Materials holding up market: ASX up 0.28% at noon

Market Reports

by Lauren Hayes

Materials are holding up the market as iron ore continued its rally over the US$100 a tonne mark, boosted by speculation that China is moving forward towards further easing of its zero-COVID policy. Only 4 out of 11 sectors are trading in the green. At noon, the S&P/ASX 200 is 0.28 per cent higher at 7,321.80.

The SPI futures are pointing to a gain of 18 points.

Best and worst performers

The best-performing sector is Materials, up 1.49 per cent. The worst-performing sector is Health Care, down 0.92 per cent.

The best-performing large cap is Fortescue Metals Group (ASX:FMG), trading 5.54 per cent higher at $20.77. It is followed by shares in BlueScope Steel (ASX:BSL) and South32 (ASX:S32).

The worst-performing large cap is Yancoal Australia (ASX:YAL), trading 4.5 per cent lower at $5.42. It is followed by shares in New Hope Corporation (ASX:NHC) and Whitehaven Coal (ASX:WHC).

Asian news

Shares in the Asia-Pacific are trading mixed ahead of the results of the Caixin Purchasing Managers’ Index, a private survey on China’s services activity.

The Nikkei 225 in Japan has fallen 0.14 per cent and the Topix has slipped 0.2 per cent.

South Korea’s Kospi is flat, and the Kosdaq has added 0.44 per cent. The MSCI’s broadest index of Asia-Pacific shares outside Japan has risen 0.21 per cent.

November payroll growth, wage inflation higher than expected

November nonfarm payrolls grew by 263,000, which was faster than the consensus of 200,000 and October's upwardly revised 284,000 pace. However, September payrolls were revised down to 269,000, from 315,000. The release noted notable job growth in leisure/hospitality, healthcare, and government. There was some offset from declines in retail and transportation. The unemployment rate held at 3.7 per cent, as expected. Average hourly earnings was up 0.6 per cent, hotter than forecast for 0.3 per cent and October's 0.4 per cent. The average workweek dropped to 34.4 hours from 34.5, and the labour-force participation rate ticked down to 62.1 per cent against the prior figure of 62.2 per cent. Headline job growth disappointed expectations for further moderation, with consensus looking for the slowest growth since December 2020 (though some analysts had seen upside risk). The lack of further slowdown in job growth and hotter wage inflation are a bit of a complication for the Fed, though unlikely to change expectations for a slower December hike. At the same time, the report may help alleviate some bubbling 2023 growth fears.

Company news

Warrego Energy (ASX:WGO) today referred to its announcement last Friday that Hancock Energy had increased the offer price under its takeover bid for Warrego from $0.23 per share to $0.28 per share (Hancock Takeover Offer). The Warrego Board has assessed the revised Hancock Takeover Offer and has determined that it is a Superior Proposal compared to the revised scheme proposal from Beach Energy (ASX:BPT) announced by Warrego on 2 December 2022 under which Beach would acquire all of the shares in Warrego for an upfront cash consideration of $0.25 per share, plus the potential for additional scheme consideration if Warrego's Spanish assets are sold within 12 months of implementation of the scheme (Beach Counterproposal). Warrego has now issued a notice to Beach under the matching rights regime in the Beach Scheme Implementation Deed, which gives Beach 5 business days to match the revised Hancock Takeover Offer, expiring at 5:00pm (Perth time) on Monday, 12 December 2022. Until Beach has had an opportunity to match the revised Hancock Takeover Offer, the Warrego Directors maintain their existing recommendation in favour of the Beach scheme proposal. Shares are trading 11.7 per cent higher at 32 cents.

Pancontinental Energy (ASX:PCL) announced an extension has been granted to Pancontinental and its joint venture partners for a second one-year period to the current, four-year period of their offshore Petroleum Exploration Licence 87. Pancontinental Technical Director Mr Barry Rushworth commented: “We are pleased that the Minister for Mines and Energy in Namibia has seen fit to allow the PEL 87 Joint Venture additional time to complete its exploration program in the Initial Exploration Period of the licence and to waive the relinquishment requirement until the expiry of the extended term. With PEL 87, Pancontinental has a strategic position in a major new oil play of global significance amongst industry giants that include Shell, Total, QatarEnergy and Chevron”. Shares are trading 33 per cent higher at 1 cent.

Arizona Lithium (ASX:AZL) announced that it has entered a Strategic Alliance Terms Sheet with Navajo Transitional Energy Company which outlines the key terms of how it is proposed that NTEC will manage the development of Big Sandy from the permitting requirements for additional exploratory drilling through to Definitive Feasibility Study (DFS) and mine construction. The Terms Sheet allows the commencement of initial work by both parties on the development of the Big Sandy project while providing time for further mutual due diligence (6 months) and the development of a final definitive agreement (as the Strategic Alliance Terms Sheet is non-binding and does not contain all material terms). Shares are trading 4 per cent higher at 7 cents.

Latin Resources (ASX:LRS) has announced that their ongoing testwork continues to demonstrate exceptional high grade concentrates at their Salina’s Lithium Project. The results show excellent consistency across the width and depth of the known ore body. Latin Resources’ General Manager of Geology, Tony Greenaway, commented, “We intend to progress this into bulk pilot plant testwork, where we will optimise the flowsheet for the detailed PEA program that is planned to be completed by SGS in the first quarter next year.” Shares are trading 1.4 per cent higher at 15 cents.

Commodities and the dollar

Gold is trading at US$1812.40 an ounce.
Iron ore is 4.1 per cent higher at US$107.30 a tonne.
Iron ore futures are pointing to a 2.9 per cent gain.
One Australian dollar is buying 68.17 US cents.

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