High cost of living causes a fall in retail sales: ASX up 0.22% at noon

Market Reports

by Peter Milios

Retail sales in Australia fell 3.9% in December, surprising expectations for a 0.2% decline. The ABS Head of Retail Statistics noted that the fall follows 11 consecutive monthly rises and is likely due to high cost-of-living pressures causing consumers to do more Christmas shopping in November.

The ASX rose 0.2% intraday following the news.

In other news, OPEC+ is being cautious with oil policy as they await clarity on China's economic reopening and Russia sanctions. Industry figures anticipate rising prices due to demand in China and a European embargo on Russia, but the signals remain unclear. OPEC and its allies will likely keep production levels unchanged at their upcoming monitoring meeting. The factors being considered are the uncertain China reopening and the Russia-Ukraine conflict.

Best and worst performers

The best-performing sector is Consumer Staples, up 1.99 per cent. The worst-performing sector is Information Technology, down 0.78 per cent.

The best-performing large cap is Woolworths Group (ASX:WOW), trading 3.06 per cent higher at $35.84. It is followed by shares in Coles Group (ASX:COL) and Paladin Energy (ASX:PDN).

The worst-performing large cap is Megaport (ASX:MP1), trading 19.79 per cent lower at $6.16. It is followed by shares in Novonix (ASX:NVX) and IGO (ASX:IGO).

Asian news

Asia-Pacific shares traded mixed on Tuesday as investors look ahead to a range of economic data and a potential interest rate hike from the Federal Reserve.

Japan’s Nikkei 225 traded slightly above the flatline and the Topix gained 0.28% as Japan reported an unemployment rate of 2.5% for December, in line with expectations.

South Korean benchmark Kospi dipped 0.4%, while the Kosdaq shed 0.72% after South Korea logged a 7.3% drop for December’s year-on-year industrial output, steeper than Reuters’ expectations of a 5.1% fall.

Down day

No one specific factor behind the Monday pullback though follows a nearly 2.5% rally last week that left stocks higher for the third time in the last four weeks. Also comes ahead of myriad high-profile macro and micro events over the next few days, including central bank meetings and tech earnings. More scrutiny surrounding the quality of the recent move higher with the focus on leadership from most-shorted stocks. While positioning still flagged as supportive for stocks, JPMorgan's US Market Intelligence team pointed out that things are getting a bit stretched. Noted level of aggregate positioning only a little below neutral and is slightly above where it was in mid-August. No leadership from Greater China stocks today coming out of the LNY holidays. The Greater China rally had recently been seen as a leading indicator for global risk appetite. While China reopening is still flagged as a key bullish talking point, also some think the benefits will be largely internal given the services sector boost. Economic calendar cited as another overhang today with hotter Spanish inflation print and softer German GDP data.

Defensives leading, growth trailing in a risk-off pattern

Growth was a notable underperformer in Monday trading. FANMAG complex is lower, giving back some of the group's solid January gains. Cloud, semis, software, solar, fintech (despite well-received SOFI-US earnings), biotech, life sciences also among weaker groups. Auto manufacturers also lowered on updates including F-US EV price cuts and GM-US downgrade, while TSLA-US gave back some of last week's 33% gain. Transports mostly lower with weakness across airlines, trucking, and parcels and logistics, though rails are better. Moneycenter banks mixed and regional banks mostly lower, though a few gainers among the investment banks. Commodity-linked groups somewhat mixed with the dollar index not doing much, with industrial metals a relative outperformer, though E&Ps, oil majors lagging. Select specialty chemicals and coatings (AXTA-US upgrade) seeing some modest upside. Defensive and safe-haven plays among the better performers, including telecom, utilities, food, beverage, HPCs (particularly CL-US on upgrade), waste, managed care, and pharma.

Dallas Fed Index better than feared, though negative for ninth-straight month

January Dallas Fed Index came in at -8..4, beating estimates for -9.9 and rebounding from last month's -20.0 print. However, the production index fell 8.9 points m/m to 0.2, though the new orders index improved by seven points to -4.0. Outlook index negative for an 11th straight month, though jumped 11 points to -2.5. Employment index rose four points to 17.6, while the wage and benefits index fell 3.7 points/m to 30.5. Raw materials index also held around 20.5, below its long-term average of 28 for the third-straight month. Finished goods prices index also little changed at 9.9, just above the long-run average of 9.0. Respondent commentary included some cautious takes including recession fears and slowdown in activity, though some noted some improvement in business climate, labour market pressures. The report comes after some cautious takeaways from latest regional manufacturing surveys. Bloomberg noted recent regional Fed surveys all indicated multiple months of contraction, and comes ahead of Wednesday's January ISM manufacturing survey, which is expected to show a third-straight month of shrinking activity.

