ASX LIVE | XJO to Slip; Markets await US CPI data tonight, Viva Energy and Pact Group Feature

If you’ve read anything from us recently, you’ll know the office is in the middle of a deep dive into the numbers and metrics behind the Net Zero movement.

If you haven’t seen the updates, then follow this link to see investing expert and Editorial Director Greg Canavan discuss the cost implications of the Net Zero changes.

As part of that huge change will come an unprecedented surge in demand for critical metals such as lithium, neodymium, and copper.

The largest agreement from analysts seems to be surrounding the potential shortfalls of the red metal; here is another small piece covering some companies you may want to put on a watchlist.

Let’s talk about opportunities among copper stocks:

While JP Morgan and other leading banks and investors see:
• large supply gaps (7-9mt by 2033)
• copper up to $15K by 2025

Both sector investment and actual prices remain weak.

Yet the long-term thesis is stronger than… pic.twitter.com/CF0uM3vbeP

— Paola Rojas 🐝 (@paola_rojas) September 12, 2023

Here’s a list of the CPI estimates out for tomorrow by top analysts:

• VISA 3.5%
• CIBC 3.5%
• GOLDMAN SACHS 3.6%
• BLOOMBERG 3.6%
• JP MORGAN 3.6%
• GURGAVIN CAPITAL 3.6%
• MORGAN STANLEY 3.6%
• RBC 3.6%
• SCOTIABANK 3.6%
• TD 3.6%
• WELLS FARGO 3.6%
• BARCLAYS 3.7%
• NOMURA 3.7%
• CITI 3.7%
• HSBC 3.7%
• UBS 3.7%
• MEDIAN 3.6%

Oil prices are up almost a third over the last three months at $92.02 pb, a 10-month high, and it’s not showing signs of slowing as OPEC flexes its muscles over markets.

Crude Brent ominously passed the $90 per barrel mark earlier this week and signed few signs of slowing. It served as a warning shot for many.

Source: Bianco Research

These are some of the sharpest monthly fuel price rises markets have seen in the past two decades, and many analysts are saying we aren’t done yet.

Throughout the northern hemisphere’s summer, we have seen weak economic data throughout Europe and a massive slowdown in China — the world’s largest crude importer. With this, we would usually expect demand to be falling— bringing prices with it.

Yet oil prices have surged as the Opec cartel showed the world the strength of its control over the market. The 13-body nation controls around two-fifths of global crude production and four-fifths of the world’s reserves.

Since the Ukraine invasion, we have seen the growing ties between head Opec honcho Saudi Arabia and non-member Russia. With their growing ties, we have seen an increase in coordinated decisions of what is known as Opec+, which includes 11 other non-Opec members, such as Russia, Mexico and Malaysia.

The latest data from Opec indicates a potential supply shortfall in the coming quarter for global oil markets. The shortfall is expected to exceed 3 million barrels a day, making it the largest deficit in over a decade.

Source: Bloomberg

This situation could bring renewed inflationary pressures to a fragile global economy and even turn into a political issue for countries like the US.

The Fed will certainly be watching the issue as they await CPI data that will arrive tonight (10:30pm AEST via this link) and should have wide implications for its next interest rate call next week and the broader economy.

Viva Energy shares tumbled today after Dutch oil trading giant Vitol sold a 16% stake in the Australian company, which currently supplies approximately a quarter of our fuel.

After rumours of the sale came to light on Monday, the share price has been rattled by concerned shareholders who assumed Vitol had the inside scoop on some negative news.

Since then, Vitol has attempted to calm fears, highlighting that it still holds an approximate 30% stake after the sale. The company went on to say:

‘[Vitol] considers Viva Energy to be one of the very best downstream companies in the world, managed by an exceptional team led by CEO Scott Wyatt,” Vitol said in an announcement released via Viva Energy today.

Vitol has also said it will maintain its current supply agreement with Viva unchanged.

Viva has been struggling to regain momentum lately after its interim results in August showed the company had 11% sales volume growth but saw its net profit fall by 51% to $174 million after its energy and infrastructure business suffered much lower margins and delays in maintenance work.

With the delays moving through to the second half of the year, the company has forecast annual capital expenditure of $405−455 million but noted that this number may be revised in a long-term capital management update in November.

The ASX 200 is down 0.82% at 7,147.8 by midday, with all sectors in the red, bar Utilities (+0.19%) and Energy (flat).

Tech stocks are leading the decline, with the sector down by 2.13%, following US Tech stocks fall overnight.

The best individual performers:

• Core Lithium +4.6%
• Lake Resources +4.4%
• Capricorn Metals +2.4%
• Coronado Global Resources +2.5%
• Liontown Resources +2%

The worst performers:

• IGO(ex-dividend) -5.8%
• Brambles -3%
• Medibank Private -2.9%
• Breville Group -2.9%
• Allkem -2.8%

Track all markets on TradingView

 

American consumers are starting to feel the pinch of rising interest rates by the Fed.

This tightening cycle began back in March 2022 but has taken some time to hit everyday Americans as many had houses fixed on long-term mortgages. Many of these are starting to unwind into floating or higher fixed rates, which are beginning to sting households.

On Monday, Morgan Stanley equity strategists said that the markets are now in a ‘late cycle’ environment.

