Adding to the negative sentiment was the release of the September quarter GDP figure by the ABS of a 0.6 per cent lift, which came in below consensus of 0.7 per cent. This was the fourth consecutive quarter of growth. Annual real GDP growth increased to 5.9 per cent from 3.6 per cent, also missing estimates of 6.2 per cent year-on-year. The ABS said in a release that “growth was largely driven by strength in household spending.”
The SPI futures are pointing to a fall of 43 points.
Best and worst performers
The best-performing sector is S&P/ASX 200 Materials, up 0.50 per cent. The worst-performing sector is S&P/ASX 200 Information Technology, down 2.33 per cent.
Shares in the Asia-Pacific have slipped in early trade. China’s November trade data is predicted to show a sharp drop in exports and imports, according to a Reuters poll.
The Nikkei 225 in Japan is so far down 0.69 per cent and the Topix has also fallen 0.17 per cent. South Korea’s Kospi has shed 0.47 per cent, and the Kosdaq is 0.62 per cent lower.
Backfitting some bearish talking points
Stocks have been on the defensive thus far this week. A few bearish talking points in focus, but also easy to backfit a narrative to the price action. Some analysts have thought the market overreacted to Powell last week, given that while he did not push back against easier financial conditions, he also did not deviate from the Fed’s inflation prioritisation and higher-for-longer messaging. The growth dynamics seemingly work against the market in both directions. A firmer labour market and services data have raised concerns about a more aggressive Fed, which have in turn raised more concerns about a policy mistake/recession. Such concerns are underpinned by deepest yield curve inversion in four decades, a sharp decline in excess liquidity following the surge from pandemic policy stimulus, softening manufacturing PMIs, somewhat more cautious corporate messaging and negative earnings revisions trends.
Growth groups the big underperformers with most sectors lower
The Growth sector was an underperformer to value by nearly 100 basis points in Tuesday’s trading, though the sectors finished somewhat mixed. FANMAG complex all sold off, with META-US a particular drag on latest EU regulatory updates. Hardware, momentum software, semis, internets, online travel agencies were also among tech decliners. Discretionary groups also lagged amid more scrutiny around consumer trends with department stores, apparel retailers, specialty retail, autos, homebuilders among the worst groups. Banks also weakened with the KEY-US update whilst Media was weaker amid some more advertising scrutiny. Cyclicals were also broadly lower including road and rails, parcels and logistics, building materials, household durables. There were a few outright gainers in today’s trading, though Chinese internets extended the recent rally. Some of the rotational winners also performed better, including hospitals and managed care. The airlines were helped by a further decline in oil prices. A modest commodity rally (ex-energy) helped groups including precious metals, industrial miners, downstream aluminium and steel products.
Strike Energy (ASX:STX) provided an update on its continuing and increased ownership of Warrego Energy (ASX:WGO) and the West Erregulla gas field. Strike has entered into Share Purchase Agreements with various Warrego shareholders to increase its shareholding in Warrego to ~19.9 per cent via the swap of Strike ordinary shares for Warrego ordinary shares at a 1:1 share exchange ratio. Strike will have the voting rights to ~19.9 per cent of Warrego. Post settlement of the share swaps, Strike will become Warrego’s largest shareholder and will increase Strike’s direct and indirect ownership of EP469, which contains the West Erregulla gas field and near field low risk upside, to approximately 60 per cent. For the avoidance of doubt, Strike’s Board has not formed any intention with regards to any future transaction that may involve Warrego, and Strike is currently considering all available strategic options. Statement from the Managing Director & Chief Executive Officer of Strike, Stuart Nicholls: “Strike has a strong track record of identifying and securing valuable and strategic energy assets at various stages of maturity. The expansion of our ownership of Warrego shares and the resulting look through to an increased economic interest in the West Erregulla gas field is a further demonstration of this.” Shares are trading 4.4 per cent higher at 36 cents.
Red Mountain Mining (ASX:RMX) has entered into an agreement with Lithic Lithium to purchase two lithium projects in Nevada, USA. Red Mountain Chairman Troy Flannery commented: “RMX view this very significant transaction as an excellent opportunity for the Company, as it increases our lithium exposure in Nevada, USA.” Shares are trading 10 per cent higher at 6th of 1 cent.
4DS Memory (ASX:4DS) has announced that they have extended their collaboration agreement with imec, of the planned manufacturing of the Fourth Platform Lot wafers, to run till mid-2023. In response, 4DS’ Executive Chairman, Drs. Wilbert van den Hoek commented, “we will continue to undertake internal activities, the results of which will be inputs to the collaboration during 2023.” Shares are trading 4 per cent higher at 5 cents.
Golden Deeps (ASX:GED) announced an exceptionally thick intersection of copper-silver mineralisation in the first deeper diamond drillhole at their deposit in Namibia. In response, The CEO of Golden Deeps, Jon Dugdale, said: “This 90m intersection of copper-silver mineralisation below the Khusib Springs mine demonstrates potential for major extensions to the deposit.” Shares are trading 10 per cent higher at 1 cent.
Commodities and the dollar
Gold is trading at US$1782.70 an ounce.
Iron ore is 0.1 per cent higher at US$109.70 a tonne.
Iron ore futures are pointing to a 1.6 per cent rise.
One Australian dollar is buying 66.95 US cents.