Company news

Arovella Therapeutics (ASX:ALA) has released its results for the 2nd quarter of FY 2023. During the quarter, the company continued to progress its iNKT cell therapy for cancer treatment towards first-in-human trials and announced a strategic collaboration with Imugene to combine Arovella’s iNKT cell therapy platform with Imugene’s onCARlytics platform. Highlights of the quarter include a collaboration, the optioning of cytokine technology, receipt of grant for key iNKT cell patent, closure of R&D facility, and $1.05 million R&D tax rebate refund. Shares are currently trading flat at 2.6 cent.

Magnetite Mines Limited (ASX:MGT) provided an update of its activities for the quarter ending 31st December 2022. The company's mineral resource base in South Australia exceeded 5.7 billion tonnes and remains focused on the development of its flagship Razorback Iron Ore Project. The company prioritized the completion of optimisation studies, engineering and metallurgical studies, and project de-risking during the quarter and remained in a strong cash position with $9.6 million cash on hand. Shares are currently trading 2.13 per cent lower at 46 cents.

Kazia Therapeutics (ASX:KZA) provided an update on the development of its oncology-focused drug candidates for the quarter ending December 31, 2022. The company presented final data from its phase II clinical trial of paxalisib in glioblastoma at the annual meeting of the Society for Neuro-Oncology (SNO) showing a median overall survival of 15.7 months, compared favorably to 12.7 months for temozolomide. A phase II clinical trial for paxalisib in diffuse midline gliomas has expanded internationally, with initial data expected in 2023. The company also reported positive preclinical data in melanoma from collaboration with Huntsman Cancer Institute and ongoing collaborations with the Queensland Institute of Medical Research. Shares are currently trading flat at 13 cents.

Novatti Group (ASX:NOV), a fintech company, reports strong growth in the December quarter of FY23, with sales revenue up 60% YoY to $9.3 million. The company also achieved its first-ever quarterly gross transaction value of over $1 billion, which was up 83% YoY. The company's acquiring division saw its quarterly GTV passing $54 million, up 13x YoY, and 19% from the prior quarter. The International Bank of Australia, launched in November with Novatti maintaining a 91% shareholding, is expected to significantly reduce Novatti's operating expenses. The company remains committed to delivering positive cashflow and has a strong balance sheet with enough cash resources to support growth. Shares are currently trading 6.98 per cent lower at 20 cents.

ABx Group (ASX:ABX) provided an update of its activities for the quarter ending 31st December 2022. Their maiden resource estimate for Rare Earth Elements (REE) Exploration shows 3.94 million tonnes of REE averaging 655ppm TREO-CeO2 and 918ppm TREO, which only covers 7.5% of the local prospective targets. The company has received a $3.3 million first installment from the federal government's Modern Manufacturing Initiative (MMI) grant funding and is making progress in its pilot plant design for Alcore (hydrogen fluoride and aluminium fluoride from aluminium smelter waste). They plan to begin mining in Tasmania in Q3 2023 and Queensland in H1 2025. Shares are currently trading 8 per cent lower at 11.5 cents.

INOVIQ (ASX:IIQ) released its Appendix 4C and Quarterly Business Update for the quarter ended December 31, 2022. INOVIQ's US sales team implemented its first EXO-NET sales and marketing campaign targeting over 1,000 researchers. Strong initial interest from potential customers has been received and is now being followed up. A Field Application Specialist has also been hired to further drive sales and provide technical support to US customers and the contract sales team. Shares are currently trading flat at 65 cents.

NOVONIX (ASX:NVX) released their quarterly activities report from October to December of 2022. NOVONIX is a leading US-based battery materials and technology company that has a clear path to profitability with a global tier 1 customer base. They have proprietary process technology and capabilities across the value chain, including industry-leading battery testing equipment. They have experienced recent milestones such as a US$150 million investment from Phillips 66 and a US$150 million grant from the DOE. Shares are currently trading 6 per cent lower at $1.82.

