ASX News Live | ASX Sinks 2.5% After Wall Street Rout

The S&P/ASX 200 ended Wednesday 2.6% down as stocks across the board were sold down.

Only a handful of stocks ended the day in the green.

The best performer was Computershare (ASX:CPU), which managed to end the day 1.2% higher.

The worst performers:

• Lake Resources (ASX:LKE), down 16.5% after a dispute over the timing of milestone completion with its key tech partner Lilac Solutions
• Megaport (ASX:MP1), down 10%
• Pinnacle Investment (ASX:PNI), down 7.5%
• Gold Road Resources (ASX:GOR), down 7.2%
• Clinuvel Pharmaceuticals (ASX:CUV), down 7%

 

I’ve been addressing the war on cash lately, and for good reason. While everyone’s attention is focused on the war in Ukraine, inflation, and the Supreme Court, government plans to eliminate cash are accelerating.

For example, central bank digital currencies (CBDCs) are coming faster than many anticipated. The digital yuan is already here; it was introduced in China last February during the Winter Olympics.

Visitors to the Olympics were required to pay for meals, hotels, transportation, etc., using QR codes on their mobile phones that linked to digital yuan accounts. Nine other countries have already launched CBDCs. Europe isn’t far behind and is testing the digital euro under the auspices of the European Central Bank.

The US was lagging but is catching up fast.

The Federal Reserve was studying a possible Fed CBDC at a research facility at MIT. Now the idea has moved from the research stage to preliminary development.

Fed Chair Jay Powell said:

‘A U.S. CBDC could…potentially help maintain the dollar’s international standing.’

But this has little to do with technology or monetary policy and everything to do with herding you into digital cattle chutes where you can be slaughtered with account freezes, seizures, etc.

https://www.dailyreckoning.com.au/welcome-to-1984/2022/09/14/

Battery developer Altech Chemicals (ASX:ATC) surged on Wednesday on plans to commercialise 100MWh sodium alumina solid state (SAS) batteries for grid storage.

Altech executed a joint venture agreement with German battery institute Fraunhofer IKTS (IKTS) to commercialise IKTS’s CERENERGY battery.

Altech believes CERENERGY batteries are the ‘game changing grid storage alternative to lithium-ion batteries.’

ATC shares rose over 25% on Wednesday, bucking a steep sell-off in the wider market.

Year to date, ATC shares are down 15%.

Writing for the Daily Reckoning, our small-caps guru Callum Newman thinks property stocks are a great contrarian opportunity for patient investors focused on the long-term.

I have no idea when the market will bottom, or enter a new bull market, and I don’t really care.

I do know from history that the problems pressing the market now will be forgotten in two or three years’ time, just as the issues hitting the market in 2018 and 2019 weren’t the same as they are now.

An individual investor has an advantage over the professional fund manager at times like now. You can take the long view — if you have the patience to hold firm.

A fund manager usually can’t. They’re so hostage to their quarterly and annual performance reports they dare not risk their clients leaving them.

As my friend Gary Norden told me on my podcast the other week, ‘there is no long term if there is no short term’.

Fund managers are hostage to their clients’ expectations and perceptions.

I know from experience I can wax lyrical about an opportunity in a certain sector forever, but if people don’t see results fairly soon, they stop listening or caring. I don’t blame them, either.

Perhaps the only exception to this rule of thumb in the world is Warren Buffett.

Anyway, that’s not our problem, but it does mean you can buy shares on the cheap with an eye to 2024 and 2025 when most participants in the market won’t.

There’s an advantage in that if you want it. Start with the sectors most beaten up.

What is beaten up?

Property stocks!

These are a superb contrarian opportunity if you can look out more than 12 months.

Here are two reasons why…

https://www.dailyreckoning.com.au/property-stocks-for-long-term-contrarians-only/2022/09/12/

The real long-term yield in the US according to the US Treasury is currently at 1.36%, slightly down from yesterday’s 1.37%. It has exceeded the peak in late-June of 1.16% and appears to be heading upwards.

This seems to indicate that the US dollar is delivering positive returns and may be the reason for further selloffs in the asset markets.

