ASX down 0.66% at noon after a moderate week of trading

Energy and Real Estate are down almost 2 per cent at noon, followed by Materials, which is down by 0.61 per cent.

Energy’s biggest players, including Woodside Petroleum (ASX:WDS) and Santos (ASX:STO), are down 2.05 per cent and 1.75 per cent respectively.

Potentia Capital Management has extended its offer period for the shareholders of Nitro Software to accept the off-market takeover. Nitro’s board original rejected the hostile bid in October, on the basis that it undervalues the company. The offer will remain open until December 18.

At noon, the S&P/ASX 200 is 0.66 per cent lower at 7305.6.

The SPI futures are pointing to a fall of 55 points.

Best and worst performers

The best-performing sector is Health Care, up 0.68 per cent. The worst-performing sector is Energy, down 2.1 per cent.

The best-performing large cap is Newcrest Mining (ASX:NCM), trading 2.81 per cent higher at $21.24. It is followed by shares in Pro Medicus (ASX:PME) and Northern Star Resources (ASX:NST).

The worst-performing large cap is Whitehaven Coal (ASX:WHC), trading 3.03 per cent lower at $9.59. It is followed by shares in New Hope Corporation (ASX:NHC) and Medibank Private (ASX:MPL).

Asian news

Markets in the Asia-Pacific fell while investors looked for clarity after China signalled slight easing of its stringent Covid restrictions.

The Nikkei 225 in Japan has fallen 1.48 per cent and the Topix has fallen 1.7 per cent. The Kospi in South Korea has fallen 0.97 per cent as the nation saw its annualised consumer price index for November inch lower from the previous month.

Past Powell and waiting for payrolls

A few moving pieces today. Sharply lower rate backdrops the big story. However, mixed drivers in terms of dovish Powell reverberations and more peak inflation traction, as well as more evidence of growth slowdown with manufacturing PMIs in contraction and elevated Challenger layoffs. In addition, follows an outsized rally in stocks on Wednesday (led by growthier/riskier pockets) and comes ahead of nonfarm payrolls tomorrow (where some previews have flagged the divergence between the household and establishment surveys). Plays into the complications surrounding bad news/good news dynamics. Market wants to see disinflation and slower growth, though some resilience on the growth front also plays into soft-landing scenarios and cushions against an earnings risk theme that has dominated the bearish strategist commentary piling in for 2023. Bearish 2023 outlooks themselves highlighted as potential contrarian indicators, though a number of firms have talked about a more risk-supportive backdrop in 2H

October's core PCE price index, ISM manufacturing show softening inflation

Core PCE up 0.2 per cent m/m, softer than 0.3 per cent consensus and a slowdown from prior month's 0.5 per cent increase. Headline October PCE price index up 0.3 per cent m/m, below 0.4 per cent consensus but level with September's pace. Release noted higher energy and gasoline prices partly offset by widespread decreases in durable-goods pricing. Elsewhere in the report, personal income and personal spending both accelerated, beating estimates. November ISM manufacturing down 1.2 points m/m to 49.0, falling into contraction territory for the first time since 20 May. New orders index down 2.0 points to 47.2 while employment index down 1.6 points to 48.4. However, prices paid index down 3.6 points to 43 and backlogs index down 5.3 points to 40.0, both at lowest level since May-20. In today's other data, initial jobless claims dropped 16K w/w to 225K. Continuing claims up 57K w/w to 1.608M, missing consensus for 1.568M.

China Covid headlines continue to move in right direction

China Covid shift continues to dominate the headlines. While recent protests have generated a lot of noise, Beijing continues to signal Covid control relaxation, underpinning reopening expectations that have been best evidenced by the outsized rally in China stocks. The Hang Seng Tech Index surged nearly 35 per cent in November. Vice premier Sun Chunlan said virus fighting efforts are moving to a new phase with Omicron's severity weakening and more people getting vaccinated. Added that policy will be fine-tuned and a statement issued after meeting with NHC omitted use of term "dynamic Covid Zero". The Global Times article also downplayed health fears over Omicron. Such concerns have long been flagged as a major economic normalisation headwind. Also reports today that China is set to announce an easing of Covid quarantine protocols. Earlier this week, NHC announced efforts to boost vaccinations among elderly and more cites lifted lockdowns in favour of targeted curbs amid calls to avoid excessive restrictions.