BluGlass (ASX:BLG), a global semiconductor developer, has launched its first suite of gallium nitride (GaN) laser products for customer purchase at the SPIE Photonics West conference in San Francisco. The first suite of GaN laser products are meeting entry-level commercial specifications and pave the way for first orders and commercial revenues. BluGlass President Jim Haden said the company has a large market opportunity within the $2.5 billion GaN laser industry and the launch at the conference allows them to engage with potential customers. Shares are currently trading 7.55 per cent higher at 5.7 cents.

PropTech Group (ASX:PTG), a software provider for real estate agencies, has released its financial results for the second quarter of FY23 ending December 31st, 2022. The results showed positive net cash flows from operations of $0.4 million and a strong cash balance of $5.8 million. The company's cash receipts for the year to date was $12.0 million, a YoY growth of 12%. The PropTech Group Board also updated shareholders on the proposed scheme of arrangement for the acquisition of the company by Rockend Technology Pty Limited. Shares are currently trading flat at 59.5 cents.

North Stawell Minerals' (ASX:NSM) December 2022 quarterly report shows a successful quarter despite a prolonged wet season. Two priority projects, Darlington and Caledonia, returned positive results and are considered bellwethers for the company's exploration strategy. Darlington had a central zone of 3+ g/t Au and Caledonia evolved from a surface gold-arsenic anomaly to a 250m strike target. Both projects remain open for further exploration. The company's exploration strategy continues to be effective with a focus on detailed mineralization modelling and geophysically responsive targets. Shares are currently trading flat at 19.5 cents.

AuKing Mining Limited (ASX:AKN) advises that it has completed the purchase of various prospective uranium and copper licences in Tanzania. In response, AuKing’s CEO, Mr Paul Williams, said: “Already this year, we have seen uranium prices push past US$50 per pound and demand is set to increase. AuKing’s strategic pivot into this important energy sector commodity is a tremendous value-add for our Company and its shareholders.” Shares are currently trading 19.1 per cent higher at 12.5 cents.

Heavy Rare Earths (ASX:HRE) has announced the Highest Grade Rare Earths to date at their Project. This brings the total number of holes reported to 141, nearly one third of all holes drilled during the 2022 campaign. Shares are currently trading 23.1 per cent higher at 16 cents.

Sayona Mining (ASX:SYA) has announced that the restart of their NAL operation achieves a new milestone, with successful trial feed of 400 tonnes of spodumene ore into the crushing plant. Guy Belleau, CEO Sayona Québec, stated, "2023 will be a remarkable year in every way for Sayona and for Québec as a whole, as the first tonnes of lithium spodumene will be produced at our NAL operation.” Shares are currently trading 3.39 per cent higher at 28.5 cents.

Radiopharm Theranostics (ASX:RAD), a company developing radiopharmaceutical products for both diagnostic and therapeutic uses, has provided a summary of its activities for the quarter ending December 31, 2022. The company has received IND approval from the FDA for its αVβ6 Integrin technology and will begin a Phase 1 imaging trial in patients with pancreatic cancer by the end of Q1 CY23. The interim data from the F-18 Pivalate phase 2a imaging trial in brain metastases was presented at a symposium in Barcelona and showed high tumour uptake and that F-18 Pivalate can be used to monitor cerebral metastases. Shares are currently trading flat at 14 cents.

Altech Chemicals (ASX:ATC) made progress on its CERENERGY Battery Project with workshops held in Germany, the design basis for a 100MWh battery plant being finalised, and major equipment suppliers being selected. The company is also exploring various grant schemes and initial contacts with EU banks. The board of directors visited Schwarze Pumpe in Germany to inspect the Silumina Anodes pilot plant and CERENERGY pilot plant, and participated in technical workshops. The Annual General Meeting was held on November 30, 2022 and all resolutions put to shareholders were carried. Altech has also launched its CERENERGY 60KWh Battery Pack design for the renewable energy storage market.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
Iron ore is 1.9 per cent higher at US$129.80 a tonne.
Iron ore futures are pointing to a 0.9 per cent fall.
One Australian dollar is buying 70.51 US cents.

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