ASX dives in morning trading

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Australian shares started the day sharply lower as world stock markets struggled to recover on Wednesday after a three-day losing streak.

At noon, the S&P/ASX 200 is 1.98 per cent or 138.60 points lower at 6848.20.

The SPI futures are pointing to a fall of 92 points.

Best and worst performers

The best-performing sector is Consumer Staples, up 0.77 per cent. The worst-performing sector is Materials, down 3.52 per cent.

The best-performing stock in the S&P/ASX 200 is Endeavour (ASX:EDV), trading 2.48 per cent higher at $7.45. It is followed by shares in Coles Group (ASX:COL) and Fisher & Paykel Healthcare (ASX:FPH).

The worst-performing stock in the S&P/ASX 200 is PointsBet Holdings (ASX:PBH), trading 8.45 per cent lower at $2.66. It is followed by shares in Sandfire Resources (ASX:SFR) and BHP Group (ASX:BHP).

Asia-Pacific

Shares in the Asia-Pacific are trading lower Thursday as investors await the results of a private survey on China’s factory activity.

Japan’s Nikkei 225 slipped 1.49 per cent, and the Topix index dropped 1.25 per cent.

The Kospi in South Korea shed 1.62 per cent and the Kosdaq lost 1 per cent.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 1 per cent.

Markets are keeping an eye on the Caixin/Markit manufacturing Purchasing Managers’ Index for August due to be released on Thursday. Official manufacturing PMI data released on Wednesday showed that factory activity shrank amid a recent rise in Covid infections, and the nation facing the worst heatwaves in decades.

Japan MOF survey confirms Q2 capex growth: MOF corporate survey ex-software capital spending grew 3.5 per cent y/y in Q2, following 5.0 per cent in the previous quarter. Strength was driven by manufacturers, while non-manufacturers were flat overall. Cash flow pipeline remained supported by ongoing double-digit gains in current profits. Revenues also maintained positive momentum, led by petroleum and electric utilities — consistent with commodity price pressures. Still, current profit margins (as well as liquidity positions) improved despite broad evidence of cost increases. Implications for GDP revisions unclear given contrast with nominal GDP non-residential investment, which accelerated to 3.4 per cent in Q2 from 2.3 per cent in Q1. Private inventory inputs also remain a wildcard. General outlook seen positive based on recent survey evidence, albeit machinery orders guidance pointed to a decline in Q3 as partial payback for strong growth in Q2.

India GDP softer than expected: GDP expanded 13.5 per cent y/y in Q2, lower than consensus 15.2 per cent, though still up sharply from 4.1 per cent in the previous quarter. Also below RBI’s estimate of 16.2 per cent. Reuters preview noted favourable base effects posed upside risk. Underlying strength came from private consumption as coronavirus concerns eased. However, outlook subdued as consensus sees growth momentum slowing to 6.2 per cent, 4.5 per cent and 4.2 per cent in the current and following quarters, highlighting a below-potential growth trajectory. Economists cited lagging recovery in the labour market compounded by high inflation. Overall implications were limited. Economists broadly reaffirmed their FY GDP forecasts. RBI rate hike trajectory also remains largely unchanged, though there was some talk of a possible pause later this year.

China’s coal stocks surge amid country’s urgency to revive economic growth: China’s coal stocks have been rising as investors are betting that the country’s plan to revive economic growth will override concerns about pollution to drive demand for fossil fuels and reliable energy. Note that China’s coal index has surged by roughly 10 per cent in August, bringing this year’s gains to nearly 50 per cent. Beijing must weigh short-term economic stability against longer-term goals of carbon emissions reduction, with markets betting that a focus on the former will prevail. China has not pledged to reduce coal consumption until 2026, offering room for growth. The production is rising and analysts expect about 200 gigawatts of new coal-fired power capacity to be built by 2025 (Reuters).

US Markets

US Stocks fell for a fourth straight day on Wednesday, the last day of August, putting the summer market comeback in doubt as investors weighed the Federal Reserve’s inflation-fighting efforts. The major averages were higher earlier in the day.

The Dow Jones Industrial Average slid nearly 0.9 per cent,The S&P 500 lost roughly 0.8 per cent , and the Nasdaq Composite fell about 0.6 per cent to 11,816.20. The major averages were higher earlier in the day.

