ASX News LIVE | ASX Dives on Signs of Economic Weakness; Nvidia Wipes off US$280b Market Cap

The Australian share market finished the day in deep red, following similar trends on Wall St as multiple signs of economic weakness coalesced into today’s losses.

The ASX 200 closed down -1.9%, its largest drop since the August 5th sell-off as weaker PMI manufacturing data from the US restoked fears of a ‘hard-landing’.

All sectors closed well down, with Materials and Energy leading the losses, down -3.03% and -2.99%, respectively.

Of the major miners it was a tough day: BHP fell -2.5% to $38.64, Rio Tinto declined -2.3% to $105.68, while Fortescue had a shocking day as it traded ex-dividend to close down -8.5% to $16.20.

Energy large caps weren’t spared from the losses, with Woodside Energy falling nearly -2.5% to $26.86, while Santos fell -2.6% to $7.07 as oil prices dived nearly -5% to US$74 a barrel.

As I mentioned earlier today, Government spending came in as a massive portion of the GDP figures in the latest data dump from the ABS today.

Household spending fell -0.2% in the June quarter, while government spending was up +1.4%.

That’s its seventh consecutive gain to new record levels.

IFM Economist Alex Joiner put it into perspective with a great series of charts today that I’ll share below.

The biggest eye-opener was the % of GDP coming from public demand (Gov spending). That has now reached 27.3% of GDP!

Public demand.. I can see the RBA's point… pic.twitter.com/gJOw41ejki

— Alex Joiner 🇦🇺 (@IFM_Economist) September 4, 2024

Santos [ASX:STO] has signed an agreement to sell 19 LNG cargoes to Glencore in Singapore, marking their second significant LNG sales contract in just over three months.

The deal entails supplying approximately 500,000 tonnes of LNG annually from Santos over three and a quarter years.

Santos has the flexibility to source the LNG from various projects in its portfolio, including PNG LNG in Papua New Guinea and GLNG in Gladstone.

The deal start in the fourth quarter of 2025 while the LNG price will be linked to crude oil indexes.

This deal with Glencore follows Santos’ previous 10-year agreement to supply LNG to Japan’s Hokkaido Gas, which was signed in late May.

Shares in Santos are down by -3%, trading at $7.045 as it is affected by the broader sell-off and weak oil prices.

Here’s the latest from the new Fat Tail Daily video series.

Publisher James ‘Woody’ Woodburn will be sitting down with our Fat Tail Daily editors to discuss the key trends and offer unique insights into market movements.

If you have any thoughts about the length, format, or topics you would like discussed, send us an email at support@fattail.com.au with the subject header: ‘Fat Tail Daily Video Feedback’.

Thanks, and enjoy today’s discussion with Strategic Intelligence Editor Nick Hubble.

Here are some of the key points from Jim Chalmer’s press conference this afternoon on the weak GDP figures seen today:

“Today’s national accounts for the June quarter show that our economy is barely growing.

 

“Growth in the June quarter was 0.2% and just 1% through the year. This is consistent with the market’s expectation for growth in our economy.

 

“This is the weakest growth since 2020. This is the inevitable consequence of global economic uncertainty, persistent but moderating inflation and higher interest rates.

 

“What we’re seeing here is weakness in the household part of the and private investment being offset by the contribution coming from exports and public final demand.

 

“The main story in these figures is consumption. Consumption went backwards and discretionary spending fell substantially.

 

“Helping people with cost of living is the highest priority of the Albanese Labor government. Without government spending or without government spending growth, there would be no growth in the economy at all, and the main contributors to that our health spending.

 

“Public final demand growth in annualised average growth terms is still lower at 3.3% than the 4.7% we saw under our predecessors but it is making avital contribution here.”

Meanwhile, Shadow Treasurer Angus Taylor reacted to the figures by saying:

“The government’s economic failures are coming home to roost.

 

“This is the sixth consecutive quarter now of household recession.

 

“The sixth consecutive quarter of negative GDP per capita, that is 18 months our economy has been in a household recession.

 

“To add to that, what we see in this quarter is that the private sector is going backwards.

 

“The private sector has gone backwards in the last quarter and we see that on the ground.

 

“With businesses right across this great country suffering from this government’s wrong decisions and wrong priorities.”

The ASX 200 market dropped -1.8% around noon as a trove of negative economic data had investors selling heavily today.

All sectors are in the red, with energy and mining stocks leading the losses, down by -2.92% and 2.57%, respectively.

The fall follows Wall St lower as overnight major US benchmarks fell on their sharpest losses since the early August drop.

A weaker Purchasing Managers Index (PMI) reading of 47.2, remained below the 50 mark, which denotes contraction for US manufacturers.

