ASX News LIVE | ASX to Slide as Iron ore Falls Below US$100 a tonne

The ASX 200 lifted in the last 40 minutes of trade to close flat at +0.07% 7,675.8 after a subdued day of trading on the major index. Markets await clearer direction from Central Banks later this week before larger movements.

Five sectors closed in the green (most barely), while Real Estate was the outlier today, falling -1.87% thanks to falls from Goodman Group -3.8% and Scentre Group -1.8%.

The major news across the ASX today was:

Aussie Broadband +0.57% has been instructed by rival Superloop -6.38% to reduce its stake in the smaller internet provider from nearly 20%to below 12% to comply with Singaporean regulations concerning share purchases.

South32 has suspended operations at its manganese mine on Groote Eylandt after Tropical Cyclone Megan damaged the site. Despite this setback, the company’s shares have risen 5%, trading at $3.13 per share.

Southern Cross Austereo is evaluating its options after shareholders moved to convene a meeting to remove chairman Rob Murray in the wake of a proposed buyout bid from rival ARN Media.

Mineral Resources is set to acquire the Lake Johnston nickel plant in WA from Poseidon Nickel. Mineral Resources shares have risen 0.9% to $66.27, while Poseidon Nickel’s shares have fallen -6.25%, trading at just 0.8 cents.

Bitcoin fund manager DigitalX has successfully raised $5.3 million from investors, exceeding its initial target of $3 million last week. After being reinstated this morning, the company’s shares fell nearly -10%, trading at 7.4 cents.

The Chinese property market is trapped in a destructive cycle, contributing to the over 13% plunge in iron ore prices last week with little reprieve in sight.

Property prices in China fell another 0.36% last month, marking the ninth consecutive monthly decline.

With the property sector accounting for a staggering 30-35% of China’s steel demand, it’s no surprise that the key steelmaking ingredient, iron ore, is losing value.

According to Vivek Dhar of the Commonwealth Bank of Australia:

‘There is a vicious cycle playing out between the deteriorating credit conditions of property developers and falling new home prices. This negative feedback loop ultimately heightens the importance of policymaker and regulator intervention to improve the credit quality of China’s property developers.

In a recent move, Chinese authorities intervened to ensure China Vanke avoided defaulting on its maturing bonds in Hong Kong on March 11th. Vanke, reportedly in talks with 12 major banks, including state-owned financial institutions, aims to secure a loan to meet upcoming repayments.

Dhar notes on these repayments:

‘While it’s too early to say whether government efforts to rescue China Vanke will be successful, China Vanke is the first property developer to receive a government bailout in the current housing crisis. The treatment of China Vanke contrasts with major developers like Evergrande and Country Garden, who were allowed to default.’

Whatever happens with this, it’s still too early to say if there is a clear turning point ahead for the Chinese property market.

Remember, steel consumption in China’s property sector is slanted towards the early stages of construction rather than later and so a boost of new activity will be the only major factor spurring this demand to recover anytime soon.

Looking elsewhere, Brazil has just opened investigations into alleged dumping of industrial products by China as the economy reels from a wave of cheap imported goods.

We’ve talked a lot about Central Banks today, and here’s why.

Here are all the central banks that are deciding on rates this week.

Per the Bloomberg chart below, it’s a big week for central banks.
Re the G-7 economies:
The question for the US #FederalReserve and the @BankOfEngland is much less about what they will do with rates (nothing for now) and much more about what they will signal with respect to… pic.twitter.com/9HdqlK2isK

— Mohamed A. El-Erian (@elerianm) March 17, 2024

The Federal Open Market Committee (FOMC) meeting on March 21 at 05:00 AEDT and the subsequent press conference by Fed Chair Jerome Powell at 05:30 AEDT will be closely watched events by the market looking for its next direction.

Here are the key points to focus on:

Interest Rate Outlook: The Fed is not expected to cut rates at this meeting, and the overall guidance and tone are likely to remain consistent with previous commentary. However, the market is pricing in around 75 basis points of rate cuts by the end of 2023, which the FOMC statement or J Powell’s speech will need to address.

The Dot Plot: The ‘dot plot’ projections from individual FOMC members will be crucial. If two members raise their projections for the federal funds rate in 2024, it will result in the median projection being reduced to two rate cuts (instead of three) through 2024.

Given the market’s pricing of 75 basis points of cuts this year, a shift towards two cuts in 2024 as the median dot could cause U.S. bond yields to spike higher, strengthening the U.S. dollar (USD) while potentially weighing down equities and gold.

Long-term Neutral Rate: The FOMC’s longer-term projection for the neutral federal funds rate, currently at 2.5%, could potentially be revised higher to 2.75%.
Economic Forecasts: If the Fed’s 2024 dot for 2024 remains at 4.6% (implying three rate cuts), but there is an upgrade to the 2024 GDP forecast (currently 1.4%), it could trigger a relief rally in equities and gold, and promote USD selling.

Things to keep in mind:

Algorithmic traders will respond quickly to changes in the 2024 dot plot, as it is the most critical factor for their projections.

A shift to pencilling in two rate cuts this year is not the consensus, but it is a real possibility, which could reduce the market’s implied rate cuts by December 2024 from 75 basis points to 60 basis points.

This outcome would likely cause the USD to spike and weigh on equities and gold. Conversely, if the 2024 dot remains at three cuts, it could prompt an immediate relief rally in risky assets and gold.

