Tech's big gains lift ASX 0.5% at noon

At lunchtime, shares have risen by 0.53 per cent to 7,322.20. The tech sector is leading the way with a 2.6 per cent increase as bond yields fall.

Block (SQ2) and Xero (ASX:XRO) have both seen gains of over 5 per cent, while the financials sector, including major banks, is up 1.2 per cent.

However, the energy and materials sectors, including BHP (ASX:BHP), Rio (ASX:RIO) and Fortescue (ASX:FMG), are all down.

Lynas (ASX:LYC) shares have fallen 5 per cent due to concerns over rare earths demand and a licence application in Malaysia.

Additionally, lithium and coal producers have also experienced losses throughout the morning.

The SPI futures are pointing to a rise of 44 points.

Best and worst performers

The best-performing sector is Information Technology, up 2.62 per cent. The worst-performing sector is Materials, down 0.65 per cent.

The best-performing large cap is Xero (ASX:XRO), trading 5.24 per cent higher at $79.58. It is followed by shares in carsales.com (ASX:CAR) and James Hardie Industries plc (ASX:JHX).

The worst-performing large cap is Lynas Rare Earths (ASX:LYC), trading 4.87 per cent lower at $7.42. It is followed by shares in New Hope Corporation (ASX:NHC) and Fortescue Metals Group (ASX:FMG).

February ISM services beats as prices index falls and employment component rises

February ISM services index down 0.1 points m/m to 55.1, though beating estimates for 54.5. New orders index up 2.2 points to 62.6, while prices paid index down 2.2 points to 65.6. Employment index also up 4 points m/m to 54. Inventories index up 1.4 points to 50.6 after eight-straight months in contraction territory. Supplier deliveries index down 2.4 points to 47.6, indicating fastest delivery performance since Jun-2009. ISM economists said the survey suggests mostly positive sentiment around business conditions with suppliers creating better capacity and logistics conditions, while employment has improved despite tight labor market. Commentary also highlighted strong sales activity, easing cost pressures, and improvements in availability and delivery times. Following the report, Treasuries came well off best levels as markets considered Fed implications of the hot print given it was the latest in a string of other positive surprises across economic data have been flagged by Fed officials as upside risks to the Fed rate path (Bloomberg).

Rate reprieve

Rate reprieve the big story in the markets since Thursday afternoon, providing some help for equities. However, may be more of a function of oversold conditions (and some cooler inflation headlines for Friday) than any notable dovish shift in Fed commentary. Fed's Bostic talked up 25 bp for the March meeting, but that has been the consensus and the market is less concerned with the path than the destination. In addition, Waller highlighted both concerns surrounding the strength of the recent data and the possibility that it was more of a blip, ultimately stressing the data dependency surrounding terminal rate expectations. This fit with thoughts that directional impulses may be ahead of February nonfarm payrolls on 10 February and CPI on 14 March. No real change in the other pieces of the market narrative. Bears focused on earnings/margin risk, negative flow and liquidity dynamics, technical deterioration and geopolitical risks. Bulls focused on soft/no landing scenarios, broader (albeit choppy) disinflation trend, corporate cost cutting efforts, and elevated cash levels and still below average positioning.

Bullish talking points for the week

Multiple headlines this week hinted at some loosening of the labor market with focus on a downtick in online job postings and companies finding it easier to hire. Also some discussion about how outside of tech, most industries avoiding layoffs, a key input for soft/no landing scenarios. Growth sentiment also supported by ISM services new orders highest since late 2021, better February auto sales and ramp in China mobility indicators. Amid all the concerns about earnings/margin risk, corporate efficiency/cost-savings/margin expansion announcements continued to be very well received. Cleaner inventory positioning one of the big takeaways from the continued flurry of retail earnings this week. BoJ commentary continued to lean dovish in terms of pushing back against a near-term exit from ultra-easy policy. BoE head Bailey said further rate increases not inevitable. Some contrarian signals from deeply negative bull-bear spread, biggest outflows from US equity funds in eight weeks and continued flood of cash into money market funds. In addition, S&P held around the trend line that has been in place since October (100-dma and 200-dma in this area as well).

Asian markets

Stocks in Asia-Pacific traded higher on Monday as investors further digested China’s growth target set in its parliamentary sessions and looked ahead to a week of economic data.

The Nikkei 225 rose 0.1 per cent in its first hour of trade and the Topix inched up 0.7 per cent. In South Korea, the Kospi gained 0.4 per cent and the Kosdaq climbed 0.6 per cent as the nation’s inflation showed further easing in February.

Futures for the Hang Seng index also pointed towards a higher open as investors further digested key targets released from Chinese Premier Li Keqiang’s government work report released Sunday.

Company news

Empire Energy (ASX:EEG) has provided an operations update and flow testing on their project, C-3H, in the Beetaloo Basin. In response, Managing Director Alex Underwood, stated “At this stage, the rates appear to exceed thresholds that others in the Beetaloo have proposed as being commercial. Empire has high earnings leverage due to the reduced capital costs we enjoy at shallower depths than other parts of the Beetaloo and high net revenue interest (working interest adjusted for royalties) in our Beetaloo properties.” Shares are trading flat at 18 cents.

BrainChip (ASX:BRN) has announced the second generation of the Akida platform aims to power highly efficient and intelligent edge devices for the Artificial Intelligence of Things (AIoT) market. Sean Hehir, BrainChip CEO said, By inferring and learning from raw sensor data, we take a substantial step toward a cloudless Edge AI experience. With this launch, we have significantly extended our competitive advantage in neuromorphic AI.” Shares are trading 13.7 per cent higher at 58 cents.

Poseidon Nickel (ASX:POS) announced an update on the progress being made on the restart of the Black Swan project, in which there is strong interest surrounding an offtake partner. In response, Managing Director and CEO, Peter Harold commented: “We are planning to finalise the preferred partner/s early in the second quarter of 2023 and we remain on track to announce the Final Investment Decision for the restart during the second quarter. Shares are trading 2.8 per cent higher at 3.7 cents.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
Iron ore is 0.2 per cent higher at US$127.45 a tonne.
Iron ore futures are pointing to a 2.4 per cent fall.
One Australian dollar is buying 67.48 US cents.