Gas stocks weighing down the market: ASX 0.57% lower at lunch

Market Reports

by Lauren Hayes

The local market has continued its downward trajectory after US stocks finished lower Friday, with all the major averages posting losses for the week, as investors look ahead to the Fed’s meeting and US inflation data later this week. At noon, the S&P/ASX 200 is 0.57 per cent or 41 points lower at 7,172.40.

The SPI futures are pointing to a fall of 38 points.

Utilities are dragging down the benchmark, shedding over 4 per cent with gas stocks selling off following the federal government’s intervention in the gas market. Origin Energy has tumbled 7.5 per cent.

St Barbara and Genesis Minerals are merging whereby SBM will acquire Genesis via a scheme of arrangement and be re-named Hoover House.

And Tyro Payments have slid almost 18 per cent after dismissing takeover talks with a private equity consortium, but says it is still open to receive a “credible” proposal, following Westpac Banking Corporation also exiting potential bid negotiations.

Best and worst performers

The best-performing sector is Energy, up 0.65 per cent. The worst-performing sector is Utilities, down 4.08 per cent.

The best-performing large cap is Pilbara Minerals (ASX:PLS), trading 2.24 per cent higher at $4.57. It is followed by shares in Woodside Energy Group (ASX:WDS) and Macquarie Group (ASX:MQG).

The worst-performing large cap is Origin Energy (ASX:ORG), trading 7.50 per cent lower at $7.215. It is followed by shares in Evolution Mining (ASX:EVN) and Aurizon Holdings (ASX:AZJ).

Asian news

Shares in the Asia-Pacific have declined in early trade. Japan’s Nikkei 225′s has fallen 0.43 per cent, while the Topix has slid 0.27 per cent. Hong Kong’s Hang Seng index has fallen just over 1 per cent in early trade, leading losses in the region.

South Korean benchmark Kospi has so far shed 0.62 per cent, and the Kosdaq has dropped 0.51 per cent. The MSCI’s broadest index of Asia-Pacific shares outside Japan has slipped 0.53 per cent.

November PPI hotter though Michigan 1Y inflation expectations lowest in 15 months

The headline November PPI rose by 0.3 per cent month-on-month, faster than October's 0.2 per cent month-on-month pace, which was also the consensus. This is up 7.4 per cent year on year, down from prior month’s 8.0 per cent. The core PPI is up 4 per cent, which is hotter than forecasts for a 0.2 per cent rise and October's upwardly revised 0.1 per cent increase. The release noted the bulk of headline increase attributable to a 0.4 per cent rise in services prices, including financial services and machinery/vehicle wholesaling (though passenger transportation and auto retailing prices decreased). The goods prices were up 0.1 per cent month-on-month overall, with a notable jump in food prices. December preliminary Michigan consumer sentiment was up 2.3 points month-on-month to 59.1, beating the consensus of 57.0. The one-year inflation expectations are down 0.3 percentage points to 4.6 per cent, the lowest since September of 2021. Current conditions index are up 1.4 points to 60.2, while expectations index up 2.8 points to 58.4.

Growth fears pick up as market waits for CPI and Fed

The CPI and Fed are looming this week. The risk off has been the theme thus far for December despite favourable seasonality. It has been the first December since 2011 in which S&P has declined in each of the first five sessions. Growth fears have been flagged even in the face of key macro surprises (payrolls and ISM services). The market seems to be concerned that the Fed focused on lagging indicators and risking a policy mistake. Such concerns are best evidenced by deep curve inversion, sharp decline in excess liquidity and a pickup in disinflationary signals. Some of the focus this week has also been on the pullback in oil and the broader commodity complex. In addition, the consumer resilience theme has come under a bit of scrutiny with some of the cherry-picking of bank executive commentary at the Goldman Sachs conference, including estimates pandemic savings will run out in mid-2023. Earnings are another big overhang on sentiment as strategists' 2023 commentary continues to highlight downside risk.

Company news

Emerging lithium producer Sayona Mining (ASX:SYA) has effectively derisked its North American Lithium operation in Québec, Canada, with the award of the final permit for NAL’s restart ahead of the planned recommencement of production in the first quarter of 2023. The completion of the permitting process follows an extensive process by Sayona Québec, with the aim of ensuring the successful restart of NAL’s lithium mine and concentrator in compliance with all necessary environmental regulations and obligations. Sayona’s Managing Director, Brett Lynch welcomed this new milestone in the recommencement of production at NAL. “Securing all the necessary permits for NAL’s restart is another important step in the derisking process, and I would like to congratulate our team in Québec for this new milestone,” he said. “With the planned expansions of our resource base both at NAL and at our northern lithium hub, Sayona is well placed to become the leading lithium producer in North America, facilitating the EV and battery revolution in North America.” Shares are trading 2 per cent higher at 22 cents.

GTI Energy (ASX:GTR) announced that four mud rotary drill rigs are now working at the Company’s ISR uranium projects in Wyoming’s Great Divide Basin. 18 of 22 drill holes encountered uranium mineralisation. Shares are trading 10 per cent higher at 1 cent.

Galileo Mining (ASX:GAL) announced high grade nickel sulphide from its diamond core and RC drilling program in WA. Galileo’s Managing Director Brad Underwood commented; “The nickel results from disseminated sulphides in diamond core show we are drilling a quality mineralised system capable of producing high grades of nickel, copper, and palladium.” Shares are trading 9 per cent higher at 96 cents.

Emmerson Resources (ASX:ERM) announced bonanza gold from an emerging new ore zone at its Tennant Creek project. Emmerson’s Managing Director, Rob Bills commented: “These latest assays indicate a significant expansion of the high-grade gold mineralisation to the north of the historic Golden Forty Mine.” Shares are trading 1.4 per cent higher at 8 cents.

Highfield Resources (ASX:HFR) announced that it has received firm commitments from institutional, sophisticated and professional investors for the placement of ordinary shares of the company at an issue price of A$0.62 per share to raise gross proceeds of $13 million. The placement was oversubscribed with strong support from new and existing shareholders, including high-quality institutional investors based domestically and offshore. Highfield Resources CEO, Ignacio Salazar, said: “We are pleased to announce the completion of the Placement which was well supported by existing and new institutional investors. We welcome all new shareholders to the Company and thank existing shareholders for their ongoing support." Shares are trading 13 per cent lower at 60 cents.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
Iron ore is 1.5 per cent higher at US$112.40 a tonne.
Iron ore futures are pointing to a 0.37 per cent rise.
One Australian dollar is buying 67.64 US cents.

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