The risks to the markets seem balanced, so it may be a good time to reduce exposure in the run-up to the meeting on Thursday AEDT.

While interest rate fears keep markets down, now is a great time to consider adding some tech stocks to your portfolio.

Our small-caps expert, Callum Newman, has been looking at this moment and thinks we are seeing a repeat of the 1995 stock market explosion.

He has a four-word roadmap into how he thinks the next few years are going….

COLLIDE. LOCK. BUILD. EXPLODE.

He’s also got five stocks he thinks are the next best thing to play this trend.

Click here to see his next big picks.

The ASX 200 is down by -0.20% around midday at 7,654.7 as almost all sectors are down, with further losses being held by Financials and Mining, which are holding the market steady from deeper losses.

Real Estate is leading the losses today, down -1.43%, while Utilities and Materials hold flat.

On the ASX 200, the biggest losses are seen by Audinate Group, down -7.3%, and Summerset Group, down -4.06%.

In the smaller caps, Race Oncology is up by 14.2% after the appointment of its new CFO, Brendan Brown.

Some positive movement in the Uranium sector today, with Paladin Energy up +3.5% and Boss Energy gaining 2.45%. Deep Yellow is also up 3.4%.

Mineral Resources [ASX:MIN] is set to acquire the Lake Johnston nickel concentrator plant and associated tenements in Western Australia from Poseidon Nickel [ASX:POS]. MinRes intends to develop the site as a lithium processing hub to service its nearby Bald Hill and Mt Marion lithium operations in the southern Goldfields region.

Under the deal, MinRes will pay $1 million upfront for the Lake Johnston site, followed by $6.5 million upon completion of the sale, and an additional $7.5 million 12 months later.

The acquisition comes as lithium and nickel prices recover from downturns, which forced some higher-cost producers to curtail production and, in some cases, reduce staff levels.

By repurposing the existing nickel concentrator infrastructure at Lake Johnston, MinRes aims to establish a centralized lithium processing facility to support its lithium mining operations in the area.

CEO, Craig Jones, commented:

‘The proposed transaction will crystallise value for shareholders through the monetisation of one of our assets and will enable the Company to continue with its strategy to progress the exciting exploration targets identified at Windarra, maintain Black Swan as our near-term production asset and progress new opportunities that are complementary to our portfolio.’

MinRes shares are up by +0.53% in trading this morning, while Posiedeon’s are down by over -10%.

Uber has agreed to pay $271.8 million to Australian taxi and hire car drivers, operators, and license holders.

The settlement compensates them for lost income and diminished license values when the ride-sharing giant entered the Australian market.

The settlement ranks as the fifth-largest in Australian history and is one of the most successful class-action lawsuits against Uber, according to lawyers behind the case. Maurice Blackburn Lawyers principal Michael Donelly stated that the settlement followed a five-year legal battle in which Uber ‘fought tooth and nail at every point along the way.’

‘But on the courtroom steps and after years of refusing to do the right thing by those we say they harmed, Uber has blinked, and thousands of everyday Australians joined together to stare down a global giant,’ Mr. Donelly said.

The class action trial proceedings continue in the Supreme Court of Victoria this morning.

Good morning. Charlie here,

The ASX 200 dropped -0.21% to 7,654.2 this morning as the S&P 500 marked its second weekly loss. Markets remain sheepish as concerns about re-accelerating inflation continue.

Iron ore continued to fall as inventories hit a 12-month high. Futures continue to fall as concerns of Chinese producers cutting production continue to hang over prices. The Singapore futures price fell below US$100/tonne over the weekend—its lowest in over seven months.

In the US, inflation is on everyone’s mind. It’s likely the Fed’s underlying path hasn’t deviated, sticking with its recent message that rate cuts are coming, but the Fed ‘will take its time’.

The next FOMC meeting is on 21 March at 5:00 AEDT in what is set to be a busy week for central banks. While the FedWatch shows the chance of a change in the meeting at only 1%, markets will be watching for any shift in rhetoric from J Powell or Fed members.

Meanwhile, the Bank of Japan is said to be in final preparations for a rate hike next week, finally unpegging its ultra-loose monetary policy after worker unions in Japan won historic wage hikes that were said to be the frontrunner to the change.

The change will scrap eight years of negative interest rate policy, marking a huge shift away from its stimulus past. The shift could see Japanese capital flow back into Japan as interest rates, however low, could be seen as safe.

Why is this significant? Japan is seen as a global creditor with huge sums of money in foreign markets such as the ASX and S&P 500, so changes here could see markets shift.

Wall Street: S&P 500 -0.65%, Dow -0.49%, Nasdaq -0.96%.

Overseas: FTSE -0.20%, STOXX -0.14%, Nikkei -0.26%, SSE +0.56%.

The Aussie dollar fell -0.02% to US 65.60 cents.

US 10-year bond yields +2bps to 4.31%.

Australian 10-year bond yields +11bps to 4.17%.

Gold is down -0.05% to US$2,154.79, while Silver is down -0.26% to US$25.13.

Bitcoin rose +3.09% to US$68,234, while Ethereum rose +2.73% to US$3,664.

Oil Brent fell -0.08% to US$85.35, while WTI Crude -0.28% to US$81.03.

Iron ore fell -2.8% to US$102.55 a tonne.