ASX heads lower in morning trading as traders await RBA hike: Aus shares down 0.4% at noon

Market Reports

by Paul Sanger

The Reserve Bank of Australia is expected to hike by 50 basis points after official data showed prices in Australia rose 6.1 per cent in the second quarter compared with a year ago. At noon, the S&P/ASX 200 is 0.40 per cent or 27.80 points lower at 6965.20.

Global markets

In the US, stocks fell on Monday as trading opened in August, with some investors questioning whether the recent rally has further to run following the best month since 2020.

This week, investors have more economic data and company earnings to digest. The July nonfarm payrolls report from the Bureau of Labor Statistics will give more insight into the labour market. Solid jobs growth has led economists to say the US is currently not in a recession, despite two consecutive quarters of negative GDP. Earnings are due from Caterpillar, PayPal and Starbucks.

Overnight all three major indexes snapped three-day winning streaks, with the S&P 500 slipping 0.28 per cent, the Nasdaq Composite losing 0.18 per cent and the Dow Jones Industrial Average down 0.14 per cent. The 30-stock Dow slipped even though Boeing jumped 6.13 per cent after the US approved a plan to resume 787 deliveries.

A better-than-expected manufacturing report helped sentiment. Shares of chipmakers like AMD and NVIDIA rebounded into positive territory and remained there. The report also showed that prices slipped, a positive development amid high inflation.

The energy sector was a big drag on the market as oil prices fell 4.8 per cent to US$93.89 a barrel as weak manufacturing data from China and Europe weighed on the demand outlook while investors braced for this week’s meeting of officials from OPEC and other top crude producers on supply. Shares of Diamondback Energy, ExxonMobil, Chevron and Devon Energy all traded down.

US contracts are edging lower after hours.

Asia-Pacific stocks fell on Tuesday as South Korea’s inflation rose and investors looked ahead to the Reserve Bank of Australia’s interest rate decision.

Hong Kong’s Hang Seng index fell 2.13 per cent in early trade, and the Hang Seng Tech index slipped 3.1 per cent.

The city’s gross domestic product shrank by 1.4 per cent in the second quarter of 2022, according to advance estimates released by the government on Monday. GDP decreased by 3.9 per cent in the first quarter of the year. Mainland China stocks also dropped.

The Shanghai Composite lost 1.49 per cent and the Shenzhen Component shed around 2 per cent. The Nikkei 225 in Japan slipped 1.35 per cent, and the Topix index lost 1.72 per cent. In South Korea, the Kospi shed 0.45 per cent and the Kosdaq declined 0.38 per cent.

Consumer prices in South Korea rose 6.3 per cent in July compared with the same period in 2021, official data showed on Tuesday. That’s in line with expectations and the fastest acceleration in prices since November 1998, Reuters reported.

The Bank of Korea raised rates by 50 basis points in July.

Bonds are rallying with the Treasury curve steepening. The Aussie curve is flattening ahead of the RBA's decision.

The yen rally is continuing, trading at a two-month high against the dollar.

Crude is nursing losses amid demand concerns and speculation the Saudis will push OPEC+ to boost output. 

US-China tensions remain elevated on several fronts. China again threatened military response amid reports Pelosi will visit Taiwan. The US has warned Beijing against escalating situation. Reuters noted that the US is weighing a plan to curb American chipmaking equipment to China. Time is also running out to avoid China stock delisting after the US audit regulator demanded full and complete access to audit papers.

Best and worst performers

The best-performing sector is Consumer Staples, up 0.52 per cent. The worst-performing sector is Materials, down 1.56 per cent.

The best-performing stock in the S&P/ASX 200 is De Grey Mining (ASX:DEG), trading 4.42 per cent higher at $0.95. It is followed by shares in Pro Medicus (ASX:PME) and Telix Pharmaceuticals (ASX:TLX).

The worst-performing stock in the S&P/ASX 200 is Credit Corp Group (ASX:CCP), trading 8.88 per cent lower at $22.16. It is followed by shares in GrainCorp (ASX:GNC) and United Malt Group (ASX:UMG).

Company news

MinRex Resources (ASX:MRR) today announced the granting of an exploration licence and the first pass ground geological mapping and rock chip sampling program over the Sisters Lithium Project. The exploration program identified high grade lithium mineralisation on the ground. MinRex Resources Managing Director Mr Karageorge commented: “We are excited to have ground confirmation of high-grade lithium mineralisation identified from outcropping pegmatites over the Sisters Lithium Project area. These rich spodumene stacked sheeted pegmatites have extensive width, length and untested zonation at depth." Shares in MRR are currently trading up 7.69 per cent at 56 cents.

Musgrave Minerals (ASX:MGV) today announced further high-grade gold assay results. Musgrave Managing Director Rob Waugh said: “It would be hard to find better results from a recent Australian exploration program and the Cue Gold Project is fast becoming one of the richest undeveloped high-grade gold deposits in Australia. Drilling continues to turn up new lodes which we will continue to define with further drilling. We are continuing to grow our understanding of the system and the controls on mineralisation." Shares in MGV are currently trading up 9.62 per cent at 28.5 cents.

Appen (ASX:APX) today issued an update in relation to the company’s half year results for the six months ended 30 June 2022 and FY2022 outlook. The company has confirmed its May 2022 downgrade with confirmation of a continued slowdown of spending from its global customers and their exposure to weaker digital advertising demand. The company however does expect higher volumes in the latter part of the second half due to the delivery of seasonal projects and a ramp up in existing projects. Shares in APX are currently trading down 27.5 per cent at $4.14.

Commodities and the dollar

Gold is trading at US$1777.30 an ounce.
Iron ore futures are pointing to a rise of 0.37 per cent.
One Australian dollar is buying 70.09 US cents.

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