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Australian shares edged lower after opening flat, following weaker markets in the US overnight.
June quarter inflation shows a 6.1 per cent increase over the past year, the highest level since 2001.
The impacts of an energy price spike, supply chain bottlenecks and workforce shortages have weighed on businesses this year, according to ACCI chief executive Andrew McKellar. “Australia’s high inflation environment is not unique. In recent months the United Kingdom, the European Union, Canada, New Zealand, and the United States have all recorded their highest consumer price figures in more than a decade. Macroeconomic trends explain increased prices in Australia,” McKellar says.
At noon, the S&P/ASX 200 is 0.03 per cent or 1.90 points lower at 6805.40.
Asian equities are weaker in early trading. There is a cautious start in Japan and Korea as markets await the Fed. Futures have swung up from earlier lows with US contracts advancing in the wake of better-than-expected results from GOOGL and MSFT.
The Fed is widely expected to raise rates by 75 basis points, bringing the funds rate to a neutral range of 2.25 per cent to 2.50 per cent. The bigger focus is on whether the Fed will guide down rate expectations for September and beyond (markets are currently pricing in around a 62 per cent probability of a 50 basis move in September). There are no meaningful changes likely in the statement, seeing that the Fed highly is attentive to inflation risks and strongly committed to returning inflation to 2 per cent.
Biden will speak with China’s President Xi Jinping on Thursday, but is not expected to make much headway on major issues such as Taiwan and tariffs. The call might simply reinforce the need to keep open lines of communication. Pelosi’s planned trip to Taiwan has aggravated US-China tensions. While China has threatened a “strong response” to her visit, US lawmakers have urged her not to back down. Meanwhile, senators are also urging sanctions on China’s purchases of Russian oil.
US stocks fell Tuesday after Walmart cut its earnings forecast, which sent other retail shares lower and added to concerns that consumer spending might not be strong enough to keep the US out of a recession.
The Dow Jones Industrial Average fell 228.50 points, or 0.71 per cent, to 31,761.54. The S&P 500 retreated by 1.15 per cent to 3,921.05. The Nasdaq Composite declined about 1.87 per cent to 11,562.57. All of the major averages were still on pace for their best month of 2022.
Walmart plunged 7.6 per cent Tuesday and dragged other retailers with it. Target dropped 3.6 per cent, and Macy’s was down 7.2 per cent.. The SPDR S&P Retail ETF fell nearly 4.2 per cent.
Across the US sectors, consumer discretionary was hit the hardest.
The retail turmoil bled into e-commerce stocks. Shopify tumbled about 14.1 per cent after the payments provider announced it would lay off about 10 per cent of its global workforce, citing a pullback in online spending and saying it misjudged how long the pandemic-fuelled e-commerce boom would last. The company will report its earnings Wednesday.
Amazon fell 5.2 per cent. Square parent Block lost 7 per cent and PayPal 5.7 per cent, both of which operate major merchant services businesses. UPS shares also slid 3.4 per cent after the shipping giant reported declines in its international and supply chain businesses.
On the flip side, Coca-Cola shares rose 1.6 per cent after the beverage giant topped earnings and revenue expectations, citing a sales volume recovery from the pandemic and higher pricing.
Industrial stocks were earnings winners, too. Shares of 3M rose 4.9 per cent after the company beat earnings and revenue estimates and announced plans to spin its health care business into a separate publicly traded company. General Electric posted better-than-expected results.
On Tuesday, the Federal Reserve commenced its two-day policy meeting. One analyst said, “The bottom line is the Fed, no matter how you cut it, is going to quickly move to that restrictive stance that will have a toll on the economy… It’s going to get there quickly enough, whether it’s an extra 25 basis points next time versus a month later. Within the next six months we’re going to be in a financially restrictive environment.”
The SPI futures are pointing to a fall of 8 points.
The best-performing sector is Health Care, up 1.41 per cent. The worst-performing sector is Materials, down 1.10 per cent.
The best-performing stock in the S&P/ASX 200 is Zip Co (ASX:ZIP) , trading 8.29 per cent higher at $1.11. It is followed by shares in Silver Lake Resources (ASX:SLR) and Gold Road Resources (ASX:GOR) .
The worst-performing stock in the S&P/ASX 200 is City Chic Collective (ASX:CCX) , trading 5.49 per cent lower at $2.24. It is followed by shares in Champion Iron (ASX:CIA) and James Hardie Industries (ASX:JHX) .
Bonds are mixed, with Treasury rates higher at the long-end, while the Aussie yield curve is bear flattening ahead of Australian CPI.
Australian headline inflation is forecast to have risen to a 32-year high of 6.3 per cent y/y (1.9 per cent q/q) in Q2, from 5.1 per cent in Q1. Trimmed mean inflation is estimated to have jumped to 4.7 per cent y/y from 3.7 per cent in Q1, well outside the RBA’s 2-3 per cent target band.