This added to a similar sub-50 mark for Chinese manufacturers over the weekend. These two haverestoked fears of a hard landing for major economies.

In Australia today, we also had a weaker-than-hoped GDP figure released an hour ago. The final revision saw Australia’s economy grow by 1.5% over the 2023-24 financial year and only 0.2% in the second quarter.

While those are very weak numbers, the market actually recovered slightly after the news. Jim Chalmers had pre-warned the market yesterday to expect a ‘softer and subdued’ growth number, which could have put some fear that things could be worse.

On this red day, the standout performer has been Orora , jumping 7% to $2.675 after announcing the sale of its North American packaging business for $1.775 billion.

The biggest faller on the ASX 200 has been Fortescue, down by -8.45 % to $16.205 as Iron ore Futures plunged another -3.5 % overnight, shedding nearly -7.5 % in the past two days amidst signs of Chinese weakness.

The latest figures from the Australian Bureau of Statistics showed further signs of weakness in the Australian economy today.

Australian GDP grew 1.5% for the 2023/24 financial year. This number was bolstered by a ton of revisions to push it up, with first figures coming in at 1% and then again lifted in the final report.

Source: Australian Bureau of Statistics

But beyond this headline number, we saw an economy slowed to a snail’s pace thanks to the RBA’s higher-for-longer interest rates.

Here are some of the signs of that struggle:

GDP per capita fell for the sixth straight month.

GDP was up only 0.2% in the June quarter. A slight improvement from the previous quarter’s 0.1% but still anemic.

Household spending was down -0.2% for the June quarter.

Katherine Keenan, ABS head of national accounts, noted:

‘Spending on many discretionary categories fell in the June quarter. This followed a relatively strong result in the March quarter, which included a number of sporting, gambling and music events.’

‘The strongest detractor from growth was transport services, particularly reduced air travel. This was the first fall for this series since the September 2021 quarter,’ Ms Keenan said.

Government spending rose +1.4% for the same period. That’s the seventh consecutive quarter of growth for government spending, often seen as working against the RBA in its goals to reign in inflation.

Investment fell 0.1% for the June quarter, the third straight quarter of falls. Annually, growth in total investment was 4.1%.

 

Can and glass bottle maker Orora [ASX:ORA] is up nearly 6% in this mornings trading after the company announced the sale of its North American packaging arm to Veritiv.

The $1.775 billion cash deal values the North American business at approximately 9.9 times its FY24 earnings before interest, taxes, depreciation, and amortization (EBITDA).

The move was hinted in Orora’s FY24 results as the company said it was nearing completion of its strategic review to unlock shareholder value.

The move also aligns with its goal to focus on beverage packaging and strengthen its balance sheet for ‘defensive growth’.

The company also said they intend to bring forward its $130 million investment to expand its can capacity at its Rocklea, QLD site.

The expansion is set to increase cans capacity by over 30%.

Orora has seen sucess with its thinner can packaging at the site as younger consumers favour its slim cans for pre-mixed drinks, kombucha, and other new offerings.

The share price is currently at $2.655 per share, losing almost 25% of its value in the past 12 months.

Good morning. Charlie here.

The ASX 200 tumbled on opening today, failing -1.88% in the first hour of trading to 7,950.7.

The fall was thanks to a market selloff in the US as traders came back from Labor Day celebrations with some big shifts to their positions.

The sparks that set this in motion are four-fold but we will try and break them down.

First over the weekend we had a slew of data from China that showed further signs of weakness. We covered them here yesterday, watching Iron ore Futures fall nearly 4% and big miners fall.

Then overnight we had the US Purchasing Managers Index reading. This also came in weak, with the PMI number at 47.2 vs 46.8 in July.

While that number is up, it’s still below 50, which indicates contraction for manufacturing. The PMI is often seen as a great leading indicator for the health of the economy.

Adding to those woes we also saw an influential report from UBS which showed semiconductor chip sales were down 11% month-on-month, leading to a sell-down of many tech stocks.

All of this was then compounded when the US Government served a subpoena to Nvidia for an upcoming anti-trust case. The case had been an open secret but the serve was enough to send Nvidia plummeting, falling -9.5% and wiping $280 billion off its market cap.

Where Nvidia goes, the Nasdaq follows and so we saw the sharpest day of falls since the early August drop.

For the ASX, we also have upcoming GDP data that Treasurer Jim Chalmers already warned us yesterday is likey to show ‘subdued’ growth.

Iron ore Futures again tumbled overnight, shedding -3.5% to trade at US$93.70 per tonne, while the Australian Dollar also fell sharply, losing -1.25% to US 66.99 cents.