Robust labour market and missile explosion in Poland: ASX down 0.41% at noon

Market Reports

by Lauren Hayes

The Australian market shook off the positive lead from Wall Street overnight with the major index opening lower. It is day 2 of the G20 summit for world leaders gathering in Bali, and investors are digesting the missile explosion in Poland with uncertainty building around a possible escalation to the Ukraine war. Energy is outperforming led by Whitehaven Coal.

At noon, the S&P/ASX 200 is 0.41 per cent or 29.10 points lower at 7112.50.

The SPI futures are pointing to a fall of 37 points.

In economic news, the Australian Bureau of Statistics released the Wage Price Index this morning, which rose 1 per cent in the third quarter of the year, taking annual growth to 3.1 per cent. The read confirms robust demand for labour which beat forecasts of a 0.9 per cent quarterly gain and a 3 per cent annual rise. The RBA will look to the result as a signal to whether high inflation is feeding through to pay and price setting behaviour. Economist’s are now predicting the RBA will raise rates by 25 basis points in December, and a further 50 basis points in early 2023.

And the crypto debacle is playing out at home with Brisbane-based crypto exchange Digital Surge freezing withdrawals citing its exposure to bankrupt global player FTX. Digital Surge outlined in an email to customers its vulnerability to the collapsed trading platform.

Best and worst performers

The best-performing sector is Energy, up 1.29 per cent. The worst-performing sector is Financials, down 1.37 per cent.

The best-performing stock in the S&P/ASX 200 is Nufarm (ASX:NUF), trading 8.95 per cent higher at $5.91. It is followed by shares in Sandfire Resources (ASX:SFR) and Whitehaven Coal (ASX:WHC).

The worst-performing stock in the S&P/ASX 200 is Aristocrat Leisure (ASX:ALL), trading 5.04 per cent lower at $35.97. It is followed by shares in Novonix (ASX:NVX) and De Grey Mining (ASX:DEG).

Asian News

JPMorgan downgraded its economic forecasts for China in response to developments including a recent surge in Covid cases and a “notable drag on domestic activity,” analysts said in a note.

The investment bank now expects China’s GDP growth for 2022 to come in at 2.9 per cent, down from its previous forecast of 3.1 per cent. In 2023, JPMorgan sees China’s economy growing 4 per cent, compared with an earlier prediction of 4.5 per cent.

The Nikkei 225 in Japan has dropped 0.59 per cent and the Topix has fallen 0.51 per cent. South Korea’s Kospi has so far slipped 0.68 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan has fallen 0.3 per cent.

Chinese tech giant Tencent is due to report its third-quarter earnings and a report said the company is conducting a new round of job cuts. Indonesia’s central bank starts its two-day meeting, in which economists expect the benchmark interest rate to be raised by 50 basis points to 5.25 per cent.

Another inflation reprieve rally

The second cooler-than-expected inflation print in less than a week has driven the latest growth/long duration/risk-led rally. In addition to this, Fed officials have continued to talk about a slower pace of tightening going forward. There was likely some additional support from positioning and sentiment dynamics. The Bank of America November Global Fund Manager Survey showed cash levels at 6.2 per cent, with the Bank of America Bull & Bear Indicator still at 0, net 77 per cent say global recession and allocation to tech will reach lowest point since 2006. There also seems to be some positive spillover today from another big rally in Greater China shares, which have been underpinned by the nascent zero Covid pivot and property support measures. Retail earnings got off to a solid start with the beat and raise from Walmart, which also highlighted some meaningful improvement in inventory positioning (key area of scrutiny into retail results). While Home Depot was up against some elevated expectations and the implied Q4 guide was below, results are still ahead and fit with fairly resilient home improvement spending.

Russian-produced missiles land in NATO member Poland, killing two

Explosions on Poland's eastern border killed two people on Tuesday (Bloomberg). Poland said the blast was caused by a Russian-produced missile, but there is no concrete evidence of who fired the explosion (Bloomberg). NATO ambassadors and EU leaders will hold separate meetings on Wednesday to discuss the development. The White House also confirmed President Biden was briefed and spoke with Polish President, Duda. Duda announced his country will likely invoke Article 4 of NATO treaty, which allows allies to raise concerns on national security threats with other NATO members. Russia denied it was responsible and called reports "deliberate provocation" aimed at escalating tensions. While there have been thoughts that the recent Russian pullback from Kherson could lead to revival of ceasefire talks, Moscow unleashed a barrage of missiles earlier on Tuesday targeting Kyiv and other parts of Ukraine.

Company News

Bass Oil Limited (ASX:BAS) has confirmed that it has identified a significant gas resource in Cooper Basin in South Australia. The gas resource has been identified following an independent geological assessment by Fluid Energy Consultants, representing a new notable gas play in the region and potential new material source of gas for the domestic market. In response, Bass Oil Managing Director Mr Tino Guglielmo said: “A new gas resource of this kind is able to be commercialised efficiently due to the mature infrastructure of the Cooper Basin. Whilst we will progress this opportunity with vigour, we are also conscious of maximising the benefit to our shareholders.” Shares are trading 138 per cent higher at 9 cents.

Stealth Global Holdings Ltd (ASX:SGI) a leading industrial distribution group has today announced its sales results for the first four months of the Fiscal year 2023 trading period. Some highlights include: the company increased its revenue by 22 per cent to $36 million along with the firm delivering double-digit sales growth in all customer segments. Shares are trading 3.9 per cent higher at 14 cents.

Archer Materials Limited (ASX:AXE) informed shareholders that the company has implemented an early-stage prototype of an integrated biochip platform with automated liquid sample handling and readout. The work is a major milestone towards Archer’s biochip technology commercialisation. Commenting on Archer’s biochip development progress, Company CEO Dr Mohammad Choucair said: “Archer will focus on building advanced and sophisticated versions of this system which could be used in commercial or applied research settings.” Shares are trading 6.8 per cent higher at 71 cents.

Commodities and the dollar

Gold is trading at US$1778.33 an ounce.
Iron ore is 0.4 per cent higher at US$95.70 a tonne.
Iron ore futures are pointing to a rise of 1.18 per cent.
One Australian dollar is buying 67.44 US cents.

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