The market is pricing in a 50 basis point RBA rate hike in August, but some think a hotter-than-expected inflation print could swing expectations to a 75 basis point hike, particularly if Fed policy outcome is more hawkish than anticipated.
Junior miner Cobre (ASX:CBE) today announced the first intersection of significant copper mineralisation from the ongoing drill program on the company’s KML’s NCP licences. Based on visual estimates, confirmed with pXRF readings, drill hole NCP07 has intersected a broad zone of copper mineralisation, starting from 214m and continuing for approximately 59m downhole to 273m. Mineralisation includes vein and fracture fill chrysocolla as well as fine-grained copper sulphides, which increase in abundance between 250 and 260m downhole. Commenting on the initial drilling results, Cobre Executive Chairman and Managing Director, Martin Holland, said: “This new copper discovery represents a transformational moment for Cobre Shareholders. Cobre has never been in a better position from a project ownership, technical and operation perspective and now we have a promising copper intersection, on one of the most prospective Copper belts in the world.” Shares in CBE are currently trading up 89.8 per cent at 9.3 cents.
Silver Lake Resources (ASX:SLR) has set fresh sales guidance of 260,000 ounces of gold production for the 2023 financial year after withdrawing its previous quarterly guidance in April amid higher costs and issues to do with labour uncertainty. The mining company said it generated quarterly production of 65,844 ounces of gold and 235 tonnes of copper in the three months through June. For the financial year, output of the precious metal reached 251,887 and 991 tonnes of copper. “Silver Lake’s operations have resiliently managed the challenges presented by the prevailing operating climate during the quarter and throughout FY22, which were impacted by the ongoing and evolving response to COVID-19, and labour and supply chain constraints,” it added. Shares in SLR are currently trading up 3.385 at $1.375.
BetMakers Technology Group (ASX:BET) today announced a strong quarterly cash flow statement and quarterly activities report for Q4 FY22. The $26.2m in reported cash receipts from customers in Q4 FY22 highlights the continued strong performance of the existing business with FY22 cash receipts from customers of $93.4m. Net cash from operating activities for the quarter was $0.4m, which includes approximately $2.5m in payments not directly related to the normal on-going costs for the period. Shares in BET are currently trading up 3.09 per cent at 50 cents.
Nickel-focused Mincor Resources (ASX:MCR) announced today OZ Minerals senior executive and former Rio Tinto veteran Gabrielle Iwanow as its new chief executive and managing director. Ms Iwanow will step into the role in November after David Southam steps down on August 12. Mr Southam is stepping down after Mincor’s successful return to the ranks of Australian nickel producers with the ongoing ramp-up of its Kambalda Nickel operations in WA. Prior to joining OZ Minerals as the manager of the Prominent Hills mining operations in September 2018, Ms Iwanow had a varied and highly successful 14-year career at Rio Tinto, including as manager of the Paraburdoo Iron Ore Operations. Shares in MCR are currently trading down 1.3 per cent at $1.895.
Natural gas prices are surging around the world as scorching temperatures stoke demand for the fuel, and as Europe’s push to move away from Russian fuel shakes global energy markets.
US natural gas futures surged more than 11 per cent at one point on Tuesday to its highest level since July 2008. Natural gas is now on track for its best month on record.
Gold is trading at US$1718.12 an ounce. Iron ore is 7.4 per cent higher at US$111.70 a tonne. Iron ore futures are pointing to a rise of 0.82 per cent. WTI advancing following larger-than-expected API crude inventory draw.
One Australian dollar is buying 69.22 US cents.
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Terracom will report their FY2022 results in September 2022. In the last two months there have been a number of company announcements that have given us improved visibility on our earnings forecasts and valuation metrics so we have taken this opportunity to update our numbers.
With the combination of geopolitical factors in the northern hemisphere as well as disruption from other supply regions, we believe the visibility on export coal prices over the next 12 months has also improved since our March note.
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Based on our current forecasts, we derive a DCF equity value for SGI of $0.33 per share, with potential upside if full synergies can be extracted. We note SGI is currently trading on very undemanding forward multiples.
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Lake Resources (LKE. ASX) – LKE has signed two non-binding MOU’s in the space of 10 days. Ford Company (Ford) has signed an MOU for ~25,000t/year and last week Hanwa, a Japanese commodity trader signed a MOU for up to 25,000t/year. Subject to execution, this is an amazing feat as Ford and Hanwa are prepared to enter into longer-term strategic partnerships with LKE. Commercial negotiations are still ongoing but are expected, especially if Ford & Hanwa inject new equity into LKE, to further de-risk the project financing & thus ensure LKE and Kachi are fully funded.
