ASX down 0.4% at noon as Materials get hit

Market Reports

by Peter Milios

Materials is down 1.79 per cent at noon, as heavy hitters, BHP (ASX:BHP), Rio Tinto (ASX: RIO) and South32 (ASX:S32) suffer losses to start the day of trade.

Qantas (ASX: QAN) experienced its biggest stock market drop in 8 months due to concerns over its plans to increase capital expenditure by up to $400m in FY23, which is higher than expected, and investors are also questioning whether the airline's record half-year profit is as good as it will get with increasing competition. As a result, Qantas' shares fell by 5.7%.

At noon, the S&P/ASX 200 is 0.38 per cent lower at 7,287.

The SPI futures are pointing to a fall of 16 points

Best and worst performers

The best-performing sector is Utilities, up 0.89 per cent. The worst-performing sector is Materials, down 1.79 per cent.

The best-performing large cap is Qube Holdings (ASX:QUB), trading 8.03 per cent higher at $3.23. It is followed by shares in Medibank Private (ASX:MPL) and The Lottery Corporation (ASX:TLC).

The worst-performing large cap is Qantas Airways (ASX:QAN), trading 5.1 per cent lower at $6.14. It is followed by shares in Reece (ASX:REH) and BHP Group (ASX:BHP).

Asian markets

Asia Pacific markets opened mixed on Thursday after the U.S. Federal Reserve released the minutes of its most recent meeting that showed central bank members are still committed to fighting inflation with rate hikes.

The South Korean Kospi started the day 0.5% higher and the Kosdaq rose 0.45% higher.

South Korea will await its central bank’s decision on whether to hike interest rates. A poll of 42 economists expect the Bank of Korea to hold its lending rate at 3.5%.

Japanese markets will be closed on Thursday for the Emperor’s birthday.

Hong Kong and Singapore are expected to release their consumer price indexes, with Singapore’s CPI expected to come in at 7.1% for January.

Not much new from February FOMC minutes

The minutes to the February FOMC meeting said almost all participants favored a 25 bp hike, though a few said they could support a 50 bp hike. Almost all officials also saw a benefit of slowing the pace of rate hikes in order to allow them to observe the economy's progress toward the employment and price stability goals. Some said that the risks to their inflation outlook had become more balanced, though participants agreed that the risks to the outlook for economic activity were weighted to the downside. However, there was a fairly large focus on financial conditions. Some noted measures of financial conditions eased over the past few months, while a few noted it was important for financial conditions to be consistent with the degree of policy restraint to bring inflation back to the 2% target. Officials cautioned that an unwarranted easing in financial conditions would complicate the committee's effort to restore price stability. The release had little impact on market pricing on the Fed rate path, with expectations for a peak Fed funds rate essentially unchanged in the 5.25-5.5% range.

Bullard still sees more hikes to come, though outlook may not be as hawkish as expected

Speaking to CNBC, St. Louis Fed's Bullard (non-voter) highlighted a soft landing scenario, saying the economy is stronger than previously thought. However, Bullard said he sees rates reaching 5.375%, with rates needing to move higher in order to tame inflation. However, Bullard also said that markets may be overpricing the risk of recession this year, though there's still a risk inflation doesn't come down or reaccelerates. Bullard didn't offer any calls on the next FOMC meeting after he said last week he wouldn't rule out a 50 bp hike in March (Bloomberg). However, early reads suggested Bullard's comments might not be as hawkish as expected as his target for a 5.375% peak fed funds rate could mean the median outlook on the next dot plot holds at 5.125% range. Other Fedspeak today include New York's Williams (voter), who is expected to speak on inflation (17:30 ET). Elsewhere, Bloomberg noted the White House may be narrowing its search for the next Fed Vice Chair, including academics Karen Dynan and Janice Eberly, as well as Morgan Stanley economist Seth Carpenter.

Company news

Mt Monger (ASX: MTM) announced that it will acquire an advanced carbonatite Rare Earth project in Canada from TSX listed Geomega Resources. In response, Managing Director Lachlan Reynolds commented, “This is a further strategic investment by the Company into the rare earth element sector, which we believe has very positive long-term demand outlook due to the global clean energy transition.”Shares are trading 33.3 per cent higher at 10 cents at noon.

IVE group (ASX:IGL) has announced their financial results for the six months to 31 December 2022. Revenue is up 31%, EBITDA is up 17.7% and NPAT is up 16.5%. In response, CEO Matt Aiken stated, ““The first half result was ahead of expectations, underpinned by a strong performance across the Group.” Shares are trading 3.9 per cent higher at $2.68 at noon.

Dateline Resources Limited (ASX: DTR) has agreed with US company MW Sorter to combine Dateline's Gold Links mine and Lucky Strike processing plant with MW's stockpiles at the London and Hock Hocking mines. In response, Dateline’s Managing Director, Stephen Baghdadi, commented: “When we commenced the search for a joint venture partner for Gold Links, we sought a partner that had both financial capabilities as well as US operating experience.”Shares are trading 11.5 per cent higher at 2.9 cents at noon.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
Iron ore is 0.9 per cent lower at US$130.60 a tonne.
Iron ore futures are pointing to a 0.2 per cent fall.
One Australian dollar is buying 68.03 US cents.

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