Optimism out of the US boosts sentiment: ASX up 0.6% at noon

Market Reports

by Lauren Hayes

Positive gains in the local market have extended into a second day as optimism out of the US about corporate earnings ahead of several key tech reports boosted sentiment. The market was also encouraged by suggestions the Fed might consider slowing the pace of rate hikes to fight inflation.

At noon, the S&P/ASX 200 is 0.6 per cent or 40.80 points higher at 6,820.20. Energy has reversed some of yesterday’s solid gains and is weighing down the benchmark in early trade.

Lithium stocks continue to be a highlight with Sayona Mining (ASX:SYA) outperforming, along with Liontown Resources (ASX:LTR). C29 Metals (ASX:C29) is a standout after their positive announcement this morning.

The SPI futures are pointing to a rise of 41 points.

Best and worst performers

The best-performing sector is Health Care, up 1.62 per cent. The worst-performing sector is Energy, down 0.64 per cent.

The best-performing stock in the S&P/ASX 200 is Sayona Mining (ASX:SYA), trading 10.64 per cent higher at $0.26. It is followed by shares in Credit Corp Group (ASX:CCP) and Liontown Resources (ASX:LTR).

The worst-performing stock in the S&P/ASX 200 is Reliance Worldwide (ASX:RWC), trading 13.37 per cent lower at $3.11. It is followed by shares in Ampol (ASX:ALD) and Sims (ASX:SGM).

Asian markets

The real news in the markets overnight was the Hong Kong market, where shares faced a wave of selling after the conclusion of the Chinese Communist Party’s national congress meeting over the weekend. The Hang Seng Index fell 6.4 per cent on Monday, the biggest one-day decline since the global financial crisis. The selloff came after Chinese leader Xi Jinping cemented his control over the ruling Communist Party, appointing a number of loyalists to the party’s most powerful decision-making body and getting a convention-defying third term.

The selloff didn’t appear to be driven by the fundamentals of those companies but instead by investors’ expectations about the shifting balance between state-owned and privately owned enterprises in China. China’s vision of common prosperity and Xi’s plans for state-owned enterprises to take a more prominent role in the economy were key points in the speeches last week.

Chinese stocks in the US were weaker across the board overnight with Alibaba and Weibo both losing 12 per cent and Tencent down 14 per cent. Chinese EV makers also led the declines.

Stocks in the Asia-Pacific have risen in early trade Tuesday after Wall Street’s second straight positive session.

The Nikkei 225 has so far added 0.65 per cent and the Topix has climbed 0.79 per cent. South Korea’s Kospi is flat, while the Kosdaq has gained 0.44 per cent. The MSCI’s broadest index of Asia-Pacific has ticked up 0.14 per cent.Singapore is due to release inflation data today, while HSBC is reporting earnings.

Biden advisers still trying to set up meeting with Xi, US won't change approach to China

The US indicated no change to its stance on China following CCP Congress (Bloomberg). State Department spokesman Ned Price reiterated the State Department will compete with China on matters of national security while looking to cooperate on areas of mutual interest. Biden administration officials are still looking at a possible meeting between Biden and Xi on G20 sidelines next month, as part of efforts to keep lines of communication open. However, there appears little prospect of an improvement in the bilateral relationship. The Department of Justice on Monday accused two Chinese intelligence officers of attempting to bribe US law enforcement officials to share secrets about a criminal investigation into Huawei (Washington Post). The Biden administration recently expanded China export controls to slow its progress in advanced chipmaking (and is reportedly looking to broaden tech export curbs). Taiwan is to remain another flashpoint with reunification a Xi priority.

October flash PMI misses as manufacturing PMI falls into contraction territory

The October Manufacturing Purchase Index (PMI) fell 2.1 points month-on-month to 49.9, falling slightly into contraction territory and missing estimates for 51.2, and the lowest print in 28 months. However, the output index ticked up 0.1 points to 50.7, a five-month high, as supply chain and delivery pressures eased. Also it saw softer cost pressures, easing to the slowest in nearly two years. However, new orders went back into contraction territory, which was down by most since May 2020. Flash services PMI was also down 2.7 points month-on -month to 46.6, missing consensus for 0.1 point increase to 49.4. Also, it showed the service sector confidence weakest since September 2020. Cost pressures have accelerated, though still second-slowest since the start of 2021. IHS economists said that the economic downturn gathered significant momentum in October, also noting a sharp deterioration in the outlook. However, the report also adds to evidence that consumer price inflation should cool in coming months.

Chinese assets sell off after end of China Party Congress

Assets linked to China saw a big selloff today with the Nasdaq Golden Dragon China Index posting the worst day on record after the end of the Communist Party Congress on Sunday. Chinese President Xi's moves at the congress to further consolidate power added to the already-elevated fears around China's Covid policy (Bloomberg) and geopolitics/Taiwan (Bloomberg), while expected leadership changes, adding to the economic uncertainty (Bloomberg). The yuan also fell to the weakest level against the dollar since 2008. Latest updates from the congress also added to ongoing China headwinds, including home prices down for the 13th-straight month in September (Bloomberg). The delayed China Q3 GDP data showed growth of 3.9 per cent year-on-year, beating expectations. Data also showed further weakening of retail sales and higher unemployment (CNBC).

