Sharemarket tumbles after new inflation data: ASX down 0.3% at noon

Market Reports

by Peter Milios

Australian inflation has grown at a rate of 7.8 per cent in the December quarter, which is higher than expected. This has reinforced the case for the Reserve Bank to lift the cash rate next month. The core inflation for the quarter also grew at 1.6 per cent against the anticipated 1.4 per cent, taking the annual reading to 6.9 per cent when analysts had predicted 6.5 per cent.

Lithium giant Albemarle has raised its forecast for future lithium demand by more than 15 per cent and plans to expand its Australian mines to supply the lithium needed for the adoption of electric vehicles. However, Mineral Resources has highlighted that expanding mines in Western Australia is a difficult task, revealing that expansion of its Mt Marion lithium mine has been delayed by labor shortages and equipment delays, resulting in a 17 per cent cut to this year's export target. Albemarle expects its assets in Australia will be very lucrative in the decade ahead, predicting in Wednesday’s five-year strategy update that its global revenues from lithium would rise from $US4.7 billion in 2022 to as much as $US15.7 billion in 2027.

At noon, the S&P/ASX 200 is 0.34per cent or 26.6997 points lower at 7,463.70.

The SPI futures are pointing to a fall of 32 points.

Best and worst performers

The best-performing sector is Utilities, up 0.59 per cent. The worst-performing sector is Information Technology, down 1.04 per cent.

The best-performing large cap is James Hardie Industries Plc (ASX:JHX), trading 2.87 per cent higher at $31.52. It is followed by shares in QBE Insurance Group (ASX:QBE) and Reece (ASX:REH).

The worst-performing large cap is Mineral Resources (ASX:MIN), trading 4.92 per cent lower at $91.54. It is followed by shares in Yancoal Australia (ASX:YAL) and (ASX:CAR).

Asian news

Asia-Pacific shares traded mixed on Wednesday, taking the lead from Wall Street’s struggle for direction as China and Hong Kong markets remain closed for the Lunar New Year holidays.

In South Korea, the Kospi rose 1.3 per cent, while the Kosdaq climbed 1.16 per cent in its first hour of trade. Japan’s Nikkei 225 dipped 0.22 per cent and the Topix shed 0.06 per cent.

January flash manufacturing, services PMI beat, but mixed takeaways around inflation trends

January Markit flash manufacturing PMI up 0.6 points m/m to 46.6, beating consensus 46.3 and highest in two months. However, still the second-fastest pace of decline since May-20 as new orders, new business both fell. Input prices also rose in January, breaking moderation in cost inflation that started in mid-22, though inflation is still below the long-run trend. Flash services PMI up 1.9 points m/m to 46.6, also better than consensus 45.3 and a three-month high. Said slower fall in activity linked to less marked contraction in new orders, while wage costs and employment rose. Supplier prices were also higher, though output prices were unchanged from December. Elsewhere, the Richmond Fed Index fell 12 points m/m to -11, worse than consensus for -5. Report showed wage growth accelerating, though prices paid and prices received both fell, while inflation expectations also fell.

Earnings call macro highlights

Verizon said payment patterns continue to be very strong and not really seeing anything different from a macro perspective. Added bad debt and delinquency around pre-Covid levels. Union Pacific noted some macro challenges with industrial production, import and housing starts. Also highlighted uncertain macro backdrop. 3M said the macro environment remains very fluid and uncertain and expects challenges to persist in 2023. Called out CE and retail as particular areas of softness. GE said while still net price cost positive, it expects inflation will continue to be challenging in 2023. However, also talked up broader restructuring/cost-savings actions. Danaher said that while supply chain disruptions and cost pressures continued, it saw modest improvement in component availability. Added it was positive on price/cost last year and probably a little bit more now. Also discussed potential upside from China, noting pent-up demand in the economy. DR Horton said it expects challenging conditions to persist but noted a pickup in sales activity in the first few weeks of January and noted some support from supply and demographics.

More antitrust headline risk for Google

The Justice Department is set to sue Alphabet regarding its dominance over the digital advertising market (Bloomberg). Report noted lawsuit will mark second monopoly case against the company and fifth major case in the US challenging its business practices. Market has long tended to largely ignore the regulatory overhang on Google and other big tech names given scepticism surrounding tail risks (breakups), cushion from favourable SOTP analysis, and the group's leverage to secular growth themes, which dominated the narrative during the pandemic. However, the group came under outsized scrutiny last year due to multiple contraction from higher yields, economic normalisation and company-specific issues. Google recently in the headlines with plans to cut 12K jobs and re-engage with founders Larry Page and Sergey Brin to deal with threat from ChatGPT, which recently secured a $10B investment from Microsoft. Google reports Q4 results on 2-Feb and focus will be on the extent of macro headwinds facing Search growth (and Cloud), TikTok competition for YouTube and efforts to control opex.

