ASX News LIVE | XJO Opens Slightly Up, Wall St Closes Mixed as Oil Prices Fall, Magellan Tumbles

That’s all from me today.

Things to keep an eye on for the weekend: the important Non-farm payrolls and employment data for the US is out tonight, along with speeches from the Fed out on Monday.

Westpac consumer sentiment and NAB’s business confidence are also due Monday to give us a barometer on the nation.

Building approval data will also be released Monday morning to give us a clearer picture of the housing market in Australia.

Until then, enjoy your weekend!

Bond markets have had some level of reprieve in the past couple of days, with US 10-year Treasuries falling back to 4.72% from their highs of 4.8%, but for many, they are still far too high.

This could pose a risk to banks and non-bank entities in the weeks ahead.

As the RBA’s financial stability report commented today:

‘After a period of fewer business failures, bankruptcies have risen in a range of economies, including Australia, Europe and the United States. While the increase has generally only seen a return to pre-pandemic levels of bankruptcies, a sharp economic slowdown would amplify this trend. Consistent with rising bankruptcies and tighter credit conditions, default rates have increased for market-based corporate debt, with vulnerabilities more pronounced for lower grade corporations. Lower grade corporate debt is characterised by more variable-rate lending, including for leveraged loans [private debt] in Europe and the United States, and is dominated by sectors exposed to cyclical trends, such as consumer products, real estate, and media and entertainment.

Default rates on speculative-grade debt have increased to be above pre-pandemic levels in Europe and the United States, and default rates are higher for variable-rate borrowers. Refinancing risks for lower grade borrowers appear limited in the near term; however, this risk rises sharply over coming years with a peak in expected maturities around 2026. Financial conditions and the state of the economy at that time will be decisive in determining whether this refinancing profile proves problematic…’

The question will be how high and for how long? Can banks handle these levels without serious stress being felt throughout markets.

As Barclay’s analyst Ajay Rajadhyaksha put it:

‘There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally,’ analysts led by Ajay Rajadhyaksha wrote in a note. ‘In the short term, we can think of one scenario where bonds rally materially. If risk assets fall sharply in the coming weeks.’

‘The magnitude of the bond selloff has been so stunning that stocks are arguably more expensive than a month ago, from a valuation standpoint,” they wrote. ‘We believe that the eventual path to bonds’ stabilizing lies through a further re-pricing lower of risk assets.’

https://twitter.com/FinanceLancelot/status/1710011432572526844

The ASX 200 closed up 0.41% at 6,954.2 today after markets rebounded from pressure earlier in the week from rising oil prices and bond yields, both of which eased yesterday evening. The benchmark finished the week down -1.01% after steep losses earlier in the week.

The worst hit sector today was the Energy sector, which fell 0.76% along with dropping oil prices, which are now heading for their biggest weekly loss since March. Brent Crude is down 12% this week as falling gasoline demand impacted futures markets. Iron ore also fell -2.33% this week, finishing the day down 0.35%.

The sectors that were top performers today were Financials (+1.21%) and Materials (+0.67%), which recovered from their losses seen earlier in the week to end near flat.

BHP finished up +1.29,while Rio Tinto closed up +1.34%.

Magellan Financial Group’s losses have widened to more than 18.5% today, the loss leader for the XJO today.

The fund manager reported a $4 billion drop in funds under management as of September, down to $35 billion.

Investors clearly are not happy.

PEXA Group also closed in the red, down by -7.34%.

Macquarie cut its price target for the digital property settlements platform because of its acquisition of UK-based Smoove.

The brokerage says the deal lacks execution details and that Smoove is a loss-making business.

No clear signals are coming out of the most recent economic tracking data.

Retail sales data: Retail sales data out today showed spending recovered slightly, up to 0.2%, in line with expectations.

The fact that retail sales spending recovered slightly is a positive sign. It suggests that consumers are still willing to spend money despite the rising cost of living. However, it is important to note that the increase in spending was relatively small, and it is possible that it could be reversed in the coming months.

Job listings Are still showing a slow and steady decrease in the Indeed Job posting index. It appears like a slow slowdown in job numbers could be in line with the RBA’s hopes.

Our Economic Activity Trackers are still not providing a decisive recession/growth rebound signal
Indeed job ads are still trending down in Australia pic.twitter.com/N9ZzyW5GQh

— Shane Oliver (@ShaneOliverAMP) October 6, 2023

Here are the latest market insights from Fat Tail Editorial Directo Greg Canavan.

As markets look unsteady, he’s got great insights on where value can be found for smaller investors.

