ASX rebounds, tech shares lead the charge: Aus shares up 0.3% at noon

Market Reports

by Paul Sanger

The ASX is back in the green today following the rally on Wall street overnight.

At noon, the S&P/ASX 200 is 0.30 per cent or 20.70 points higher at 6996.60.

The SPI futures are pointing to a rise of 16 points.

Asia-Pacific shares are also trading higher

Hong Kong’s Hang Seng index jumped 2.15 per cent in early trade, and the Hang Seng Tech index rose 3.16 per cent.

Shares of Alibaba popped around 5 per cent ahead of its earnings results later Thursday. The Chinese e-commerce giant could see revenue decline for the first time on record,according to analysts’ average forecast on Refinitiv. But that could be the floor for Alibaba as revenue is expected to improve going forward.

Mainland China markets gained as well. The Shanghai Composite added 0.39 per cent and the Shenzhen Component climbed 0.44 per cent. Elsewhere in Asia, Japan’s Nikkei 225 rose 0.57 per cent, while the Topix index was flat. The Kospi in South Korea gained 0.55 per cent and the Kosdaq advanced 1.08 per cent.

US contracts steady in extended trade after major indexes finished at multi-month highs on Wednesday.

Bonds mixed with JGB, Aussie and New Zealand curves flattened and Treasury yields reversed lower.

Dollar little changed against majors.

Crude and base metals leading commodity market gains.

Best and worst performers

The best-performing sector is Information Technology, up 2.10 per cent. The worst-performing sector is Energy, down 1.61 per cent.

The best-performing stock in the S&P/ASX 200 is Block (ASX:SQ2), trading 9.69 per cent higher at $127.00. It is followed by shares in Imugene (ASX:IMU) and PointsBet Holdings (ASX:PBH).

The worst-performing stock in the S&P/ASX 200 is Orica (ASX:ORI), trading 8.78 per cent lower at $15.69. It is followed by shares in GrainCorp (ASX:GNC) and Lynas Rare Earths (ASX:LYC).

US equities were higher in Wednesday trading, ending just off best levels.

US stocks clawed back losses from earlier in the week, as traders cheered better-than-expected economic data that helped negate recession fears.

Multiple data points regarding employment in the first half of the year haven't reconciled with what usually happens during recessions, according to research by CNBC. For one, payrolls usually decline during downturns, when they actually rose in the first of the year. Personal consumption also grew at a solid pace in the first six months, in contrast with historical recession trends.

Overnight the Dow Jones Industrial Average rose 1.29 per cent The S&P 500 gained 1.56 per cent to 4,155.17, hitting its highest level since June while the Nasdaq Composite increased 2.59 per cent. The Nasdaq finished at its highest level since 4 May, and the S&P 500 since 2 June.

The earnings season is continuing, giving investors hope that the market can recover and potentially start a new bull market as opposed to a bear rally. The S&P 500 is up about 14 per cent from its recent intraday low in June, and the Nasdaq is at levels not seen since May.

The top mover among major Nasdaq stocks was Moderna, which surged 16 per cent on the back of a blowout earnings report. That move boosted other biotech stocks.

Overnight best-performing industries included metaverse and AR, finance, internet and retail stocks. Weaker industries included lithium and social media stocks.

The only negative sector was energy, with the oil price down 3.98 per cent. Interestingly, while the oil price has been falling, oil stocks are up. One reason is that the aggregate per-share earnings for energy companies in the the second quarter have beaten expectations by 12 per cent, according to Credit Suisse.

Refiners, producers and big multinational names like Exxon Mobil are likely to post their best earnings results in more than a decade, if not the best ever.

One metric that investors have been particularly focused on is free cash flow, which includes the cash a company brings in after paying for capital and operating expenses.

Most oil producers are returning the majority of their free cash flow to shareholders via dividends and share buybacks, so the total cash return yield against the price of oil stocks is fairly high, keeping investor money flowing into these names.

Following free cash flow is certainly a thematic playing out on the ASX with coal stocks at the moment with capital management initiatives on the agenda as free cash flow drives share prices higher and investors see dividend potential.

Recent Fed pushback against expectations of a dovish pivot in 2023 have led markets to dial back rate cut projections and price in additional tightening in 2023. Fed's Barkin said will do what it takes to return inflation to target, Daly backed a 50 bp rate hike in September and Kashkari said rate cuts next year are "very unlikely." Continued yield curve inversion also heightening concerns about a recession and a policy mistake.

While markets appear to have moved on from Pelosi's Taiwan visit, political fallout continues with Taiwan scrambling jets after following Beijing's military provocations on the Strait. Also concerns China will widen its economic retaliation against Taipei. Few articles have highlighted White House efforts to deter Pelosi from visiting and block lawmakers from strengthening US policy toward Taiwan.

Company News

Brookside Energy (ASX:BRK) provided an update to shareholders today confirming the establishment of commercial production at their Flames Well in the Anadarko Basin. Flame Well is now producing premium light sweet crude and liquids rich gas, the unhedged production is allowing the company to take full advantage of the current strong pricing environment. Brookside Energy’s Managing Director David Prentice commented “ The establishment of commercial production on our Flame Well is a fantastic achievement on its own, but when combined with the now sustained production from our other two wells, it marks the achievement of a company making milestone. Shares are currently trading 13.3 per cent higher at 1.7 cents.

Anson Resources ( ASX:ASN) today announced further increases in lithium grades from its current drilling campaign at the Paradox Lithium Project in UTAH, USA. Based on these results, the Company plans to confirm a JORC resource upgrade incorporating all of the Clastic Zone horizons and the Mississippian Units to add to the Project’s existing JORC resource. Shares are currently trading 9.6 per cent higher at 14 cents.

American Rare Earths ( ASX:ARR) today announced Assay Results from new claims area “bluegrass” showing significant upside for Halleck Creek. These results are on the back of an outstanding maiden drill campaign announced in June and July, demonstrating Halleck Creek as potentially one of the largest, rare-earth projects in the US. MD and CEO Chris Gibbs commented: “Halleck Creek continues to exceed our expectations.” “These are very exciting results for the Company coming soon after the highly encouraging drill results from the maiden drill program completed at Halleck Creek earlier this year.” Shares are currently trading 8 per cent higher at 27 cents.

Commodities and the dollar

Gold is trading at US$1768.74 an ounce.
Iron ore is 4.6 per cent lower at US$108.10 a tonne.
Iron ore futures are pointing to a fall of 2.7 per cent.
One Australian dollar is buying 69.61 US cents.

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