Market losing momentum, materials the saviour: ASX flat at noon

Market Reports

by Lauren Hayes

Last week’s gains have not continued with the same momentum this morning. Materials, up 3.4 per cent, is bolstering the local market following a rise in commodity prices after the US dollar weakened last week. The majority of the sectors are trading in the red. At noon, the S&P/ASX 200 is 0.04 per cent or 2.90 points lower at 7,160.90.

The SPI futures are pointing to a fall of 1 point.

Best and worst performers

The best-performing stock in the S&P/ASX 200 is Champion Iron (ASX:CIA), trading 10.39 per cent higher at $5.90. It is followed by shares in Fortescue Metals Group (ASX:FMG) and Core Lithium (ASX:CXO).

The worst-performing stock in the S&P/ASX 200 is Elders (ASX:ELD), trading 16.08 per cent lower at $11.12 after announcing its FY22 results and the retirement of Managing Director and CEO Mr Allison. It is followed by shares in Perpetual (ASX:PPT), after the Pendal and Perpetual court hearing has been moved to Wednesday, and Flight Centre Travel (ASX:FLT), which confirmed at its AGM that it was too soon to provide full-year guidance citing ongoing uncertainty around the industry’s recovery.

Asian news

Asia-Pacific markets are so far mixed in early trading with China announcing some easing of its Covid measures.

Japan’s Nikkei 225 inched 0.3 per cent lower in early trade, while the Topix fell 0.4 per cent. The Kospi in South Korea has added 0.28 per cent, and the Kosdaq was 0.13 per cent higher. MSCI’s broadest index of Asia-Pacific shares outside Japan is presently up 0.25 per cent.

In economic news, Japan will release later in the week figures for gross domestic product, trade and consumer inflation, while Indonesia’s central bank holds a monetary policy meeting. Alibaba and are expected to release earnings results.

Democrats will retain control of Senate, GOP still favoured to win House

Democrats will retain control of the Senate, after they ended up winning the battle in Arizona and Nevada. Their re-elections diminished the importance of the 6 December Georgia runoff, where a Democratic win would see the party pad its Senate majority to 51-49. The Republican Party is still favoured to win the House of Representatives, although several races are still yet to be called (Politico). Republicans led 212 seats to Democrats' 210 with 218 needed for the majority win. The divided government has been favourable for markets given the thoughts the GOP will be able to block expensive legislation going forward. There is a focus shifting to a debt ceiling, which is projected to be reached in 2023. Democratic leaders on Sunday vowed to address the issue in the coming weeks during lame-duck session of Congress (Reuters, Bloomberg). The debt ceiling talks took on added urgency before the next Congress begins on 3-Jan after some Republicans threatened to use it as leverage to force concessions from President Biden.

China says Covid rules refined, not relaxed

Bloomberg has reported that top health experts believe that an overhaul to China’s Covid-Zero policy was a refinement of rules and not a relaxation of controls, dismissing interpretations that the changes were a step toward living with the virus. Cited data showing a shorter quarantine period would still catch the vast majority of Covid infections but said a strict attitude toward stamping out infections remains China's guiding principle. The NHC said changes will come from a better understanding of the virus, and a better R&D of the vaccines. China cannot afford to "lie flat" like other countries due to its large population and relatively limited medical resources. Still, officials did not rule out a further easing of the rules, as CDC reiterated the government would gradually move to shut down quarantine camps. Bloomberg has also discussed the market impact, with rule changes set to provide a further boost.

Company news

Warrego Energy (ASX:WGO) advised that it has entered into a Scheme Implementation Deed with Beach Energy (ASX:BPT), under which Beach will acquire all the issued shares in Warrego for $0.20 cash per share, plus any net proceeds received from the sale of Warrego’s Spanish assets, by way of a members’ scheme of arrangement. This represents a 36 per cent premium to Warrego’s 1-month VWAP to 9 November 2022. The Scheme is subject to approval by Warrego shareholders. Commenting on the proposed acquisition, Beach CEO Morné Engelbrecht said: “We look forward to completing the transaction with Warrego. Warrego’s exciting Perth Basin gas acreage represents an additional development opportunity for new gas supply beyond Beach’s Waitsia Stage 2 project and our gas exploration drilling which will soon commence.” Shares are trading almost 14 per cent higher at 21 cents.

Immutep (ASX:IMM; NASDAQ:IMMP) announced that it has received a $986,286 cash rebate from the Australian Federal Government’s R&D tax incentive program. The cash rebate is provided in respect of expenditure incurred on eligible R&D activities conducted in the 2021 fiscal year, mainly related to the company’s TACTI-002 clinical study using its lead compound eftilagimod alpha. Immutep will apply the non-dilutive funding towards furthering its current active clinical trial programs. The expected cash reach of the company extends into first half of calendar year 2024. Shares are trading 1.6 per cent higher at 32 cents.

Antisense Therapeutics (ASX:ANP; FSE:AWY) announced that it has initiated the process with Contract Research Organisation (CRO) Pharmaron to conduct a nine-month chronic monkey toxicology study to support the advancement of the ATL1102 program in the US for Duchenne muscular dystrophy (DMD) or any other clinical application of ATL1102. Dr Charmaine Gittleson, the Chair of Antisense Therapeutics, said: “The commencement of a chronic toxicology study that aligns with FDA requirements is an important advancement for the ATL1102 program and a key value adding catalyst. Importantly it provides the Company the prospect of sharing with FDA a compelling data package encompassing the clinical results from the placebo controlled six month study along with the outcome of the nine-month toxicology study. The Company expects that this investment in the chronic toxicology study should remove a key hurdle to lifting the partial clinical hold and in initiating clinical DMD studies under an IND and in turn provides more certainty on the path forward in the US.” Shares are trading 5 per cent higher at 11 cents.

Alpha HPA (ASX:A4N) has announced the expansion of its strategic relationship with Orica, the key chemical element counterparty to its HPA First Project currently under development in Queensland. Alpha and Orica have executed a subscription agreement whereby Orica will acquire a 5 per cent equity interest in the company. In response, Alpha’s Managing Director stated, “Orica has a detailed understanding of our process technology, the advanced nature of our marketing activities, and a strong appreciation of our commitment to building a sustainable business to help decarbonise critical future-facing industries.” Shares are trading 7.7 per cent higher at 56 cents.

Invictus Energy (ASX:IVZ) provided a drilling update on their project in Zimbabwe’s Cabora Bassa Basin. The update shows that the total depth of 3,618m measured depth has been reached, and additional zones of elevated gas and fluorescence. Commenting on the news, Managing Director Scott Macmillan, stated, “The evidence of hydrocarbon charge throughout the Upper Angwa reservoir intervals provides further validation of our subsurface model and the presence of a conventional working hydrocarbon system in the Cabora Bassa Basin." Shares are trading 48 per cent higher at 36 cents.

Commodities and the dollar

Gold is trading at US$1762.90 an ounce.
Iron ore is 4.7 per cent higher at US$92.25 a tonne.
Iron ore futures are pointing to a rise of 2.65 per cent.
One Australian dollar is buying 66.95 US cents.

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