Company news

C29 Metals (ASX:C29) announced this morning the signing of an option agreement to acquire 80 per cent of two exploration licences located within the world renowned South American lithium triangle. Projects are drill ready with previous exploration indicating highly prospective layers of lithium bearing brine potential. C29’s Executive Director Mark Major commented: “We recognise the rapid changes in the future world's metal usage caused by the evolution to move to a more sustainable electrified world. The fundamental movement for increased electrical storage and the growth in electric vehicle markets is driving unprecedented growth in the lithium market. The company believes the potential of Lithium brine extraction that is quicker to enter the market, and which operates at the lower end of the cost curve will be critical to fill the void being created with the current and future demand fundamentals.” Shares are trading 56.7 per cent higher at 24 cents.

Hammer Metals (ASX:HMX) announced that its first Reverse Circulation (RC) drill-hole completed at the South Hope prospect, located ~650m south of the Carnaby Resources Limited’s (ASX:CNB) Mount Hope prospect, has intersected a broad zone of copper-bearing sulphides. Hammer’s drilling in the Mount Hope region, part of its extensive copper-gold portfolio in the Mount Isa district of NW Queensland, commenced on Saturday, 22 October 2022. In response to the news, Hammer’s Managing Director, Daniel Thomas said: “This is the first recorded drillhole at South Hope and the interim XRF analysis confirms the nature of the historical workings and provides an indication of the significant copper potential at this prospect.” Shares are trading 17.2 per cent higher at 7 cents.

St George Mining (ASX:SGQ) announced today that drilling has commenced at its Mt Alexander Project to test below numerous widespread pegmatite dykes, which are interpreted as highly prospective for lithium mineralisation. John Prineas, St George Mining’s Executive Chairman, said: “This is an exciting milestone for St George as we commence the first-ever, lithium-focused drill programme at Mt Alexander. This initial phase of drilling will provide St George with an opportunity to potentially make a greenfields discovery within what is emerging as a significant lithium province.” Shares are trading 25.5 per cent higher at 6 cents.

Chrysos Corporation (ASX:C79) provided its Quarterly Cash Report and summary of its activities for the Quarter ended 30 September 2022 (Q1 FY23) today. Chrysos Managing Director and CEO Dirk Treasure commented: “Chrysos saw strong and sustainable growth across the business including a quarterly record of 10 lease agreements signed, and a 14 per cent QoQ increase in sample volumes. Our global deployment capacity enables installations to occur across three locations simultaneously; supporting our target of 21 deployed PhotonAssay units by the end of FY23. Our balance sheet and cash position both remain strong, with cash at $82m, supporting the Company’s accelerating rollout of PhotonAssay units around the world. We continue to progress discussions with debt financiers to provide future funding capacity for further international growth into FY24.” Shares are trading down 1.2 per cent to $3.31.

Askari Metals (ASX:AS2) has announced today that it has executed a landmark deal to acquire an advanced Lithium-Tantalum-Tin project in Namibia, Africa. The company has executed a binding Heads of Agreement (HoA) signed with LexRox Exploration Services (Pty) Ltd (LexRox) to acquire a 90 per cent interest in the project. Commenting on Acquisition of the Uis Lithium-Tantalum-Tin Project, Executive Director Mr Gino D’Anna stated: “The acquisition of the Uis Lithium-Tantalum-Tin Project signifies a transformational period for the Company as we expand our exposure to the battery metals sector. To acquire a project within 2.5km from an operating mine sharing the same geology and mineralised pegmatites is remarkable.” Shares are trading 5.3 per cent higher at 50 cents.

Australian medical technology company LBT Innovations (ASX:LBT) a leader in medical technology automation using artificial intelligence, announced this morning that it will be conducting a pro-rata non-renounceable entitlement offer to existing eligible shareholders. The company is seeking to raise up to approximately $3.5 million (before costs) through the offer of one new fully paid ordinary share in the capital of the company for every six shares held by eligible shareholders at an issue price of $0.065 per share, plus one free attaching option for every three new shares subscribed for. The company intends to use the proceeds of the offer to support expected sales growth and finalisation of the core offering of Analysis Modules which will extend the utility of the APAS Independence. Shares are trading down 13.7 per cent to 6 cents.

Immutep (ASX:IMM; NASDAQ:IMMP), a clinical-stage biotechnology company developing novel immunotherapies for cancer and autoimmune disease, today provides an update on the ongoing development of its product candidates, eftilagimod alpha (“efti”) and IMP761 for the quarter ended 30 September 2022 (Q1 FY23). Key highlights include: Clinical development strategy for efti to prioritise non-small cell lung cancer (NSCLC), as well as advance head & neck squamous cell cancer (HNSCC) and metastatic breast cancer (MBC). Further encouraging interim data in 2nd line NSCLC from TACTI-002 comparing favourably to standard of care chemotherapy-based options. Three abstracts accepted at the upcoming SITC Annual Meeting 2022 including first interim data from INSIGHT-003 trial and a late breaking abstract. New investigator-initiated Phase II trial in new indication soft tissue sarcoma. Board strengthened with LAG-3 pioneer, Professor Frédéric Triebel, Immutep’s CSO and CMO. Fast Track designation granted by US FDA for efti in 1st line NSCLC, post period and lastly strong cash position of $73.9 million, giving cash runway into early calendar year 2024. Shares are trading down 1.7 per cent to 29 cents.

Commodities and the dollar

Gold is trading at US$1653.51 an ounce.
Iron ore is flat at US$93.00 a tonne.
Iron ore futures are pointing to a fall of 0.6 per cent.
One Australian dollar is buying 63.33 US cents.

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