What began as a strong month for the three major averages ended on a weaker note. The Dow finished August down nearly 4.1 per cent, while the S&P and Nasdaq posted monthly losses of 4.2 per cent and 4.6 per cent, respectively.

The market gave up early bounce attempts that were likely helped from slower jobs growth and select Internet read-throughs from SNAP update. Shares of Snap, the parent company of social media app Snapchat, surged 9 per cent. In addition to announcing that it is reducing its full-time employee headcount by about 20 per cent, the company said it is either substantially reducing or entirely eliminating investments in some of its more speculative and obscure product lines and services.

It’s also been a wild month for Bed Bath & Beyond shares amid a return of retail-trader interest. The meme stock, a favourite of the reddit crowd, jumped from a low of $4.89 at the start of August to an intra month high of $30 in the middle of the month, before paring those gains. It came under pressure recently after influential investor Ryan Cohen sold his stake in the firm, only to bounce back on the possibility of fresh financing.

Overnight, the Energy sector was under notable pressure alongside weaker crude. Oil prices have continued to slide on investor worries about the ailing state of the global economy, the prospect of central bank interest rate hikes, and increased restrictions to curb Covid-19 in China.

On the energy front, China’s coal stocks have been rising as investors are betting that the country’s plan to revive economic growth will override concerns about pollution to drive demand for fossil fuels and reliable energy. Note that China’s coal index has surged by roughly 10 per cent in August, bringing this year’s gains to nearly 50 per cent. Beijing must weigh short-term economic stability against longer-term goals of carbon emissions reduction, with markets betting that a focus on the former will prevail.

An emerging trend is seeing coal fired plants extend their decommissioning in response to the energy crisis.

Across Europe political leaders have been trying to calm fears about the spiralling energy costs. Germany’s Economy Minister said the country’s gas storage facilities were close to hitting an 85 per cent storage target ahead of winter. The minister said Germany was “better prepared” for this latest round of pipeline maintenance, Russia has halted the flow of gas through the Nord Stream 1 pipeline to Europe for three days

The energy crisis raises fears of Europe facing a “second wave” of inflation as spiralling energy prices drive up the cost of everything from wages to logistics. The head of the world’s largest building materials company which works on big construction projects across Europe and the US and is valued at €30bn, said it was hit by a 50 per cent increase in energy costs in the first half of the year.

Company News

American Rare Earths (ASX:ARR) today announced a substantial increase to the Exploration Target for their Halleck Creek project, confirming its potential to be one of the largest Rare Earth Projects in the USA. CEO Chris Gibbs commented “ The Hallek Creek project is shaping up to become a world class asset. The maiden drill campaign was a resounding success, and the new exploration target is massive. Shares are trading 10.64 0er cent higher at 26c.

Conico (ASX:CNJ) today provided an update on exploration activities at the Mt Thirsty Joint Venture, where all five diamond drill holes completed to date as part of the Phase I drill campaign have intersected thick zones of disseminated sulphides. The current Phase I drill campaign is testing for extensions to the discovery made by Galileo Mining located less than 200 metres from the MT Thirsty northern tenement boundary. Executive Director, Guy le Page, commented: “The continuity of prospective horizons south of Callisto is encouraging with recent drilling from this first phase intersecting thick and continuous zones of heavily disseminated sulphides in the first five drill holes. Shares are trading 9 per cent higher at 6c.

American West Metals (ASX:AW1) today announced outstanding first assay results for the diamond drilling program at their Storm Copper Project on Somerset Island, Canada.
Dave O’Neill, Managing Director of American West Metals commented: the first assays to be received for drilling in the current program – have returned spectacular copper grades over very significant thicknesses. “These results immediately validate the historical high-grade intersections and highlight the quality of the Storm mineral system. These kinds of grades and thicknesses are exactly what we want to see as we work to define a shallow high-grade copper resource. Shares are trading 70.37 per cent higher at 23c.

Commodities and the dollar

Gold is trading at US$1705.24 an ounce.
Iron ore is 3.4 per cent higher at US$100.95 a tonne.
Iron ore futures are pointing to a rise of 1.38 per cent.
One Australian dollar is buying 68.10 US cents.

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