All red across the board following US rate hike sentiment: ASX down 1.96% at noon

Market Reports

by Lauren Hayes

US equities plunged after Fed Chair Jerome Powell indicated policymakers would continue raising interest rates to fight persistent inflation. Markets had initially soared after the Fed announced another rate hike of 75 basis points, however this was short lived when Jerome Powell further commented that it was “premature” to talk about pausing the tightening cycle. The latest hike brings the federal funds rate to a range of 3.75 per cent to 4 per cent, the highest level since 2008.

Local investors have reacted to the news, with the S&P/ASX 200 sliding 1.96 per cent or 136.80 points to 6,849.90 at noon. Shares are red across the board, with index-heavyweights like BHP, Wesfarmers and Woolworths weighing down the benchmark.

The SPI futures are pointing to a fall of 159 points or 2.28 per cent.

Best and worst performers

All sectors are in the red. The sector with the fewest losses is Communication Services, down 0.73 per cent. The worst-performing sector is Materials, down 3.08 per cent.

The best-performing stock in the S&P/ASX 200 is The A2 Milk Company (ASX:A2M), trading 7.02 per cent higher at $5.64. It is followed by shares in Perpetual (ASX:PPT) and Downer EDI (ASX:DOW).

The worst-performing stock in the S&P/ASX 200 is Domino Pizza Enterprises (ASX:DMP), trading 8.29 per cent lower at $55.04. It is followed by shares in Silver Lake Resources (ASX:SLR) and De Grey Mining (ASX:DEG).

Asian news

Shares in the Asia-Pacific have dropped in early Thursday trade. The Kospi has fallen 1.41 per cent and the Kosdaq has shed 1.57 per cent. Japan’s market is closed today for a holiday.

The MSCI’s broadest index of Asia-Pacific shares has so far slipped around 1 per cent.

October ADP private payrolls a bit hotter, though Fed pressures beginning to be felt

The ADP private payrolls for October increased by 239K, above consensus for 198K and September's downwardly revised 192K pace (it previously was 208K). The release noted hiring was not broad-based, with goods producers (more sensitive to interest rates) pulling back, but services (particularly leisure/hospitality) are still adding jobs. The added job changers are still commanding double-digit pay gains, but that momentum is easing. It concluded the Fed-driven demand destruction was beginning to be felt, but only in certain sectors. Today's release sets up Friday's October nonfarm payrolls report. Consensus is looking for a 200K print, which would be a deceleration from September's 263K (the slowest since April 2021). The view is that the unemployment rate will tick up to 3.6 per cent from a prior 3.5 per cent. Average hourly earnings are forecast to rise 0.3 per cent month to month, which is level with September's pace (which would be the third consecutive month near that level). It is worth recalling the tight labour market and its inflationary potential remain a key focus for the Fed, especially given yesterday's higher-than-expected September job openings report.

No confirmation, no official pushback on China reopening speculation

There is further speculation on social media about how China may be preparing for some kind of pivot on its zero Covid policy. However, there is still no official confirmation and lots of scepticism about the potential for a meaningful shift (even as far out as March 2023) given the messaging out of the recent party congress and the imposition of restrictions with the ramp in cases. At the same time, there is no outright denial from Beijing either. There is speculation that has driven a big bounce in China stocks with the Hang Seng up nearly 8.5 per cent in the last two days. Reopening plays have not surprisingly outperformed, while the battered HSTECH is up 13 per cent from recent lows and bumping up against the 50-dma. Upside is seemingly exacerbated by the very depressed sentiment surrounding China stocks. This has been a function of growth concerns surrounding the zero Covid levels, the lack of more forceful measures to address the structural headwinds facing the property market and Xi's consolidation of power.

Company news

Immutep (ASX:IMM; NASDAQ:IMMP) today announced a late-breaking abstract relating to its phase II TACTI-002 trial has been accepted for an oral presentation at the Society for Immunotherapy of Cancer Annual Meeting 2022. The oral presentation will include new clinical data for eftilagimod alpha, its first-in-class soluble LAG-3 protein, in combination with pembrolizumab in 1st line non-small cell lung cancer patients. The 37th Annual SITC meeting will be held in Boston, MA and virtually from 8 to 12 November 2022. Shares are trading 6.8 per cent higher at 32 cents.

Rhythm Biosciences (ASX:RHY) confirmed this morning the expansion of its international regulatory footprint, having successfully registered ColoSTAT with the New Zealand national database of Medical Devices, which allows the lifesaving cancer detection technology to be marketed and sold in the country. Rhythm CEO and Managing Director, Glenn Gilbert commented: “Rhythm is pleased to expand its international regulatory approval footprint into New Zealand which enables the Company to commence marketing and sales activities for ColoSTAT. Bowel cancer is the second highest cause of cancer death in New Zealand and a growing issue with 1 in 10 now diagnosed under the age of 50. ColoSTAT is a simple blood test which has the potential to make a material impact on health outcomes through mass screening for higher participation to achieve early diagnosis.” Shares are trading 10.5 per cent higher at $1.26.

The a2 Milk Company (ASX:A2M) advised today that the United States Food and Drug Administration, the FDA, has approved a2MC to import, sell and distribute infant milk formula product from New Zealand into the US. The a2 Milk Company’s Managing Director and CEO, David Bortolussi, said: “We are pleased to be able to assist parents and caregivers in the US by providing access to significant volumes of high quality, a2 Platinum infant and toddler milk formula manufactured in New Zealand during this challenging period. a2MC is well positioned to support this initiative being one of the leading premium international infant milk formula brands with annual sales exceeding 30 million cans. We have scalable production capacity in New Zealand with Synlait plus existing a2MC US sales, marketing and supply chain capability that can be leveraged.” Shares are trading 7.9 per cent higher at $5.69.

Norfolk Metals (ASX:NFL) provided an update on the company’s maiden drilling program today at the Roger River Project, located in the north-western region of Tasmania. In the program, copper and sulphide mineralisation were intersected in the maiden drill test of coincident gravity and magnetic anomalies at their project. The assay results are expected to come in December of 2022. Commenting on the results, executive chairman Ben Phillips said: “NFL’s prospectus stated that the Roger River Fault copper occurrences are poorly understood and would require work; we look forward to exploring this virgin fault via our defined targets.” Shares are trading 107.4 per cent higher at 28 cents.

Carbonxt Group (ASX:CG1) reported that it has enjoyed strong shareholder support for the Share Purchase Plan (SPP) announced on 30 September 2022. Due to this support, the Company decided to increase the SPP offer to $1.58m so that investors will receive all of their subscriptions under the offer. The initial target was $1.0m. Shareholders were invited to subscribe for up to $30,000 of shares on the same terms as the recent Placement with institutional investors at $0.10 per share. A total of 15,803,000 shares will be issued on Thursday 3 November 2022 and are expected to trade on Friday 4 November 2022. Carbonxt Managing Director Warren Murphy said: “We thank all shareholders for their strong support and look forward to the development of our new joint venture in Kentucky which will add materially to production volumes and strengthen our position as a trusted and dependable Cleantech company in the large United States market. We anticipate reporting a steady stream of updates on the progress of Kentucky once our second tranche institutional placement is approved by shareholders later this month.” Shares are trading unchanged at 11 cents.

Commodities and the dollar

Gold is trading at US$1635.23 an ounce.
Iron ore is 3.6 per cent higher at US$83.05 a tonne.
Iron ore futures are pointing to a rise of 0.79 per cent.
One Australian dollar is buying 63.28 US cents.

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