‘We view this year as an extension of the late cycle period often experienced when the (Federal Reserve) is expected to pause or reverse its hawkish policy stance,’ strategists led by Michael Wilson said in a research note.

Overall, the strategists’ ‘late cycle playbook’ included a ‘barbell’ portfolio approach with defensive growth on one side and energy and industrials – two areas that tend to benefit in strong economies – on the other.

The note also mentioned healthcare stocks, which are poised to benefit because they have both defensive and growth properties.

Whatever position you feel the economy is in, this is a good chart to keep an eye on as the Fed lines up for another interest rate decision next week.

Auto loan delinquency rates are now at their highest levels since 2008.

Since the Fed started raising rates in March 2022, auto loan delinquency rates have nearly doubled.

For Q2 2023, the auto loan delinquency rate in the US jumped to 7.3%.

This is up from 6.9% in Q1 2023 and… pic.twitter.com/Izz6PjU3UJ

— The Kobeissi Letter (@KobeissiLetter) September 12, 2023

Billionaire Raphael Geminder has made a bold move today, buying the other half of his struggling packaging manufacturing company Pact Group and taking the company private.

In an off-market takeover, Geminder’s Kin Group, which owns a 50% stake in Pact Group, has offered 68 cents per share for the remaining 50% of the company. Pact Group’s most recent share closing price was 67.5 cents.

The decision comes after the company has struggled in the past year, with shares down nearly 60%.

Pact Group is one of the largest packaging companies in Australia but has faced a tough couple of years with inflationary and input costs impacting the bottom line.

Investments into a greener product line have come at a time when the company has struggled to maintain costs and have added to its woes. The company has a goal of eliminating all non-recyclable packaging by 2025.

These costs have dragged the value of the company from $1.6 billion two years ago to the valuation from the latest deal at approximately $234 million.

‘Pact faces a challenging environment, with supply chain disruptions, inflationary pressures, fluctuating resin prices, labour constraints and macroeconomic uncertainty,’ Kin Group said in a statement.

Shares in the company are up by 6.30% this morning after the announcement.

The Transport Workers Union (TWC) is celebrating the judgement by the High Cout today as judges dismissed Qantas’ appeal in the illegal sacking of 1,700 ground workers during the height of the pandemic.

In a statement today, the TWC said the verdict was a clear sign that the ‘Qantas board must be spilled’ and that the company should own up.

In the full statement, the Union went on to say:

‘Richard Goyder and the entire Qantas board must be replaced by new directors including a worker representative, after the High Court today unanimously upheld two Federal Court verdicts that Qantas illegally outsourced 1,700 workers,” the TWU said.

“The TWU has also called on new CEO Vanessa Hudson to publicly apologise to illegally sacked workers and commit to a speedy and non-adversarial approach to Federal Court hearings on compensation and penalties.

“Three unanimous rulings from the Federal Court and High Court found Qantas breached the Fair Work Act. Outsourcing workers prevented them accessing industrial rights to collectively bargain and take protected industrial action.

“Qantas previously convinced the Federal Court not to reinstate the workers saying that if it did, Qantas management would sack them all over again.’

Qantas had appealed the previous ruling by the courts for a large compensation payout for the 1,700 workers who were illegally sacked at 10 airports by the airline.

The company then outsourced the jobs in a move the company claimed was needed to stay afloat during the dramatic decline in business from lockdowns.

It’s been a tough month for Qantas, who has been mired in multiple scandals that have led to the eventual early retirement of ex-CEO Alan Joyce. Pressure now mounts on the board for larger changes in leadership, and the company attempts to win back public trust.

Good morning all,

ASX 200 opened down 0.14% to 7,169.9 as Wall St tech stocks dragged US markets down overnight.

The Nasdaq fell by 1% as competition with China heats up on the tech front.

Despite trade restrictions put in place by the Biden Administration, the latest phone out of Huawei shows the latest Chips the country is producing are of a much higher standard than many analysts were expecting, with transistors 7 nanometers apart and exhibiting modern architecture despite the bans.

Huawei increased its shipment targets for the second half of the year by 20%, after the Chinese government banned government officials from using Apple products, in a move that is seen as a retaliation for the US ban of similar Huawei products.

Apple stocks were down 1.8% after releasing the latest iPhone 15 with its USB-C charging after being forced by governments to standardize its cables with the rest of the industry.

Oil hit a new high overnight and also put pressure on markets as many fear inflationary pressures are beginning to creep back into the economy, potentially forcing the hand of the Fed, who are due to make their decision on interest rates next week.

OPEC has curbed its output and upgraded demand expectations for the rest of the year, which has sent oil prices up 1.6%, in a move that is seen as a direct challenge to the US administration.

Qantas is awaiting judgment at the High Court today on the ruling surrounding the legality of its controversial decision to sack 1,700 ground staff at the height of the pandemic.

• $AUD flat +0.05% at 64.27 US cents
• ASX futures flat +0.01% to 7,189.5
• S&P 500 down -0.57%
• NASDAQ down -1.04%
• DOW flat -0.05%
• FTSE up +0.41%
• STOXX flat -0.04%
• SSE down -0.18%
• Bitcoin up +2.7% to $US 25,840.38
• Spot gold down -0.45% to $US 1,912.95
• Iron ore up +1.14% to $US 118.23
• Brent Crude up +1.46% to $US 91.96pb

All figures shown are from 10:05am AEST