ASX NEWS LIVE | ASX Set for Weak Day as Energy Stocks Hold the Line; Iron Ore Jumps Ahead of China Stimulus Hopes

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

Here’s a great in-depth discussion between Editorial Director Greg Canavan and Gavekal’s Louis-Vincent Gave.

As a contrarian investor, Greg had recommended bombed-out Chinese equities to members in mid-2024. He reached out to
Louis with the intention of discussing just how bad China’s economy was.

But China announced major stimulus measures just before the discussion took place.

So it turned out to be a very different conversation.

The conversation with Louis covers a lot of ground, including:

• Does the rally have legs (yes)
• What China’s policymakers really care about (not the stock
  market)
• Why the world is more dependent on China than ever
• Where are China’s US$80 billion a month in trade
  surpluses going?
• Why a New Plaza Accord Could lead to a Massive Boom
• Why Louis is bullish on commodities (but not iron ore)

Click below to watch the discussion.

In promising news for job hunters, a measure of ad numbers has recorded its first gain in eight months.

ANZ and Indeed have been recording a steady decline in job ads since 2022, with the index down 15.8% since January.

Today, we saw the first signs of improvement in ads for new jobs.

September’s 1.6% increase adds to the broader labour market resilience narrative mentioned in its minutes today.

What this could mean for us is— sadly, yes— it’s still ‘higher for longer’ for Australia’s interest rates.

ANZ-Indeed Australian Job Ads rose 1.6% m/m in September. The rebound was led by Queensland, where Job Ads rose to their highest level since October last year. @MadelineDunk @cfbirch @CallamPickering #ausecon pic.twitter.com/Wf0x5cHgOW

— ANZ_Research (@ANZ_Research) October 8, 2024

After a run-up of Iron ore Futures throughout this morning’s session, reaching US$115 per tonne, Iron ore has dropped again.

China’s National Development and Reform Commission’s meeting today disappointed investors with a lack of anything substantive.

China’s state planner acknowledged today that ‘the downward pressure on China’s economy is increasing.’

Here are some choice quotes from the dry and rather vague meeting today:

‘China’s economy largely stable.

 

China’s economy facing more complex internal, external environments.

 

Market expectations have improved after new policy adoption.

 

Fully confident of achieving full-year economic, social development targets.

 

Will promote sustained, stable, healthy economic development in 2024, 2025.

 

Will expand domestic demand, prioritise consumption.

 

Will strive to boost capital markets.

 

Will promote economic rebound.

 

Governments aim to complete special bond issuance by end of October.

 

When speaking on policy package, the NDRC noted –

 

Step up counter cyclical adjustments, improve policy coordination.

 

Will quicken fiscal spending to support economy.

 

Will support state banks to replenish core capital.

 

Will implement key reforms unveiled at party plenum.

 

Will step up efforts to attract foreign investment.

 

Improve policy framework supporting births.

 

Will speed up local government special bond issuance.

 

Next year will continue to issue special treasury bonds.

 

Plan to issue 200 billion yuan in advance budget spending and investment projects from next year.

 

Will guide financial institutions to step up support for small firms.

 

Will promote stabilisation of property market.

 

Will guide long-term capital into capital markets.

 

Will protect small, medium-sized investors.

 

Will support sustainable economic growth.

 

Economic growth remained generally stable over first three quarters.’

Iron ore Futures are currently down -3.5% to US$106.95 and dropping.

After the meeting, a sell-off of major Iron ore miners has dragged the ASX 200 down in afternoon trading, currently down by -0.28% at 8,182.4.

BHP is down by -1.54% at $44.17 per share. Fortescue fell by -4.9% at $19.35 and Rio Tinto shaved off -0.69% at $120.33 per share.

Mining companies rallied, helping the Australian sharemarket recover from earlier losses as investors await a crucial announcement on further China stimulus.

The ASX 200 remained flat at 8,204.9 having opened lower following Wall Street’s weak performance amid US Federal Reserve interest rate speculation. ASX tech stocks declined, with Xero dropping 1.6%.

BHP and Rio Tinto saw gains of 0.9% and 1.4%, respectively, following iron ore futures surpassing US$111 per tonne in Singapore.

Citi predicts the steelmaking ingredient could reach US$120 if Beijing delivers an anticipated public spending package.

China’s National Development and Reform Commission is scheduled to hold a press conference at 1pm AEDT.

Energy stocks rose alongside oil prices, with Brent crude exceeding US$80 per barrel due to heightened Middle East tensions and speculation about potential Israeli attacks on Iran’s oil infrastructure.

West African Resources rebounded 10.2% after confirming its Burkina Faso mining permits were not under review.

Piedmont Lithium and Atlantic Lithium also saw significant gains. Incitec Pivot announced the upcoming departure of its CFO, while NRW Holdings secured a $360 million contract with Evolution Mining for surface mining in Western Australia.

The Reserve Bank of Australia just released its minutes for the September meeting where it left the cash rate unchanged at 4.35%.

