Mining rout prompts a rethink on China's lockdown: ASX down 0.6% at noon

Market Reports

by Melissa Darmawan

The banking bulls’ resilient rally amid a surge in treasury yields has taken the spotlight on the Australian sharemarket, ahead of two central banks to unveil its interest rate decision this week.

Financials lead the ASX, again

The financial sector is out in front for its second straight day with Westpac (ASX:WBC) leading the gains by 1.2 per cent. The sector moves come after its strongest start to a full trading week since early October last year.

After 17.5 million Chinese went into a lockdown, 5,154 new cases were reported on Monday, prompting investors to recalibrate their portfolio, as nerves grow on an already uncertain outlook as imminent rate hikes are set to crimp the future value of stocks.

Market participants are assessing the backdrop of geopolitical risks and mounting concerns on sticky inflation amid slowing economic growth.

Morgan Stanley cuts China's growth forecast

Investors’ sentiment was tampered with after reading Morgan Stanley’s forecast for China this year. The banking giant slashed the current quarter’s economic growth outlook to zero, predicting that Beijing is set to miss its annual target as its zero-Covid policy in play.

This comes after the world’s second largest economy experienced a recent setback in the property sector. The Evergande crisis roiled financial markets, threatening a contagion, putting the steel-making ingredient, iron ore under pressure.

Iron ore mining giants tumble under pressure

Mining stocks are drilling lower, pushing the materials sector to the worst performer, down 3.5 per cent, followed by energy, down 3 per cent and information tech. Gold stocks are also under pressure as bond yields rise. The price of the underlying commodity weakened as traders look to get a grip on how the Federal Reserve will play the lift-off game.

Fortescue Metals Group (ASX:FMG) is down over 5 per cent, leading the losses in the miners while Woodside Petroleum (ASX:WPL) is trading over 3 per cent lower as Beach Energy (ASX:BPT) falls over 4 per cent. Meanwhile, Evolution Mining (ASX:EVN) is leading the losses in the gold space by over 3.7 per cent

Despite the pullback in commodity prices, inflationary pressures is set to rise and is likely to retard economic growth the longer Russia's offensive in Ukraine continues. Now with the news from China, concerns on the inflation outlook grow. All this forms part of the bull case for the price of gold to rally.

In Asian markets, Japan’s Nikkei is off to a choppy start though edging higher, while Hong Kong’s Hang Seng continues to decline, weighed down by the tech index which posted its worst decline since the gauge was launched in July 2020.

At noon, the S&P/ASX 200 is 0.6 per cent or 41 points lower at 7.108.

The SPI futures are pointing to a fall of 40 points.

Local economic news

The residential property price index rose for its sixth straight month by 4.7 per cent in the fourth quarter in 2021, coming in above expectations of 3.9 per cent as per the Australian Bureau of Statistics. This comes after a 5 per cent growth, supported by record-low interest rates and strong demand. Through the year to the fourth quarter, the index jumped 23.7 per cent, the strongest pace since the series started 2003.

This comes after conditions in the housing market remain strong if a little "more uneven", while wages growth is likely to remain similar to pre-Covid19 levels for the year, according to the Reserve Bank of Australia March meeting minutes.

Company news

Pushpay (ASX:PPH) has reconfirmed and narrowed its previous guidance for the year ending March 31. The company’s guidance for the period represents an increase in underlying earnings before interest, tax, depreciation, amortisation, foreign currency and impairments (EBITDAFI) of between 6 and 10 per cent when compared to the previous financial year. Shares are trading 6.2 per cent higher at $1.03.

Imugene (ASX:IMU) has announced a new clinical trial collaboration and supply agreement with MSD, a trade name for the US pharmaceutical company Merck & Co. The agreement aims to evaluate the safety and efficiency of Imugene’s HER-Vaxx for patients with gastric cancer. Shares are trading 2 per cent higher at $0.26.

Last night, Rio Tinto (ASX:RIO) announced a non-binding proposal to acquire the remaining 49 per cent stake in Turquoise Hill, which it does not already own. Under the proposal, Turquoise shareholders would receive $34 per share, valuing the company’s share capital to around US$2.7 billion. Shares are trading 4.1 per cent lower at $106.55

Objective Corporation (ASX:OCL) has signed off on the purchase of Atlanta-based software company, Simflofy. The software company said Simflofy’s technology tames the data sprawl prevalent in today’s organisations, by connecting myriad business systems, content management repositories and file stores so that users can find information wherever it is held. Shares are trading 1.6 per cent lower at $15.97.  

Best and worst performers

The best-performing sector is financials, up 1.2 per cent. The worst-performing sector is materials, down 3.5 per cent.

The best-performing stock in the S&P/ASX 200 is Uniti Group (ASX:UWL) amid takeover rumours, trading 16.9 per cent higher at $3.69. It is followed by shares in Janus Henderson Group (ASX:JHG) and Clinuvel Pharmaceuticals (ASX:CUV).

The worst-performing stock in the S&P/ASX 200 is Chalice Mining (ASX:CHN), trading 11.1 per cent lower at $6.74. It is followed by shares in Champion Iron (ASX:CIA) and Zip Co (ASX:Z1P).

Commodities and the dollar

Gold is trading at US$1,947.86 an ounce.
Iron ore is 6.2 per cent lower at US$144.90 a ton.
Iron ore futures are pointing to a fall of 3.2 per cent.
One Australian dollar is buying 71.91 US cents.

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