Aus shares open stronger despite dismal performance on Wall Street: ASX up 0.26% at noon

Market Reports

by Peter Milios

The ASX is up at noon, largely based on heavy gains from Energy, up by over 1.5 per cent at lunch.

Large caps Woodside Energy Group (ASX:WDS) and Santos (ASX:STO) are up 1.14 per cent and 1.73 per cent respectively.

The Australian has revealed that Matt Kean planned to issue orders ­requiring all thermal coal producers in the state to reserve up to 10 per cent of their annual production for NSW coal-fired power plants.

Yancoal (ASX:YAL) is up 3.62 per cent, Whitehaven (ASX:WHC) is up 7.5 per cent and New Hope Corporation (ASX:NHC) is up 3.72 per cent.

At noon, the S&P/ASX 200 is 0.26 per cent or 19.3003 points higher at 7,454.60.

The SPI futures are pointing to a rise of 9 points.

Best and worst performers

The best-performing sector is Energy, up 2.14 per cent. The worst-performing sector is Consumer Discretionary, down 0.83 per cent.

The best-performing large cap is Pilbara Minerals (ASX:PLS), trading 9.45 per cent higher at $4.40. It is followed by shares in Whitehaven Coal (ASX:WHC) and Fisher & Paykel Healthcare Corporation (ASX:FPH).

The worst-performing large cap is Challenger (ASX:CGF), trading 2.27 per cent lower at $7.545. It is followed by shares in Reece (ASX:REH) and IDP Education (ASX:IEL).

Asian news

Markets in the Asia-Pacific traded mixed on Friday as investors digested Japan’s inflation data. The nationwide core consumer price index rose 4 per cent in December on an annualized basis, the fastest pace since 1981.

The Nikkei 225 fell 0.18 per cent in its first hour of trade, while the Topix traded 0.12 per cent lower. The yield on the 10-year Japanese Government Bond rose to stand at 0.415 per cent, slightly below the central bank’s upper ceiling of its tolerance range.

The Kospi in South Korea rose 0.41 per cent and the Kosdaq gained 0.53 per cent.

Today's Fedspeak continuing the "raise and hold" theme

NY Fed President Williams welcomed signs inflation is moderating, but said more needs to be done to return to 2 per cent target. Fed Vice Chair Brainard (voter) voiced support for Fed downshift in its hiking pace and added rates may need to stay restrictive for some time (speech). Noted despite constrained labor supply, wages do not appear to be driving a wage-price spiral. Boston's Collins (non-voter) reiterated her support for a downshift to 25 bp hikes, though said rates will still have to rise above 5 per cent and hold for some time to bring down inflation (Reuters). Fed officials mostly signaling support downshift down to 25bp, including Philadelphia's Harker (voter) on Wednesday (Reuters). However, no real move off the "raise-and-hold" messaging despite markets continuing to price in a peak rate in the 4.75-5.0 per cent range, as well as two rate cuts by year end. However, some Wall Street rates strategists expect Fed to pull median dot down in March SEP to reflect inflation coming in below Fed forecasts.

Risk sentiment waning

A few dynamics behind recent deterioration in risk sentiment. Biggest issue seems to be some dent in the momentum behind the soft-landing narrative with the string of negative US macro surprises (Empire manufacturing, retail sales and IP, while Citi US Economic Surprise Index lowest since early last September). Disappointing earnings/guidance also playing into growth concerns as more companies flag heightened macro uncertainty, softening demand and destocking (and some of the more bearish strategists believe 2023 consensus needs to come down 10 per cent+ to reflect lower growth backdrop). Corporate layoff announcements playing into growth concerns as well after seemingly attracting some positive spin via economic normalization and profit margin protection. At the same time, Fed officials have stuck with their higher-for-longer messaging and pushed back against some of the disinflation enthusiasm. Also some doubts about the credibility of the recent rally given the marked outperformance of most-shorted baskets.

Company news

Azure Minerals (ASX:AZS) has announced outstanding lithium grades in their project in WA, up to a maximum value of 4.9 per cent lithium oxide. This comes after news last week that global mining company SQM would invest $20 million at a 19.99 per cent stake, highlighting the strengths of their strategy. Commenting on the recent high grade assay results, Azure’s Managing Director, Mr Tony Rovira, “Work completed by our dedicated lithium exploration team has built a strong foundation for future growth, with high grade lithium identified in multiple pegmatites.” Shares are currently trading 9.8 per cent higher at 33.5 cents.

Red Dirt Metals (ASX:RDT) has announced outstanding results at their lithium project in WA. Commenting on the drilling update Executive Chairman, David Flanagan said; “This result demonstrates we have grade, we have width, we have strike, it comes to surface and it is just the first target. We have high expectations for this Project.” Shares are currently trading 2.2 per cent higher at 47 cents.

American Rare Earths (ASX:ARR) has announced that their drilling shows mineralization to depths of 50 per cent more than the exploration target at their Rare Earths project in the US. Managing Director and Chief Executive Officer Chris Gibbs said “The drill results together with the positive metallurgical studies amplify the significant value of Halleck Creek’s potential as a key domestic US rare earth supplier.” Shares are currently trading 7.7 per cent higher at 21 cents.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
Iron ore is 1.8 per cent higher at US$124.95 a tonne.
Iron ore futures are pointing to a 0.64 per cent rise.
One Australian dollar is buying 69.13 US cents.

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