As he puts it:

‘…everyone knows, the catalyst for the market’s recent sharp falls is that the Fed Reserve has now finally convinced traders of the ‘higher for longer’ scenario. Expected rate cuts for 2024 have been squeezed out of the futures market.’

‘Now, if that’s because the labour market remains strong, inflation sticky, and nominal economic growth high, it needn’t be too bearish for stocks. Yes, there is a necessary adjustment based on higher yields increasing the risk free rate, but this shouldn’t cause too much damage if growth prospects remain good.’

‘…any decent sell-off from here should be looked at as an excellent long-term buying opportunity. Especially at the smaller end of the market, there are many well priced companies. When that market turns, it will turn hard.’

Read his latest thoughts over at LimeWire here.

Here are the latest market insights from Fat Tail Editorial Directo Greg Canavan.

As markets look unsteady, he’s got great insights on where value can be found for smaller investors.

As he puts it:

‘…everyone knows, the catalyst for the market’s recent sharp falls is that the Fed Reserve has now finally convinced traders of the ‘higher for longer’ scenario. Expected rate cuts for 2024 have been squeezed out of the futures market.’

‘Now, if that’s because the labour market remains strong, inflation sticky, and nominal economic growth high, it needn’t be too bearish for stocks. Yes, there is a necessary adjustment based on higher yields increasing the risk free rate, but this shouldn’t cause too much damage if growth prospects remain good.’

‘…any decent sell-off from here should be looked at as an excellent long-term buying opportunity. Especially at the smaller end of the market, there are many well priced companies. When that market turns, it will turn hard.’

Read his latest thoughts over at LimeWire here.

In a dramatic turn of events at the trial of Sam Bankman-Fried, co-founder of cryptocurrency exchange FTX, Gary Wang, the co-founder of TX and former MIT roommate, confessed to a staggering multibillion-dollar fraud.

Wang, who also served as FTX’s chief technology officer, took the stand in a federal court and revealed shocking details about the fraudulent activities that led to FTX’s downfall.

In testimony, he admitted that he and Bankman-Fried secretly shifted customer funds to trading company Alameda Research. Bankman-Fried allegedly directed Wang to alter FTX’s code so that Alameda could draw a $US65 billion line of credit.

‘When customers deposited money on FTX, the money went to Alameda instead,’ Wang said. ‘Alameda withdrew so much that FTX was not able to pay customers who tried to withdraw.’

Wang is testifying as a government witness against Bankman-Fried, who is accused of fraud and conspiracy after FTX went bankrupt last year.

Wang’s testimony highlighted the blatant misuse of customer assets, revealing a breach of trust that reverberated throughout the cryptocurrency industry. The revelation of this fraud not only tarnished the reputation of FTX but also raised serious concerns about the security and integrity of digital asset exchanges, leading to increased scrutiny from regulatory authorities and investors alike.

In a dramatic turn of events at the trial of Sam Bankman-Fried, co-founder of cryptocurrency exchange FTX, Gary Wang, the co-founder of TX and former MIT roommate, confessed to a staggering multibillion-dollar fraud.

Wang, who also served as FTX’s chief technology officer, took the stand in a federal court and revealed shocking details about the fraudulent activities that led to FTX’s downfall.

In testimony, he admitted that he and Bankman-Fried secretly shifted customer funds to trading company Alameda Research. Bankman-Fried allegedly directed Wang to alter FTX’s code so that Alameda could draw a $US65 billion line of credit.

‘When customers deposited money on FTX, the money went to Alameda instead,’ Wang said. ‘Alameda withdrew so much that FTX was not able to pay customers who tried to withdraw.’

Wang is testifying as a government witness against Bankman-Fried, who is accused of fraud and conspiracy after FTX went bankrupt last year.

Wang’s testimony highlighted the blatant misuse of customer assets, revealing a breach of trust that reverberated throughout the cryptocurrency industry. The revelation of this fraud not only tarnished the reputation of FTX but also raised serious concerns about the security and integrity of digital asset exchanges, leading to increased scrutiny from regulatory authorities and investors alike.

The stock market continued its upward trajectory, building on previous gains as the recent turbulence in US bonds and equities subsided overnight. This calming trend was observed just before the release of crucial non-farm payroll data out tonight AEST, which holds significant weight in guiding the market’s expectations regarding the Federal Reserve’s next interest rate decision.

At midday, the ASX 200 is up 0.34% to 6,949.2. A robust surge in financial sector stocks drove this upswing. All major banks experienced positive momentum, with Commonwealth Bank leading the way with a 1.51% increase, followed by Westpac with a 1.79% jump, ANZ with a 1.28% gain, and National Australia Bank with a rise of 1.75%.