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TNG Ltd is an ASX-listed technology owner and developer of the world-class Mount Peake near-surface vanadiferous titanomagnetite deposit. To unlock value, TNG will concentrate ore from its central Northern Territory mine for processing through its patented TIVAN® process produce three premium quality revenue streams: hi-purity vanadium pentoxide (V2O5) for steel alloys and Vanadium Redox Flow batteries, a quality titanium pigment for paints and a premium steel input with >64%Fe iron ore fines.
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Two recent gravity surveys have considerably exceeded expectations and revealed potential for extensions to the existing MRE at Lake Throssell, plus a material growth opportunity at Lake Yeo. This reinforces the potential for a multi-decade, Tier-1 SOP production hub based around Lake Throssell.
TMG is currently completing work towards the PFS due early 2023, including drilling to start in Q3 2022, evaporation trials and permitting activities. Results from these programs will support the PFS and any future resource upgrade.
Benchmark SOP prices have risen to ~US$940/t due to recent geopolitical developments. The Oct 2021 Scoping Study assumed a SOP price of US$550/t and contained a sensitivity analysis showing every 10% increase in price drives a +$144m increase in the project NPV of $364m. The c.70% increase above the Scoping Study thus implies a project NPV of ~$1.4bn.
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The news being reported about the performance of biotechnology has been dour, to say the least, for some time now. Those dour articles have been deserved with the iShares Biotechnology Exchange-Traded Fund down 25% and the SPDR® S&P® Biotech ETF is down 45% from their highs. However, those articles are backward-looking, and successful investors need to be looking forward.
Recently, however, an article in Nature Reviews Drug Discovery caught our eye which we believe should point the way forward for the vast majority of Australian biotechnology investors. This article indicates that, at least, two companies, Antisense Therapeutics (ANP) and Kazia Therapeutics (KZA), are right in the sweet spot in terms of the future of drug development.
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The news being reported about the performance of biotechnology has been dour, to say the least, for some time now. Those dour articles have been deserved with the iShares Biotechnology Exchange-Traded Fund down 25% and the SPDR® S&P® Biotech ETF is down 45% from their highs. However, those articles are backward-looking, and successful investors need to be looking forward.
Recently, however, an article in Nature Reviews Drug Discovery caught our eye which we believe should point the way forward for the vast majority of Australian biotechnology investors. This article indicates that, at least, two companies, Antisense Therapeutics (ANP) and Kazia Therapeutics (KZA), are right in the sweet spot in terms of the future of drug development.
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Despite the lower realised oil and gas price, which fell by 5.4% and 19.7% respectively in August, Calima managed to show improvement in its key business metrics.
We expect higher production in November due to the contribution by the new Thorsby wells which will be drilled in August/September which will see Calima meet its 2021 production guidance of 4,500 boe/d.
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WT Financial Group Limited (WTL) is a growing diversified financial services company, founded in 2010 and listed on the Australian Stock Exchange (ASX) in 2015. Its advice and product offerings are delivered primarily through a group of independent financial advisers operating as authorised representatives of WTL under its Wealth Today Pty Ltd (Wealth Today) and Sentry Group Pty Ltd (Sentry Group) dealer group operations. It has around 275 advisers across more than 200 financial advice practices Australia-wide. It also operates a direct-to-consumer operation under its Spring Financial Group brand.
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In May 2021, Corporate Connect analyst Marc Sinatra published a comprehensive research report on ASX-listed biotech Immutep Ltd (ASX: IMM). So impressed was he with IMM that Corporate Connect felt it imperative that a follow-up report be released placing a valuation on the company, because the market was not seeing the vast potential of eftilagimod alpha (efti).
This follow-up report has been released today. Using comparables, after adding cash back to their EV estimate and dividing by the total number of issued shares, Corporate Connect now places the fair value of an Immutep share at $A2.20.
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Phillips 66 (PSX) has entered into an agreement with NVX to acquire 77.9m new shares for US$150m (A$203m). PSX is the worlds largest producer of speciality petroleum coke a precursor for battery grade synthetic graphite anode materials found with an Enterprise Value of US$47.5Bn and assets of US$57Bn.
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PayGroup (PYG) delivers multi-country BPO services and cloud SaaS HCM solutions, assisting companies to manage employees in multiple, complex jurisdictions. The company has many growth opportunities, including new clients, new jurisdictions, new products, partner expansion, and new revenue sources. PYG’s scalable business model allows operating leverage and with savings from in-housing third party technology, support margin expansion.
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OpenLearning (OLL) is a higher education technology company that operates a scalable online learning platform through a software-as-a-service (SaaS) business model and provides a global marketplace of high quality courses for learners of all levels. Its primary customers are education providers based in Australia and South-East Asia (primarily Malaysia). OLL started operations in Australia in 2012 and expanded to Malaysia in 2015, Singapore in 2018, and recently also Indonesia.
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