ASX down 1.31% as China's deflation concerns spooks investors

Market Reports

by Peter Milios

China's shift towards deflation is causing concern in financial markets, yet some money managers suggest potential positive outcomes, as lower prices stemming from China's role as a major global producer could lead to reduced costs worldwide.

This deflationary trend might enable central banks to avoid further interest rate hikes, potentially pivoting towards easing to support sluggish growth, offering a silver lining amid China's struggle to recover from post-Covid setbacks, with subdued inflation expected due to factors such as a property market downturn and challenges in the shadow banking sector, as noted by EdenTree Investment Management and Gama Asset Management SA.

This situation could even prompt a sooner peak in monetary tightening and decrease demand for commodities, ultimately easing inflationary pressures and potentially allowing Western economies to sustain higher levels of activity.

At noon, the S&P/ASX 200 is 1.31 per cent lower at 7,209.10.

The SPI futures are pointing to a fall of 97 points.

Best and worst performers

The best-performing sector is REITs, up 0.14 per cent. The worst-performing sector is Information Technology, down 3.01 per cent.

The best-performing large cap is REA Group (ASX:REA), trading 0.86 per cent higher at $160.22. It is followed by shares in Liontown Resources (ASX:LTR) and Coles Group (ASX:COL).

The worst-performing large cap is Pro Medicus (ASX:PME), trading 3.64 per cent lower at $69.87. It is followed by shares in WiseTech Global (ASX:WTC) and Computershare (ASX:CPU).

Asian markets

Asia-Pacific markets fell on Wednesday mirroring moves on Wall Street after a decline in U.S. banks.

Shares of JPMorgan Chase and Wells Fargo dropped 2%, and Bank of America dropped 3%. The action came after Fitch warned it may have to downgrade credit rating dozens of banks, including JPMorgan Chase.

Last week, Moody’s lowered its rating on 10 U.S. banks while putting other big institutions on a watchlist for potential downgrades.

In Asia, Japan’s Nikkei 225 slid 0.82% and the Topix was down 0.68%, despite business
sentiment improving in July, according to the Reuters Tankan survey.
South Korea’s Kospi came back from a public holiday 1.03% down, while the Kosdaq saw a larger loss of 1.18%.

Futures for Hong Kong’s Hang Seng index stood at 18,360, pointing to a weaker open compared to the HSI’s close of 18,581.11. China will release its house prices for July, that investors will watch given the country’s recent real estate troubles.

Company news

AML3D (ASX:AL3) has received a $2M order from US Navy for submarine parts. In Response, interim CEO Sean Ebert said: “AML3D’s focus is on the US defence, aviation and maritime sectors and the Company is well positioned to access the many opportunities that will be created as a result of the AUKUS Alliance, in the US, Australia and Europe.” Shares are trading 26.98 per cent higher at 8 cents.

Imugene Limited (ASX:IMU) announced that it has entered into an agreement with Precision Biosciences, Inc. (NASDAQ GS: DTIL) to acquire a worldwide exclusive licence to Precision’s off the shelf CD19 CAR T cell therapy. In response, Imugene MD & CEO, Ms Leslie Chong said, “We plan to complete the ongoing multi-centre Phase 1b study using the recommended Phase 2 regimen as we prepare for the start of a potential registrational study at the earliest opportunity.” Shares are on a trading halt and last traded at 9.4 cents.

Loyal Lithium (ASX:LLI) announced that multiple spodumene bearing pegmatite dykes discovered at the Trieste Lithium project, James Bay, Canada. In response, Mr. Adam Ritchie, commented: “The discovery of five spodumene rich dykes gives us great confidence as we accelerate our exploration activities and prepare for drilling.” Shares are trading 18.9 per cent higher at 53.5 cents.

Commodities and the dollar

Gold is trading at US$1934.80 an ounce.

Iron ore is 0.6 per cent higher at US$104.10 a tonne.

Iron ore futures are pointing to a 0.13 per cent rise.

One Australian dollar is buying 64.44 US cents. 

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