Meanwhile, on Wall Street, losses were curtailed as data revealed a moderate rise in the number of Americans filing new claims for unemployment benefits last week. Although this figure increased, it remained close to historic lows.

In the currency market, the Australian dollar strengthened, trading 0.5% higher at around US63.71 cents

On the downside, the Energy sector faced challenges as crude oil prices extended their decline overnight. Concerns about slowing global economic growth, which could potentially reduce consumption, weighed heavily on the energy market. West Texas Intermediate settled near $US82.77 a barrel, dipping below its 50-day moving average for the first time since July.

The stock market continued its upward trajectory, building on previous gains as the recent turbulence in US bonds and equities subsided overnight. This calming trend was observed just before the release of crucial non-farm payroll data out tonight AEST, which holds significant weight in guiding the market’s expectations regarding the Federal Reserve’s next interest rate decision.

At midday, the ASX 200 is up 0.34% to 6,949.2. A robust surge in financial sector stocks drove this upswing. All major banks experienced positive momentum, with Commonwealth Bank leading the way with a 1.51% increase, followed by Westpac with a 1.79% jump, ANZ with a 1.28% gain, and National Australia Bank with a rise of 1.75%.

Meanwhile, on Wall Street, losses were curtailed as data revealed a moderate rise in the number of Americans filing new claims for unemployment benefits last week. Although this figure increased, it remained close to historic lows.

In the currency market, the Australian dollar strengthened, trading 0.5% higher at around US63.71 cents

On the downside, the Energy sector faced challenges as crude oil prices extended their decline overnight. Concerns about slowing global economic growth, which could potentially reduce consumption, weighed heavily on the energy market. West Texas Intermediate settled near $US82.77 a barrel, dipping below its 50-day moving average for the first time since July.

Over the past two days, a large retreat in oil prices has eased fears of ’embedded inflation’ for many investors.

Despite renewed promises by Saudia Arabia and Russia to continue their 1 million-barrel oil cut through to December, oil prices have eased.

Brent crude has fallen from its peak of US$96.55 pb on the 27th of September to US$84.48 pb today.

Despite gaining 0.50% in trading today, markets have calmed as $100 per barrel seems out of reach for now.

WTI crude is down to US$82.82pb today, also gaining 0.62% but far off its highs seen at the end of September of US$93.68pb.

Over the past two days, a large retreat in oil prices has eased fears of ’embedded inflation’ for many investors.

Despite renewed promises by Saudia Arabia and Russia to continue their 1 million-barrel oil cut through to December, oil prices have eased.

Brent crude has fallen from its peak of US$96.55 pb on the 27th of September to US$84.48 pb today.

Despite gaining 0.50% in trading today, markets have calmed as $100 per barrel seems out of reach for now.

WTI crude is down to US$82.82pb today, also gaining 0.62% but far off its highs seen at the end of September of US$93.68pb.

Today, the Reserve Bank of Australia released its semi-annual financial stability review, outlining the state of the economy and what it views as risks for Australia moving forward.

Here is the report in full if you would like to read it.

For those short on time, here is the summary.

The increase in inflation and interest rates since 2021 has put pressure on household and business finances in Australia and around the globe. It has also exposed vulnerabilities in some overseas banks, financial markets and non-bank financial institutions (NBFIs). However, in the face of a more challenging macroeconomic environment, households and businesses have been largely resilient to date, which has kept loan arrears low, and the global banking system continues to be supported by high levels of capital and liquidity.

Global financial stability risks remain elevated and include the following:

• The spread of property sector stress in China to the rest of its economy and financial system, which has other longstanding vulnerabilities. While direct links between China’s financial system and the global financial system (including Australia) are generally limited, financial stress in China could spread to the rest of the world via its effect on global economic activity and associated changes in risk aversion.
• A sharp tightening in financial conditions and disorderly asset repricing caused by, for example, a severe global economic downturn or a reassessment of the interest rate outlook if inflation stays high for longer than expected. A tightening in global financial conditions could transmit to Australia via linkages in funding markets and risk aversion.
• NBFIs in key financial centres could amplify abrupt adjustments in global financial conditions, as seen in episodes of stress in the global financial system in 2022.
• A further weakening of conditions in commercial real estate (CRE). Current challenges – including higher interest rates, declining incomes and falling prices – are weighing on the ability of borrowers in this market to service and roll over their debt; as a result, stress in the sector could intensify. However, banks in most overseas markets and in Australia should generally be more resilient to CRE stress than in past, owing to conservative lending practices implemented in recent years. Banks in some economies, including Australia, are also less exposed to the CRE sector compared with previous periods of high inflation and interest rates, such as in the early 1990s.
• A sharp increase in unemployment and a slowdown in economic growth. While most banks are well placed to withstand a sharp economic slowdown, higher-than-anticipated loan losses resulting from high unemployment could lead to a tightening in lending standards, which would in turn amplify that downturn.
• Renewed pressure on smaller banks, especially in the United States, due to a significant increase in their cost of funding and the potential for a rise in non-performing loans (NPLs), including from CRE exposures. This could lead to a broad-based tightening in financial conditions, because these banks account for a large share of loans outstanding.
• Ongoing threats to global financial stability generated from outside the financial system continue to build, including those related to cyber-attacks, geopolitical tensions and risks associated with climate change.

