ASX LIVE | ASX Drops Following Wall St Weakness; New RBA Head’s First Day

Costa Group [ASX:CGC] announced today that after Paine Schwartz Partners completed takeover due diligence, they have cut the amount they are willing to pay for Costa by over $100 million.

The New York-based firm has dropped its original offer of $3.50 per share, made in May, to $3.20 per share after due diligence and accounting for Costa’s lower profit outlook from adverse weather conditions.

Costa’s board are now reviewing the lower offer and has said they remain in talks about the terms of the deal to assess that the new offer is in the best interest of shareholders.

Investors have responded today, with Costa’s share price taking a hit, falling by 3.40% to $2.84 per share as of this afternoon.

In a year of S&P 500 performance surprising investors, it’s worth looking at the index’s historical average.

Here, we can see this year’s performance when compared to the post-WWII performance.

While it’s easy to match any two random graphs and show a correlation, it might be worth considering as we enter the second half of September, which is considered the weakest-performing time in the average S&P 500 performance each year.

This year’s move has been stronger, but it’s pretty incredible how closely 2023 has followed the historical script for the S&P. Check out this chart:

(From this week’s Bespoke Report: https://t.co/TConEFNGlm) pic.twitter.com/wDjUVTZxmB

— Bespoke (@bespokeinvest) September 16, 2023

ASX 200 down 0.68% at 7,229.9 at midday with tech stocks having a rough day, with the IT Sector down -2.08%, its worst day in over three weeks.

Software company Xero is down by 3.31% while WiseTech Global is down by -2.29% and Altium is down by 1.24%.

At midday, all sectors are in the red with a tough start to the week as markets follow losses seen on Wall Street.

Guest contributor Nick Hubble picks up the conversation as the office continues its deep dive into the economics of the Net Zero future.

Here, he looks at the EROI (energy return on investment) in history and compares it to our current predicament with the policies in place to power our future.

Read on below.

https://www.moneymorning.com.au/20230918/net-zeros-goose-is-uncooked-now-eat-it.html

Whitehaven Coal [ASX:WHC] responded to calls for more clarity from investors as its share buyback plan remains on hold. The coal giant confirmed today that it was considering the purchase of two BHP Mitsubishi Alliance coal mines, Daunia and Blackwater, in Queensland.

Today, the company confirmed the talks were progressing and that the buyback program would be delayed until the talks were resolved, saying:

‘Whitehaven’s share buy-back has been temporarily suspended while the Company is considering application of its capital allocation framework in light of growth opportunities. Whitehaven confirms that those opportunities include the Daunia and Blackwater mines. The Board will make a decision regarding resumption of the share buy-back at the appropriate time.’

The response came after pressure mounted from shareholders, including major shareholder Bell Rock Capital, who requested ‘urgent clarification, saying:

‘If our understanding of what was said … at the investor meeting is correct, Bell Rock is concerned that the market is misinformed as to whether or not [Whitehaven] is bidding for one or both mines and what implications this may have for the share buyback program,’

‘In our view, if our understanding is correct, this information may have a material effect on the price or value of WHC’s shares and should be disclosed immediately … if not disclosed, there is a material risk that a false market in [Whitehaven]’s shares is being created due to the uncertainty surrounding these media reports and selective disclosure about these matters that may have been made to some but not all shareholders.’

Bell Rock Capital currently holds 5% of the Whitehaven shares and was joined by other major brokerages who were concerned about the lack of clarity around the buyback program.

The Daunia and Blackwater mines are for sale with a price of approximately $5.4 billion, but it is unclear how much Whitehaven is expecting to pay for the QLD mines.

Whitehaven shares are currently up 0.60%, trading at $6.71 per share in this morning’s trading.

Today was the first day in the RBA head office for Michele Bullock, who became the ninth governor in the central bank’s 63-year history and the first female in the position.

One of her first steps in the role will be implementing many of the 51 recommendations made by the independent review of the RBA, which focused on reshaping the internal culture among the bank’s 1400 staff.

‘Getting a culture of sharing, debate and … respectful challenge. And that’s something that I’m very, very passionate about,’ Ms Bullock said.

