surface.” Shares are trading 7.8 per cent down at 5 cents.

Next Science (ASX:NXS) this morning announced the launch of topical collagen products to complement the Company’s BlastXTM product. To take this product to market more effectively, the company has established itself as, and been licensed and accredited by US Medicare as, a Durable Medical Equipment (DME) provider based in the State of Florida, USA. The medical Collagen market in the US is estimated at over US$1.4B per annum1. Once traction is established, revenues from the sale of Collagen are expected to be material. Shares are trading 7.7 per cent higher at 80 cents.

Delorean Corporation (ASX:DEL) this morning announced the company has entered into a binding agreement to form a multi-project development funding partnership to support DEL’s project funding for up to $200m. Funds will be managed by Palisade Impact and arranged by Planum Partners. DEL’s Managing Director Joe Oliver commented, “This development funding partnership with Palisade Impact is a major milestone for Delorean’s business. DEL listed on the ASX in April 2021 with the specific purpose of focusing on development and capitalisation of its own bioenergy infrastructure pipeline, to diversify the business beyond its already growing construction project portfolio and WA energy retail revenues”. Shares are trading up 29.2 per cent to 8 cents.

Commodities and the dollar

Gold is trading at US$1652.27 an ounce.
Iron ore is 1.1 per cent higher at US$94.80 a tonne.
Iron ore futures are pointing to a rise of 0.14 per cent.
One Australian dollar is buying 63.15 US cents.