Wednesday, March 29, 2023
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The ASX declines by 0.2% at noon amid concerns that recession is looming in the US

Australia’s share market trimmed most of its early decline as US futures slightly rose. The S&P/ASX 200 index decreased by 0.2 per cent at 7512 around midday, after initially falling as much as 0.5 per cent to a six-day low of 7494.4 points.

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The decline was broad but mostly small, with the exception of the utilities and tech sectors where AGL dropped 9.8 per cent due to disappointing results and Xero fell 2.9 per cent . ANZ rose 0.7 per cent after its trading update, while other banks were little changed.

The materials sector saw mixed results for iron ore miners and weakened performance from gold and lithium players.

The SPI futures are pointing to a fall of 20 points.

Best and worst performers

The best-performing sector is Health Care, up 0.59 per cent. The worst-performing sector is Utilities, down 2.34 per cent.

The best-performing large cap is Mercury NZ (ASX:MCY), trading 6.18 per cent higher at $5.84. It is followed by shares in IDP Education (ASX:IEL) and ASX (ASX:ASX).

The worst-performing large cap is AGL Energy (ASX:AGL), trading 9.57 per cent lower at $7.18. It is followed by shares in Whitehaven Coal (ASX:WHC) and New Hope Corporation (ASX:NHC).

Asian news

Stocks in the Asia-Pacific traded lower on Thursday, as investors assessed further risks of more rate hikes to come. A number of Federal Reserve speakers reiterated the central bank is yet to be finished with its hiking cycle, including Fed Governor Christopher Waller.

The Nikkei 225 fell 0.58%, the Topix fell 0.21%.In South Korea, the Kospi fell 0.56% and the Kosdaq shed 0.12%.

All sectors lower, with big tech a drag

All sectors were lower today in the wake of Tuesday afternoon’s rally. FANMAGs were mostly lower today with GOOGL-US the big decliner after its Bard chatbot stumbled in a demonstration; meanwhile MSFT-US not as bad, cushioned by ongoing positive AI sentiment. Retail/apparel was broadly down; UAA-US beat but analysts flagged margin concerns. Homebuilders were weak despite an uptick in weekly mortgage applications. Restaurants were mostly lower with some focus on CMG-US paring recent gains after its earnings miss. Multis (EMR-US ), utilities, paper/packaging, grocers, semis lagged as well. Many meme stocks were weaker; BBBY-US gave back some of Tuesday’s big rally. Few outright gainers though autos outperformed (TSLA-US the standout though most EVs down). Managed care, larger-cap pharma, and select distributors cushioned healthcare. Several insurers added to solid WTD gains. Media, oil services, A&D, and waste also held up better.

A busy day of Fedspeak leans hawkish with commentary around inflation, wage growth

Fed Governor Waller (voter) said excessive inflation is a more serious problem than higher rates, and he needs to see more moderation before his outlook changes. Waller also said that he sees no signs of a quick drop in inflation, and that rates may stay higher for longer than some expect. New York Fed’s Williams (voter) said this morning that the Fed still has a lot of work to do on rates, though the Fed can probably take lesser steps as it moves toward a peak, which he still sees at 5.0-5.25% (Bloomberg). Williams also said financial conditions have gotten tighter and are now broadly consistent with the Fed’s policy outlook, though the Fed would have to go much higher on rates if financial conditions loosen too much. Minneapolis’ Kashkari (voter) said wage growth remains too hot to support 2% inflation, while also saying that financial markets have more confidence than the Fed does that inflation will fall quickly. Fed Governor Cook said today that the Fed isn’t done yet with raising rates, and rates will need to be kept sufficiently restrictive (Bloomberg). While the latest Fedspeak included some hawkish views, it has still mostly paralleled Chair Powell’s latest commentary, noting more rate hikes are ahead though the Fed will be data dependent given falling inflation though a still-tight labor market.

Company news

Kairos Minerals (ASX:KAI) has announced that Extensional Drilling at their Mt York Gold Project has intercepted outstanding results. Kairos Managing Director, Dr Peter Turner said: “The results support our view that Mt York is a big system in a Tier-1 location with consistent mineralisation.” Shares are trading 9.5 per cent higher at 2.3 cents.

Accelerate Resources (ASX:AX8) announced High Grade Manganese Drill Results from their project in WA. In response, Managing Director Yaxi Zhan commented, “These exceptional results represent only the very early stages of our efforts to delineate significant high grade resources across our 35 km long Woodie Woodie North Project with a series of extensive high grade zones already identified across the project.” Shares are trading flat at 2.6 cents.

Argenica Therapeutics (ASX:AGN) has announced that their preclinical data shows ARG007 inhibits a cause of alzheimers. In response, Dr Liz Dallimore, Argenica’s Managing Director, said “It is well recognised that Abeta aggregation in the brain plays a key role in initiating Alzheimer’s Disease, and therefore a safe therapeutic drug that can reduce Abeta aggregation is a huge opportunity.” Shares are trading 28.4 per cent higher at 52 cents.

Commodities and the dollar

Gold is trading at US$1782.70 an ounce.
Iron ore futures are pointing to a 1.24 per cent rise.
One Australian dollar is buying 69.25 US cents.

Peter Milios

Peter Milios is a recent graduate from the University of Technology – majoring in Finance and Accounting. Peter is currently working under equity research analyst Di Brookman for Corporate Connect Research.

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