Good news, bad news and lots of complications

Good news/bad news dynamics seem pretty complicated for the market right now. Some of the bounce attempts this year have been partly a function of a bad news is good news mentality given the outsized focus on monetary policy. This gets back to the Fed put, though with the inflation fight prioritisation and sticky price pressures, it remains far out of the money. Good news has been flagged as an overhang for the market given the support for the Fed's higher-for-longer policy narrative. However, it has also provided select support for soft-landing scenarios and been flagged as a cushion against an earnings risk theme that strategists have increasingly warned is the next big downside driver for the market following the multiple compression seen this year. The complications are not to the US. While a China move away from zero Covid has been long viewed as one of the more credible drivers of a ramp in global risk sentiment, it also brings with it the potential for another inflation scare.

Company news

Little Green Pharma (ASX:LGP) has announced that it has secured a second exclusive supply agreement with Cannamedical, for the exclusive supply of the company’s medicinal cannabis product in Germany. The company is targeting delivery of the first shipment of SMS Product in the first quarter of CY2023. Shares are currently trading 2.78 per cent higher at $0.185.

Warrego Energy (ASX:WGO) has announced that it has received a counter proposal from Beach Energy (ASX:BPT) at a bidding price of $0.25 plus cash consideration. Initially, Strike Energy (ASX:STX) proposed a bid for $0.186, then Beach Energy came into the picture, offering $0.20 plus cash considerations, and then yesterday, Gina Rinheart’s Hancock Energy offered an off-market takeover bid at $0.23 per share. Shares are currently trading 8.46 per cent higher at $0.282.

Allegiance Coal (ASX:AHQ) advises that Itochu Corporation, who held 10.1 per cent of the shares in Telkwa Coal, has sold its shares in TCL to Allegiance for a non-material consideration. As a result of this transaction, Allegiance has re-acquired a 100 per cent Interest in Telkwa Coal. Shares are currently trading 4.35 per cent higher at $0.048.

Knosys (ASX:KNO), a global software-as-a service information technology company offering a range of software solutions designed to boost productivity, collaboration and connectivity in the digital workplace, is pleased to announce that Singtel has signed a two year contract extension for the continued use of Knosys’ market leading knowledge management platform KnowledgeIQ. The value of the contract over the two year period is expected to be $750,000. In addition, Singtel will upgrade to the latest release of KnowledgeIQ over the next six months to benefit from the new product features and capabilities. Knosys Managing Director, John Thompson said, “Over the past few years, Knosys has demonstrated that it has a robust business model through the cycle, with low volatility recurring revenue based on multi-year contracts with blue-chip clients.” Shares are currently trading flat at $0.087.

Magnetite Mines (ASX:MGT) confirms that it has not launched any formal processes relating to the sale or partnering of any of its assets, including its flagship Razorback Iron Ore Project, nor has it appointed advisors in readiness to commence such a process. As outlined in recent ASX announcements, including the Chair’s address to the Annual General Meeting on 23 November 2022, the Company has experienced a substantial increase in interest in the Project from a range of global iron and steel industry participants over recent months. The nature of this interest relates to securing access to high-grade iron ore, now increasingly in demand to support the mandated decarbonisation of the iron and steelmaking industry. Shares are currently trading 3.13 per cent higher at $0.0165.

Commodities and the dollar

Gold is trading at US$1814.60 an ounce.
Iron ore is 1.9 per cent higher at US$103.10 a tonne.
Iron ore futures are pointing to a 0.1 per cent fall.
One Australian dollar is buying 67.95 US cents.