Ms Bullock also reiterated that she would not hesitate to raise rates if required in the coming months as global markets see inflation creep up in the face of rising oil prices.

At the end of August she remarked:

‘In Australia’s case, all I can say is that we may have to raise interest rates again, but we’re watching the data very carefully.‘

Friday was the last day in office for exiting head Philip Lowe, who was at the RBA for 43 years and saw the country through the COVID-19 pandemic and the early days of Russia’s invasion of Ukraine.

Treasurer Jim Chalmers commented on Dr Lowe’s tenure, saying:

‘We respect and appreciate the remarkable dedication and contribution he has made to our country and our economy, and the way he has conducted himself in a difficult role at a challenging time.’

Despite these positive words, the change of head will be a welcome one for the government as Dr Lowe garnered the ire of the nation as he held the reigns through the RBA’s record run of interest rate hikes that added 4% to borrowing costs in a 13-month tightening cycle that began in May 2022.

The market and economists are again split over the Federal Reserve’s next interest rate decision, due Wednesday night AEST.

The CME FedWatch, which watches interest rate traders, shows the odds of a rate rise this week at only 1% and the odds of an increase in November to be 29.9%.

Meanwhile, a survey of leading academic economists polled by the Financial Times showed more than 40% of those surveyed expected the Fed to raise rates twice or more from the current 5.25-5.5% rate, a 22-year high.

August headline and core CPI inflation numbers in the US increased 0.6% and 0.3% MoM and 3.7% and 4.3% YoY.

According to analysts at Straegas:

‘The monthly trend in core inflation has been encouraging, but August was a bit too high for comfort. The US labour market does not appear to have rolled over enough to remove concerns about wage inflation yet (which matters for services inflation), despite some small cracks appearing.’

‘Bottom line: the Fed can likely pause in September given the improving core inflation trajectory in the past several months. Still, since inflation has historically come in multiple waves, it’s too early to consider Fed cuts at this stage.’

August CPI #inflation (blue) +3.7% year/year vs. +3.6% est. & +3.2% prior … core (orange) +4.3% vs. +4.3% est. & +4.7% prior pic.twitter.com/7Evth21emc

— Liz Ann Sonders (@LizAnnSonders) September 13, 2023

Infant formula company A2 has announced today that it has cancelled its decade-long exclusivity deal with supplier Synlait.

‘a2MC [A2 Company] has given notice of cancellation of Synlait’s exclusive manufacturing and supply rights due to Synlait’s delivery in full and on time performance (DIFOT) during FY23 falling below the level required for Synlait to
maintain such exclusive rights…’

The exclusivity rights relate to the current infant milk formula products sold in China, New Zealand, and Australia.

According to the release today, Synlait has advised that is ‘considering the notice’ and ‘will respond formally in due course’.

Earlier in the year, A2 said it was ‘surprised’ by the size of a profit downgrade by Synlait Milk in April as background tensions boiled over into the public light.

Shares in A2 are down by 1.12% this morning.

Good morning all,

The ASX 200 opened down 0.49% at 7,243.4 this morning, reflecting weakness across the ditch as Wall Street ended Friday down as investors bided their time ahead of the Federal Reserve’s next interest rate decision on Wednesday night Australian time.

This week, we also have interest rate decisions from the Bank of England on Thursday and the Bank of Japan on Friday.

Today is also the first day of new RBA head Michele Bullock, who takes over from Philip Lowe after finishing his tenure at the Reserve Bank on Friday.

• ASX 200 down -0.49% to 7,243.4
• $AUD up+0.15% at 64.37 US cents
• ASX futures up +0.52% to 7,288.0
• S&P 500 down -1.22%
• NASDAQ down -1.56%
• DOW down-0.83%
• FTSE up +0.50%
• STOXX up +0.24%
• SSE down -0.28%
• Bitcoin flat +0.05% to $US 26,533.43
• Spot gold flat +0.01% to $US 1,923.82
• Iron ore up +0.61% to $US 121.29
• Brent Crude flat -0.03% to $US 93.96pb

All figures shown are from 10:20am AEST