Local market erases yesterday’s losses: ASX up 1.39% at lunch

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Strong bank earnings overnight helped to boost US markets and have lifted the local market in early trade. At noon, the S&P/ASX 200 is 1.39 per cent or 92.60 points higher at 6757.00.

The Reserve Bank of Australia is expected to release its meeting minutes for its October meeting today.

The SPI futures are pointing to a rise of 85 points or 1.28 per cent.

Best and worst performers

All sectors are trading in the green except Energy. The best-performing sector is Information Technology, up 2.77 per cent. Energy, the only underperforming sector is down 0.95 per cent.

The best-performing stock in the S&P/ASX 200 is HUB24 (ASX:HUB), trading 13.13 per cent higher at $24.98. This comes as the company announced their Q1 market update this morning with strong platform net inflows of $3.0 billion. It is followed by shares in Novonix (ASX:NVX) and Block (ASX:SQ2).

The worst-performing stock in the S&P/ASX 200 is St Barbara (ASX:SBM), trading 19.78 per cent lower at $0.54 after their disappointing Q1 update this morning. It is followed by shares in News Corporation (ASX:NWS) and Coronado Global Res (ASX:CRN).

Asian markets

Shares in the Asia-Pacific have commenced trading higher on Tuesday following Wall Street’s rally overnight.

The Nikkei 225 in early trade has risen 1.46 per cent and the Topix has added 1.23 per cent. Japan’s yen touched 149.08 against the dollar and was last trading near 148.90. South Korea’s Kospi is so far 1.13 per cent higher and the Kosdaq is up 2.16 per cent. MSCI’s broadest index of Asia-Pacific shares has added 0.46 per cent.

China was due to report gross domestic product data, but has delayed that and a slew of economic releases for the third quarter, according to an updated calendar posted on the National Bureau of Statistics’ website. The unusual move comes as the Communist Party of China holds its 20th National Congress.

Big Monday bounce

The latest bounce has been helped out by a better sentiment surrounding the UK, with the new finance minister bringing forward tax and spending measures to tackle deficit and placate markets. Technical dynamics are also in focus with talk about the potential for another squeeze following aggressive short selling during Friday’s selloff (Zero Hedge). Even some of the more bearish strategists are flagging potential for relief with the 200-week moving average providing credible support (Bloomberg). The release of bank earnings continues to highlight the tailwind from higher rates, while credit remains strong. There has been a big pullback in European (price cap headlines) and US natural gas prices, which is another area of focus. Bearish narrative continues to revolve around upside risk to terminal rate on sticky (and increasingly services driven) inflation pressure and related downside risk to growth. Earnings are still seen as the next shoe to drop as 2023 estimates remain resilient.

Q3 earnings metrics soft, takeaways mixed

According to FactSet, the blended growth rate for Q3 S&P 500 earnings now stands at 1.6 per cent, which is down by almost 10 per cent than the expected prediction made at the start of the quarter. Estimates have slipped ~1 per cent in just the last week. Of the 7 per cent of the index that has reported, 69 per cent have beat the consensus, which is below the 77 per cent five-year average. In addition, companies are reporting earnings that are just 0.1 per cent above estimates, well below the five-year average positive surprise rate of 8.7 per cent. Early takeaways were somewhat mixed. Goldman Sachs noted three of the S&P 500’s top 25 stocks reported last week (JPMorgan, Pepsi and UnitedHealth) and despite the disparate sectors, all were fine, suggesting Corporate America may be as resilient as US consumers. Bank of America noted that bank earnings reaffirmed that big banks are well-capitalised and consumer balance sheets remain solid, though management teams did flag concerns about economic uncertainty.

Terminal rate puts and takes

The terminal rate ended last week at ~4.95 per cent, up from ~4.67 per cent just before the hotter than expected September CPI print and the 4.65 per cent median projection in the September dot plot. There is a big concern for the market right now, as investors are wary of another Federal Reserve interest rate hike. Such concerns are seemingly underpinned by the Street’s poor track record when it comes to estimating underlying inflation pressure. Bank of America pointed out that in the last 19 months, headline inflation has shocked everyone – to the upside 12 times and to the downside just once. At the same time, some Fed officials have started to talk a bit more about the lagged effects of the tightening cycle, which fit the most realistic “pivot” scenario in terms of a near-term pause. Bullard recently discussed this dynamic when he said September CPI did not necessarily mean the Fed needs to raise rates above terminal projection, but does warrant continued frontloading that could get it 4.50-4.75 per cent by year-end (Reuters).

Company news

Arizona Lithium (ASX:AZL), a company focused on the sustainable development of the Big Sandy Lithium Project, has announced the completion of its scoping study, which has confirmed the Big Sandy Lithium project as being well positioned to become a long-term lithium producer to supply the rapidly growing demand for electric vehicles in North America. The company has cash reserves exceeding $50 million, so is in sound position to further advance with the project. AZL Managing Director, Paul Lloyd, commented: “Building on the work undertaken by Hazen Research on the initial design basis and flowsheet, the Scoping Study has further advanced the development of Big Sandy, which will be continued at our newly established Lithium Research Centre in Arizona.” Shares are trading up 5.3 per cent to 8 cents.