Gold has also taken a hit overnight as soon as the announcement of the CPI figures came out. It has pared some of the losses and is now around US$1,702 an ounce, down from US$1,733. It traded as low as US$1,696.

Markets expect a possible 1% rate rise from the Federal Reserve, although the consensus is 0.75% when it meets next week.

Copper is widely used in many sectors of our economy. It’s why it’s usually used as a barometer for the economy’s health. It even has a nickname — Dr Copper.

Let’s take a look at the price of copper over the last couple of years:

As you can see, prices collapsed at the beginning of the pandemic.

But what’s interesting is that even as most of the world was in lockdown, copper started to climb, mainly driven by pledges for the energy transition.

It dropped earlier this year on recession fears and a stronger US dollar.

But prices have started to recover recently regarding concerns over physical supply and a weakening dollar, along with the fact that workers at Escondida, the largest copper mine in the world, were threatening a strike.

The strike’s been called off, and prices have once again fallen over concerns of a stronger US dollar.

Still, copper prices are considerably higher than before the pandemic.

And while it may sound strange, considering that there’s lots of talk of recession and copper is a proxy for the economy’s health, copper is looking very interesting indeed.

We are going to need higher copper prices

Europe is speeding up its energy transition to move away from Russian fossil fuels. China is also investing big in EVs and renewable energy, and the US has taken a giant leap into this space with the Inflation Reduction Act.

Copper is a crucial material for EVs, solar panels, and batteries, and we are going to need a lot of copper if we want to electrify everything.

In fact, it may not be reflected in the copper price, but things have been heating up recently in the copper space.

https://www.moneymorning.com.au/20220914/keep-an-eye-out-for-dr-copper.html

Commenting on the latest CPI reading from the US, Fat Tail’s veteran guru Vern Gowdie argued inflationary pressures in the US are far from over and are in no way transitory.

“Higher energy and food costs feed into demand for higher wages. Breaking that spiral will not be easy.

“The bigger picture here is the impact these inflationary pressures will have on US profit margins.

“Corporate America, for several years now, has enjoyed the healthiest profit margins since the 1929 peak. I expect we’ll see two things happen from here.

“Firstly, a fall in reported earnings. Secondly, the multiple (PE ratio) applied to those earnings to also fall.

“This is a case where two negatives DO NOT make a positive. The next leg down in the US market is going to be driven by disappointing earnings and a more subdued investor outlook.

“Best guess…there’s a 30+% drop ahead in this next leg…but it won’t be the final resting place for this market.

“More pain awaits.”

The world’s largest cryptocurrency fell 10% overnight following the latest inflation data from the US.

Bitcoin is currently trading for around US$20,350, having traded over US$22,700 immediately prior the CPI print.

Bitcoin is now down over 15% in the past month, bringing its 12-month loss to 55%.

US stocks were smashed overnight, recording their worst day since June 2020.

ASX stocks didn’t need further encouragement and followed suit, with the ASX 200 currently down 2.8%.

The catalyst? The latest CPI print out of the US.

The US Consumer Price Index rose 0.1% in August. Over the last 12 months, inflation rose 8.3%, down on the 8.5% increase for the period ending July and down on the record 9.1% increase for the 12 months ending in June.

Sounds good, no?

No.

The index for all items less food and energy rose 0.6% in August, a larger increase than in July, which rose 0.3%.

It means the index less food and energy rose 6.3% over the last 12 months, up from 5.9% over the 12 months ending in July.

This core inflation figure came in higher than economists’ predictions.

Today’s CPI report confirms that the US has a serious inflation problem.
Core inflation is higher this month than for the quarter, higher this quarter than last quarter, higher this half of the year than the previous one, and higher last year than the previous one.

— Lawrence H. Summers (@LHSummers) September 13, 2022

This is a much much worse CPI report than anyone was expecting. The decrease in headline inflation due to lower energy prices is there, but the underlying rate — best proxied by core inflation — is running a fair bit higher than anyone forecast and most of us hoped.

— Justin Wolfers (@JustinWolfers) September 13, 2022

It gets worse the more you unpack the headline numbers.