Our central bank’s overall tone is cautious. Here were the main topics discussed:

Economic Outlook:

Inflation is gradually easing but remains above target.
GDP growth in June quarter was in line with expectations, but household consumption was weaker than anticipated.
Labour market conditions remain tight but are easing as expected.

Global Economic Conditions:

Indicators have been somewhat weaker in recent months.
Chinese economy outlook has softened, affecting commodity demand and prices.
Many advanced economies are seeing easing labor markets and declining inflation.

Financial Conditions:

Australian financial conditions remain restrictive overall but have eased somewhat.
Market expectations for the cash rate path are lower than a few months ago.
Housing and business credit growth has increased.

Financial Stability:

Global vulnerabilities remain, including increased complexity in the financial system and low market risk premia.
Domestic risks from lending to households and businesses are contained.
Most borrowers maintain resilience despite financial pressures.

Future Policy Considerations:

The Board remains vigilant to upside risks to inflation.
Future decisions will be guided by data and evolving assessments of risks.
Scenarios for both tightening and easing were discussed.

The Board also noted that Australian monetary policy doesn’t need to evolve in line with other economies due to different economic conditions.

Here’s an extract from the meeting that gives the best overview of those talks:

‘Members judged that Australian financial conditions remained restrictive overall but had eased somewhat over preceding months. Market expectations for the path of the cash rate were materially lower than a few months earlier, and bond yields and some lending and deposit rates had declined in tandem.

Housing credit growth had also gradually increased, and business credit growth was above its average pace since the global financial crisis. Funding conditions more generally for Australian financial and non-financial corporations remained favourable.

Members discussed the implications of this for future business investment and concluded that it seemed unlikely financial conditions would be a binding constraint on investment for most businesses.’

While market expectations for the path of the cash rate were lower than a few months earlier, members noted that they had risen in response to the Governor’s comments that, based on data to hand at the August meeting, the Board did not expect to lower rates in the near term.

Market pricing suggested that participants expected the RBA to start cutting the cash rate from around late 2024 or early 2025, but at a more gradual pace than that expected in several other advanced economies.

That was consistent with the fact that policy rates in most other advanced economies had been increased earlier and to more restrictive levels than in Australia, and that inflation appeared to be returning sustainably to target more quickly in those economies.

Market expectations were nevertheless for the stance of monetary policy in those countries (as measured by gaps between the policy rate and central bank estimates of the neutral interest rate) to be more restrictive than in Australia until around late 2025.’

African gold miner West African Resources [ASX:WAF] is this morning’s top performer, jumping 7.8% after dropping over 20% yesterday.

The fall came after concerning remarks from Burkina Faso’s Junta leader Ibrahim Traore on a local radio.

‘We know how to mine our gold and I don’t understand why we’re going to let multinationals come and mine it.’

 

‘In fact, we are going to withdraw mining permits.’ he said.

He did not specify which permits or provide further details, but the comments were enough to shake investor confidence in the area.

Gold is the primary export of the West African Nation, which has faced Islamic insurgency and has shed ties with Western allies while seeking closer ties with Russia.

Yesterday, WAF released this statement to try to calm investor nerves, saying operations remain unaffected. They went on to say:

‘WAF is not aware of any plans by the government of Burkina Faso to withdraw any of its mining permits.’

 

‘President Traore has spoken previously about taking action against miners who have not adhered to the Mining Code and also regulating the semi-mechanised and artisanal mining sectors.’

Today, WAF provided a production update for the September quarter.

Q3 unhedged gold production came in at 47,799oz. While gold sales were 49,643oz at an average price of US$2,493/oz.

The company said it was tracking ‘towards the upper end of 2024 guidance of 190,000 to 210,000 ounces of gold’.

Good morning. Charlie here,

The ASX 200 opened slightly down but is now trading around flat +0.04% at 8,208.4, now just 4 points below the all-time closing peak of 8,212.2 set in September.

It will likely continue to be a choppy day of trading after a broad sell-off on Wall St as traders absorbed the impacts of the incredibly strong September jobs report last Friday.

While the initial news on Friday was a shoot for higher across many of the stocks on Wall St.

A new week has set in for the US where traders are now anticipating a far more constrained Fed.

By this, I mean it is very unlikely that the Fed will make another 50bps interest rate cut at the start of this cutting cycle.

This, plus the risks of a wider conflict in the Middle East pushed both oil and bonds, overnight US 10-year treasury bond yields jump 6bps to 4.03%.

Meanwhile Australian 10-year bonds jumped 12bps to 4.20%, while the Australian dollar plummeted -0.69% to US 67.52 cents.

Oil prices once again spiked due to supply risks stemming from the Middle East as well as hopes of stimulus from China today.

Brent crude jumped nearly 4% to US$80.98 overnight as Isreal was attacked from three different directions overnight on the anniversary of the October 7 terrorist attack by Hamas.

Many China watchers will be watching China’s top economic planner, National Development and Reform Commission chairman Zheng Shanjie, who is due to give a briefing this afternoon.

With such a high-profile meeting set, many expect a broad outline of fiscal policy changes to boost Chinese economic growth.

Iron ore futures show that many have already piled into the trade, expecting positive news. Iron ore futures are up by 3.02% at US$114.10.