Apollo Minerals (ASX:AON) has announced a high-grade massive sulphide discovery. The assay results confirm a quality of 40 per cent zinc and lead — the highest-ever grades at the Kroussou Project. Apollo Minerals’ Managing Director, Mr Neil Inwood, commented: “The new style of mineralisation discovered, provides a structural target style which will redefine our future exploration focus. The opportunity for discovery is massive and our excitement is palpable — we believe Kroussou really does have the potential to be a very large, province-scale zinc district.” Shares are trading 7 per cent higher to 6 cents.

Sezzle (ASX:SZL) announced this morning that it has signed a new US$100m receivables funding facility with affiliates of Bastion Management II, as Administrative Agent for the lenders. The new facility will support the company’s business in the US and Canada, replacing its prior facility with Goldman Sachs Bank USA and Bastion. “We are excited to continue our relationship with Bastion, as they have been a supportive partner,” stated Karen Hartje, CFO of Sezzle. “The new facility positions Sezzle with the necessary liquidity and balance sheet strength to pursue the Company’s growth objectives and achieve profitability.” Shares are trading 12.6 per cent higher to 54 cents.

Felix Gold (ASX:FXG) announced this morning assay results for a further 23 holes at its Treasure Creek Project in Alaska. These results continue to substantiate Felix’s expectations of shallow, thick gold deposition of robust grades across the project. Follow-up and extensional drill testing is planned to focus on the zones of gold mineralisation with the highest potential for encompassing delineated gold resources. Felix Managing Director and CEO Joe Webb commented: “NW Array is quickly building into a significant gold discovery. Today’s results expand the southern mineralised gold zone by over 150 metres further east. This enlarged footprint, combined with the shallow nature of the intercepted mineralisation, further builds support for the potential existence of a near-surface open-pittable gold deposit of substantial scale.” Shares are trading 7.7 per cent higher to 14 cents.

Envirosuite (ASX:EVS) released a Q1 sales update this morning stating it has achieved quarterly sales of $3.4m in Q1 FY23. The update also noted that Envirosuite has entered into a global strategic alliance agreement with SGS SA, the world’s leading testing, inspection, and certification company. Jason Cooper, Envirosuite’s CEO, said: “We are excited to partner with SGS, a leading and globally recognised organisation, to expand and accelerate our opportunities especially in the Mining, Heavy Industrial and Oil & Gas sectors. Following a successful initial trial at an EMEA client, we expect that this collaborative relationship will produce combined solutions that will deliver even greater value to our customers, and we look forward to seeing this strategic alliance accelerate revenue growth for both companies.” Shares are trading up 9.6 per cent to 14 cents.

DroneShield (ASX:DRO) has announced it has been recommended by the US Department of Defence Joint Counter-small Unmanned Aircraft Systems Office (JCO) as part of the Science Applications International Corporation (SAIC) joint solution for Counter-UAS as a Service. The JCO formalised its recommendation of three approved solutions after thorough evaluation at Yuma Proving Ground earlier this year. In response, Matt McCrann, DroneShield US CEO, commented: “We are pleased to complement the overall SAIC solution with key components for both extended-range detection and defeat. We look forward to supporting this partnership and further expansion of critical Counter-UAS capabilities across the services.” Shares are trading 11.4 per cent higher to 20 cents.

Emerging lithium producer Sayona Mining (ASX:SYA) has developed a transport solution for its North American Lithium (NAL) operation, with a Québec rail operator awarded the contract to deliver NAL spodumene (lithium) concentrate to port. Under the agreement, Solurail Logistique Inc, a Val d’Or company specialising in bulk transhipment and rail logistics, will be responsible for transporting lithium from the NAL operation in La Corne to the Port of TroisRivières for delivery to customers. The agreement strengthens the logistics solution for delivery of NAL product to fast-growing markets. Sayona is continuing to advance the restart of production at NAL, scheduled for Q1 2023. Sayona Québec CEO, Guy Laliberté, said: “We are very happy to collaborate with a local company that will allow Sayona to easily supply its customers by rail, while establishing more roots in the region. Solurail’s strategic location in AbitibiTémiscamingue region and the expertise it has developed in transhipment and freight forwarding are key elements that will contribute to the achievement of our common objectives, as we advance the production of this key battery metal in Québec.” Shares are trading 2.3 per cent higher to 22 cents.

Commodities and the dollar

Gold is trading at US$1651.24 an ounce.
Iron ore is 2.5 per cent lower at US$93.75 a tonne.
Iron ore futures are pointing to a fall of 0.5 per cent.
One Australian dollar is buying 63.06 US cents.

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