Company news

Sky Metals (ASX:SKY) has announced that Large-Scale Rare Earth Element Mineralisation was discovered at their project in NSW. In response, SKY CEO Oliver Davies commented: “The scale of mineralisation of the DMK system is already remarkable, at over 16 km long, it has the potential to develop into an extremely large source of REE.” Shares are trading 64 per cent higher at 8.2 cents at noon.

Okapi (ASX:OKR) has entered the Uranium enrichment sector with an investment in Ubaryon, a private Australian company. Okapi’s Managing Director, Mr Andrew Ferrier said: “We are now uniquely positioned to provide shareholders significant exposure to multiple components of the nuclear fuel cycle including uranium exploration, uranium mining and now uranium enrichment.” Shares are trading 18.2 per cent higher at 19.5 cents at noon.

Anson Resources Limited (ASX:ASN) announced that approval has been granted for the commencement of its Resource expansion drilling program at the Paradox Lithium Project in the USA. The strategy re-entry program will target lithium rich-brine aquifers within the thick Mississippian units. Shares are trading 21.1 per cent higher at 23 cents at noon.

Tamboran Resources (ASX:TBN) completed a $60 million acquisition of Beetaloo Basin assets, positioning the company as the largest operator and acreage holder in the Basin. The company also completed drilling the Maverick 1V well in 100 per cent owned and operated EP 136, reaching a total depth of 3,050 metres and encountering strong gas shows. Tamboran plans to commence a stimulation program of the A2H well in the first quarter of 2023, subject to weather allowing for the mobilisation of equipment. Shares are trading 2.08 per cent higher at 24.5 cents at noon.

BlueBet Holdings (ASX:BBT) had a strong quarter in Q2 FY23, with turnover up 6.6 per cent to $147.7 million driven by strong growth in Sports and mobile channels. The company continued to gain market share in Australia despite increased competition, with Active Customers up 32.3 per cent to 59,632. The company also made progress in the US, soft-launching in Iowa, with ClutchBet ranked #10 of 19 Operators by revenue in Q2, and on track for a mid-March go-live in Colorado. Shares are trading 5.7 per cent higher at 37 cents at noon.

Laybuy Group (ASX:LBY) has submitted a formal request to the Australian Securities Exchange to be removed from the official list. The Delisting is considered by the company's Board to be in the best interests of the company and its shareholders due to low trading price of the company's shares, relatively low levels of trading liquidity, and a number of flow on consequences, including the cost and administrative burden of remaining listed on ASX outweigh the benefits associated with remaining listed on the ASX. Shares are trading 30 per cent lower at 4.2 cents at noon.

Antisense Therapeutics (ASX:ANP) submitted a Clinical Trial Application in three European countries for its Phase IIb trial of ATL1102 in non-ambulant boys with Duchenne muscular dystrophy. The company also initiated a nine-month chronic monkey toxicology study of ATL1102 at Contract Research Organisation to support the advancement of the ATL1102 program in the US. The study outcomes are expected to be reported in 1H'24. Shares are trading 5.68 per cent higher at 9.3 cents at noon.

Careteq (ASX:CTQ) reported a significant increase in contracts won and expansion of sales pipeline for both its Sofihub Assistive Living Tech and Strong Care Digital Medication Management solutions. The company also reported a large increase in the number of new contracts won across North America and ANZ, and a further expansion in its sales pipeline, putting it in its strongest position yet to grow the business and disrupt the aged/disability care sector since listing on the ASX. Shares are trading flat at 6.8 cents at noon.

MinRex Resources (ASX:MRR) has announced the completion of stage 1 RC drilling at the Tambourah North and Talga- Moolyella North Lithium Project near Marble Bar. The drilling targeted the Zone 1 surface rich pegmatites and surface outcropping pegmatite, which yielded rock chip samples consisting of 2.56 per cent Li2O, 1.59 per cent Li, 1,293 ppm Rb, 115 ppm Cs, 40 ppm Ta and the highly elevated soil anomalies over 15 per cent of the tenement area with up to 447 ppm Lithium soil sampled in 2017 completed by BC Iron Limited. The company is currently reviewing multiple opportunities for potential lithium partnering and acquisitions on a Western Australian and global platform thanks to its highly lucrative cash position of over $13M. Shares are trading 5.88 per cent higher at 3.6 cents at noon.

Altech Chemicals (ASX:ATC) announced an update on its CERENERGY battery joint venture with Fraunhofer IKTS. They have made outstanding progress on the project and held expert workshops in Germany in October and December 2022. Design basis for the 100MWh battery plant have been finalised and major equipment suppliers have been selected. Shares are trading 10.6 per cent higher at 9.4 cents at noon.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
One Australian dollar is buying 70.86 US cents.

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