ASX holds ground after yesterday’s fall: Aus shares 0.6% higher at noon

The Australian share market has opened slightly higher after yesterday’s $60 billion sell-off, which was sparked by fears of more-aggressive rises in interest rates.

That follows a return to calm on Wall Street, which saw its biggest losses since 2020 on Tuesday after consumer prices rose in North America last month.

At noon, the S&P/ASX 200 is 0.55 per cent or 37.60 points higher at 6866.20.

The SPI futures are pointing to a rise of 16 points.

Best and worst performers

The best-performing sector is Energy, up 3.70 per cent. The worst-performing sector is Utilities, down 0.73 per cent.

The best-performing stock in the S&P/ASX 200 is Coronado Global Resources (ASX:CRN), trading 9.44 per cent higher at $1.85. It is followed by shares in New Hope Corporation (ASX:NHC) and Pilbara Minerals (ASX:PLS).

The worst-performing stock in the S&P/ASX 200 is South32 (ASX:S32), trading 6.83 per cent lower at $4.03. It is followed by shares in Fletcher Building (ASX:FBU) and Domino Pizza Enterprises (ASX:DMP).

Asian markets

Shares in the Asia-Pacific have mildly risen after Wednesday’s negative session. US indexes inched higher overnight and the producer price index showed a decrease in wholesale prices of 0.1 per cent in August amid inflation fears.

The Japanese yen was last trading at 143.04 against the dollar after a reported “rate check” by the Bank of Japan.

In South Korea, the Kospi has added 0.29 per cent.

New Zealand GDP growth tops forecasts, bolstering expectations of another 50 bp RBNZ rate hike

New Zealand GDP expanded 1.7 per cent q/q in Q2, higher than consensus for a 1.0 per cent increase and capping off a turnaround from Q1’s 0.2 per cent contraction. On a y/y basis GDP rose 0.4 per cent vs consensus for no growth and Q1’s 1.0 per cent pace. Underlying details were mixed. Reopening of international border and hospitality underpinned services spending. However, fuel and food costs dampened discretionary spending, supply constraints contributed drove construction lower and manufacturing output fell sharply. Growth anticipated to slow as New Zealand households contend with rising interest rates and inflation, and falling house prices. RBNZ still expected to hike official cash rate (OCR) by another 50 bp in October, which would take it to 3.50 per cent. More rate hikes expected after RBNZ modelled a terminal rate of just above 4.0 per cent by early 2023.

China GDP growth forecasts continue to come down

Latest round of Covid restrictions has prompted further downgrades to China GDP growth forecasts. While Bloomberg consensus is for GDP to expand 3.5 per cent in 2022, some economists doubt 3 per cent is achievable given the multitude of headwinds to growth. August activity data expected to show muted improvement in fixed asset investment, industrial production, and retail sales. Covid lockdowns remain the biggest drag on growth with services spending slow to recover amid depressed consumer confidence. Moreover, authorities are not expected to ease up on the zero tolerance approach until at least March 2023. Property remains weak with developers facing ongoing cash crunch, home sales continuing to contract, and falling housing values dragging down consumer wealth. Manufacturing sector is also struggling to expand as weaker external demand compounds disruptions to output from lockdowns and drought.

Markets cautious on Japan FX intervention, though scepticism remains

No additional developments since BOJ reportedly conducted a rate check Wednesday as a required step in preparation for FX intervention. USD/JPY stabilized in the low 143 range after trading near 145, reversing most of the movements in the wake of the US CPI data. Finance Minister Suzuki declined to confirm or comment on the rate check, adding that the government will continue to monitor market developments with the BOJ (Kyodo). Added the government will move “instantly and incessantly” if the government decides to intervene. Rate check surprised markets, though analysts are doubtful about the possibility and effectiveness of intervention. Some thoughts this was an extension of verbal warnings. Press have widely noted a high bar, requiring consent from the US and/or other major economies, seen as unlikely. Looking ahead, BOJ-Fed policy divergence stands to widen further next week with Fed expected to announce another rate hike while BOJ remains committed to easing.

Japan trade data mixed

Customs exports rose 22.1 per cent y/y in August, below expectations of 23.6 per cent and followed 19.0 per cent in the previous month. Highest growth since August last year. Growth driven by autos, metallurgical fuel, and semiconductor making equipment. Imports surged 49.9 per cent vs consensus 46.7 per cent and prior 47.2 per cent. Coal and LNG are still logging triple-digit growth, while crude oil is up 90.3 per cent. Average yen rate was down 22.9 per cent vs dollar on customs-cleared basis. By region, exports led by US demand, while Asia drove imports. Underlying dynamics were little changed as sharply higher price factors masked declines in export volumes (sixth straight month, though US shipments turned positive for the first time since April) and low single-digit gains in imports. Next focus will be BOJ real trade indices for clearer GDP implications.

Company news

Kingston Resources (ASX:KSN) has reported that gold production at its Mineral Hill Mine in NSW has increased significantly in the first two months of the September quarter. The ramp-up of gold production from the Tailings Storage Facility processing operation has delivered a monthly gold production record in the month of July, which was subsequently exceeded in August to deliver a further production record. Commenting on the production, Kingston Resources Managing Director Andrew Corbett said: “Most notably, production from the TSF Project has delivered continuous monthly gold production records in July and August, and we are pleased to see grade and recoveries improve as expected as mining moves deeper in the tailings facility.” Shares are trading 3.4 per cent higher at 9 cents.

Provaris Energy (ASX:PV1) has executed a Memorandum of Understanding (MOU) with Total Eren, a leading French-based renewable energy Independent Power Producer (IPP), to further their co-operation on the development of solutions to transport green hydrogen projects to Asia and Europe where the application of Provaris’ compressed hydrogen storage and transport supply chain can be applied. Martin Carolan, Provaris CEO commented: “Our discussions with Total Eren over time have identified a strong alignment on the commercial and technical benefits of compression for the storage and transport of hydrogen, and we look forward to a closer relationship to facilitate and accelerate the delivery of the first fleet of GH2 Carriers.” Shares are trading 7.9 per cent higher at 7 cents.

Caspin Resources (ASX:CPN) today announced significant rhodium mineralisation has been found at the Yarawindah Brook Project in Western Australia, only 100km north of Perth. Caspin’s CEO, Greg Miles, commented: “This is an outstanding result that clearly celebrates Serradella as a major PGE discovery. Our best drill result just got better. When we discovered rhodium in our initial discovery hole we commenced a large re-assay program in the hope that further mineralisation would be found. This exercise has surpassed our expectations and with such high-grade results, clearly differentiates Yarawindah Brook from other PGE projects.” Shares are trading 17.7 per cent higher at 77 cents.

Commodities and the dollar

Gold is trading at US$1694.69 an ounce.
Iron ore is 3.3 per cent lower at US$100.80 a tonne.
Iron ore futures are pointing to a rise of 1.81 per cent.
One Australian dollar is buying 67.52 US cents.

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