ASX opens to 7-month high after Powell's positive news: Aus shares up 0.8%

Market Reports

by Peter Milios

The ASX has reacted positively to overnight news from the Federal Reserve. Chair Jerome Powell has confirmed the central bank will slow the pace of interest rate rises from December.

The Australian dollar has hit an 11-week high as global currencies increased the US dollar after Powell delivered his speech.

At noon, the S&P/ASX 200 is 0.82 per cent higher at 7344.2.

The SPI futures are pointing to a gain of 51 points.

Best and worst performers

The best-performing sector is Materials, up 1.99 per cent. The worst-performing sector is Energy, down 1.15 per cent.

The best-performing stock in the S&P/ASX 200 is Appen (ASX:APX), trading 10.11 per cent higher at $2.94. It is followed by shares in Ramelius Resources (ASX:RMS) and Block (ASX:SQ2).

The worst-performing stock in the S&P/ASX 200 is HMC Capital (ASX:HMC), trading 6.13 per cent lower at $4.90. It is followed by shares in Sayona Mining (ASX:SYA) and Downer EDI (ASX:DOW).

Asian news

Markets in the Asia-Pacific traded higher, carrying on the optimism behind Wall Street’s rally.

The Nikkei 225 in Japan rose 1.13 per cent while the Topix rose 0.25 per cent and in South Korea, the Kospi gained 0.77 per cent.

Fed Chair Powell says time for moderating the pace of rate hikes could come as soon as December

In his appearance at Brookings (speech), Fed Chair Powell reiterated that a slower pace of rate hikes could come as soon as December, and that there is still a long way to go in restoring price stability. However, Powell didn't do much to push back against recent easing financial conditions (as he did in his August Jackson Hole appearance), while the messaging didn't deviate from the recent Fedspeak calling for "higher-for-longer" policy, noting services inflation and wages that continue to run above what is consistent with 2 per cent inflation. In the Q&A portion, Powell said that wages are going to be increasingly important moving forward, and there could be a role in moderating demand to bring the labour force back into balance. Elsewhere, Fed Governor Cook earlier said that the Fed will keep at rate hikes until its job on inflation is done, though remains mindful that policy works with long lags (speech).

ADP private payrolls show easing growth, slightly lower wage pressures

November's ADP private payrolls increased by 127K vs consensus for 198K and October's 239K pace. Release noted job growth slowed by the most since January 2021, with job gains confined to medium-sized businesses. Declines seen in manufacturing, construction and other rate-sensitive sectors while leisure/hospitality remained a key area of strength. Added y/y pay growth remained elevated, though the pace continued to moderate. Said data suggest Fed tightening having an impact on job creation and pay gains. Report comes alongside a slight contraction in job openings in today's October JOLTS report. Focus now shifts to Friday's November nonfarm payrolls report, with forecasts for job growth to step down to 200K from October's 233K pace. The unemployment rate is seen holding steady at 3.7 per cent while consensus sees average hourly earnings ticking down to a 0.3 per cent m/m increase from October's 0.4 per cent pace.

Job openings ticked down in October, with hires and quits little changed

The October JOLTS report showed job openings ticked down 353K to 10.3M, a bit lower than the 10.4M consensus and September's 10.7M level. Report noted decreases in nondurable goods manufacturing, education, and other government openings. Added hires were little changed across industries, as were total separations and quits. Among today's other data releases, October pending home sales index came in at 77.1, below forecasts for 78.0 and September's 79.5 level. Down 4.6 per cent m/m and now 37.0 per cent lower y/y. Release noted monthly declines in contract signings in three of four geographic areas, pointing to a 20-year high in mortgage rates and expensive home prices (though it also argued upcoming months could see a return of buyers). Elsewhere, November Chicago PMI printed at 37.2, well below consensus for 47.0 and October's 45.2 level. The release noted weaker new orders though the prices-paid component posted a notable drop.

Latest Fed Beige Book says economic activity flat or up slightly since previous report

The Fed's latest Beige Book said economic activity was about flat or up slightly since the previous report, down from the modest average pace of growth in the prior period. Employment grew modestly though noted labour demand weakened overall. Wages also increased at a modest pace , though some saw some relaxation of wage pressures. Prices rose at a moderate or strong pace in most districts, though pace of price increases slowed on balance given improvements in supply chains and weakening demand, while inflation also expected to hold steady or moderate further moving forward. Despite some of the easing supply chain, price, and wage conditions, contacts expressed greater uncertainty or increased pessimism around the outlook. Also some mixed takeaways around consumer trends, with non-auto consumer spending holding up, though bank lending fell amid increasingly weak demand.

Company news

Greenstone Resources (ASX:GSR) has announced a shallow high-grade bonanza at its flagship Burbanks Gold Project in Western Australia. The recent JORC Exploration Target shows between 215,000 and 330,000 ounces of contained gold. In response, Managing Director and CEO Chris Hansen commented, “these most recent intercepts serve to highlight the potential to significantly increase the resource base at Burbanks over the coming months.” Shares are currently trading 16 per cent higher at $0.029.

Chase Mining (ASX:CML) has announced spherical purified graphite battery anode potential at their Mcintosh project in Western Australia. Preliminary battery anode test work was conducted on 100kg of the McIntosh graphite flake concentrate with test results passing on all early parameters for the battery industry. Shares are currently trading 12.5 per cent higher at $0.018.

XTEK (ASX:XTE) has received a purchase order from the Commonwealth of Australia’s Department of Defence, totalling A$26.9m, for new Small Unmanned Aerial Systems (SUAS). Scott Basham, XTEK’s Group CEO, said: “XTEK is very pleased to be able to continue to provide Defence with high-end SUAS technology, and this new order for a mixed fleet of advanced AeroVironment drones, will deliver significantly enhanced tactical reconnaissance and surveillance capabilities for Defence.” Shares are currently trading 12.7 per cent higher at $0.71.

Kazia Therapeutics (NASDAQ:KZIA; ASX:KZA), an oncology-focused drug development company, is pleased to announce the publication of positive preclinical data for EVT801, a clinical-stage drug candidate currently in a clinical trial for multiple forms of cancer. “These data demonstrate the substantial potential of EVT801 as a cancer therapeutic,” stated Dr Michael Paillasse, lead author of the publication. “EVT801 has been shown to act exactly as intended: by impacting the vasculature in and around the tumor.” Shares are currently trading 4.6 per cent higher at $0.091.

Warrego Energy (ASX:WGO) notes the off-market takeover offer announced today by Hancock Energy to acquire all of the fully paid ordinary shares in Warrego at an offer price of $0.23 per share. The takeover offer is subject to a "Pre-Emptive Rights Condition", which requires the Warrego Board to recommend in its Target's Statement or any supplementary Target's Statement that Warrego shareholders accept the Hancock Takeover Offer in the absence of a superior proposal, and a "No Prescribed Occurrences Condition.” Shares are currently trading 1.96 per cent lower at $0.25.

Commodities and the dollar

Gold is trading at US$1788.90 an ounce.
Iron ore is 0.1 per cent lower at US$101.15 a tonne.
Iron ore futures are flat.
One Australian dollar is buying 68.02 US cents.

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