Harvard economist Jason Furman noted that August’s median CPI, which excises large changes in either direction, registered its highest print since at least 1983.

The median CPI, which excludes all the large changes in either direction and is better predicted by labor market slack, is out and is extremely ugly. A 9.2% annual rate in August, the single highest monthly print in their dataset which starts in 1983 (second highest was in June). pic.twitter.com/4W6XDLdJXA

— Jason Furman (@jasonfurman) September 13, 2022

What does it all mean?

A 75 basis points interest rate hike is almost a certainty now. Any optimism about moderating interest rate hikes is likely dashes by last night’s CPI release.

Headline inflation is trending down — but slowly — while core inflation is worryingly elevated.

As economist Justin Wolfers put it, it’s hard to see a quick path to 2% inflation.

That has pushed some to call for bolder action from the Fed.

Harvard professor Lawrence Summers thinks the Fed should seriously consider a 100 basis points hike at the upcoming Fed meeting.

It has seemed self evident to me for some time now that a 75 basis points move in September is appropriate. And, if I had to choose between 100 basis points in September and 50 basis points, I would choose a 100 basis points move to reinforce credibility

— Lawrence H. Summers (@LHSummers) September 13, 2022

Every stock in the ASX 200 is currently down except Computershare (ASX:CPU). And even Computershare’s gains are hanging by a thread, up less than 1% in early Wednesday trade.

This is a quite the sell-off, with the ASX 200 extending its losses from the market open. The benchmark index is now down 2.8%.

Computershare $CPU is currently the only stock (in #ASX200) trading in positive territory (up ~1%). Lake Resources $LKE is falling most, followed by Megaport #MP1 (down ~7.3%) and Zip Co $ZIP (down 7.5%). Novonix $NVX, which yesterday climbed by 7.5%, is now down ~7%.

— CommSec (@CommSec) September 14, 2022

Wall Street’s huge drops overnight were unlikely to leave the ASX unscathed. And so it proved.

The S&P/ASX 200 is currently down 2.5%, following the major US indices lower.

The worst performers at the open:

• Lake Resources (ASX:LKE), down 15% after flagging a dispute with its key DLE tech partner Lilac Solutions
• Zip (ASX:ZIP), down 8%
• Megaport (ASX:MP1), down 7%
• Novonix (ASX:NVX), down 7%
• Brainchip (ASX:BRN), down 6.5%
• EML Payments (ASX:EML), down 6%

 

Lithium developer Lake Resources (ASX:LKE) has revealed a dispute between it and its key technology partner Lilac Solutions.

LKE plans to use Lilac’s direct lithium extraction (DLE) technology to mine and process lithium in Argentina.

The dispute concerns the timing of certain milestones LKE expects Lilac to achieve.

Lake expects Lilac to achieve these by the end of this month, while Lilac thinks it has until November 30.

The milestones include completing at least 1,000 hours of operations of the Lilac Pilot unit onsite at Kachi as well as producing a lithium carbonate feed of at least 2,500kg of lithium carbonate equivalents from onsite operations.

To resolve the dispute, Lake has exercised its rights to have the issue resolved by agreement of both parties or by arbitration.

LKE said if the milestones are not achieved by the end of the month, it has buy back rights it may exercise.

It was carnage on Wall Street overnight.

Following the release of the latest CPI print, all major US stock indexes suffered some of their worst declines in years.

Annual US inflation did ease to 8.3% in August but core inflation came in higher than economists anticipated.

The battle to tame inflation is likely to drag on, meaning investors are unlikely to see the Fed ease off its aggressive interest rate policy.

A 75 basis point hike looks inevitable.

Even a 100 basis point hike is now an outside chance. Traders are currently assigning a 34% probability to a 1% interest rate increase at the Fed’s next meeting, up from a 0% chance only a day earlier.

The market is now pricing in Fed rate hikes to 4.25%-4.50% by the first quarter of next year, then rate cuts in the back half of 2023 and more cuts in 2024… pic.twitter.com/ktJLUdYovX

— Charlie Bilello (@charliebilello) September 13, 2022

• The Dow fell 3.9%
• The S&P 500 4.3%
• The Nasdaq tumbled a full 5.2%