Neurotech International [ASX:NTI] shares tumbled by 6% in trading today after its latest results failed to woo investors.

NTI is a medical company experimenting with medical cannabis products for the treatment of a range of issues, including autism, inflammation, and anxiety.

The latest 12-week clinical trials focused on anxiety, depression and neurological disorders like childhood autism.

Initial results from its anxiety and depression trials suggest a 30% improvement in overall symptoms after four weeks.

Neurological disorder children were shown to have ‘strong benefits’ although no statistics were shared.

Professor Russel Dale, C0-Principle investigator, commented on the study today, saying:

‘I am very pleased with the clinical results reported to date and wish to thank all patients and their families for participating in this novel clinical trial. I have observed quite profound improvements in a number of my patients with NTI164, making it the first trial of its kind with a broad-spectrum cannabinoid therapy showing initial clinical utility like this with excellent safety.’

‘In addition, we await further evidence of genomic molecular changes from baseline measures and after 12 weeks of treatment to correlate this meaningful clinical response we have seen with biological evidence of effect. This would be a major step-forward for PANDAS/PANS patients and assist in identifying relevant biomarkers of the disease.’

Neurotech International [ASX:NTI] shares tumbled by 6% in trading today after its latest results failed to woo investors.

NTI is a medical company experimenting with medical cannabis products for the treatment of a range of issues, including autism, inflammation, and anxiety.

The latest 12-week clinical trials focused on anxiety, depression and neurological disorders like childhood autism.

Initial results from its anxiety and depression trials suggest a 30% improvement in overall symptoms after four weeks.

Neurological disorder children were shown to have ‘strong benefits’ although no statistics were shared.

Professor Russel Dale, C0-Principle investigator, commented on the study today, saying:

‘I am very pleased with the clinical results reported to date and wish to thank all patients and their families for participating in this novel clinical trial. I have observed quite profound improvements in a number of my patients with NTI164, making it the first trial of its kind with a broad-spectrum cannabinoid therapy showing initial clinical utility like this with excellent safety.’

‘In addition, we await further evidence of genomic molecular changes from baseline measures and after 12 weeks of treatment to correlate this meaningful clinical response we have seen with biological evidence of effect. This would be a major step-forward for PANDAS/PANS patients and assist in identifying relevant biomarkers of the disease.’

Australian fund managers Magellan [ASX:MFG] have seen their shares tumble today as they provided an update to their funds under management.

MFG is the worst performer on the ASX 200 today after it reported a $4 billion drop in funds under management in September.

The fund experienced net outflows of $2 billion, which included net retail outflows of $0.3 billion and institutional outflows of $1.7 billion.

The money manager booked $35 billion in FUM in its latest update, down from the $39 billion it recorded in August.

Australian fund managers Magellan [ASX:MFG] have seen their shares tumble today as they provided an update to their funds under management.

MFG is the worst performer on the ASX 200 today after it reported a $4 billion drop in funds under management in September.

The fund experienced net outflows of $2 billion, which included net retail outflows of $0.3 billion and institutional outflows of $1.7 billion.

The money manager booked $35 billion in FUM in its latest update, down from the $39 billion it recorded in August.

Good morning investors,

A mixed showing for global equities markets overnight with Wall St closing with little change on the day.

Investors have been fretting over US unemployment figures, which reveal the labour market is still tight.

Oil prices continue to slide as demand remains uncertain.

In Australia, eyes are on the Reserve Bank.

It releases its half-yearly financial stability review this morning, which may give us an indication of how households are faring with higher interest rates.

Also expected today are Australian Retail sales numbers which should give us an insight into the state of the economy moving forward.

S&P500 finished down -0.13%, while the DOW was flat at -0.030%. The Nasdaq ended its session down -0.12%.

The ASX 200 opened its session today flat but has since gained slightly, up 0.20% to 6,939.6.

Good morning investors,

A mixed showing for global equities markets overnight with Wall St closing with little change on the day.

Investors have been fretting over US unemployment figures, which reveal the labour market is still tight.

Oil prices continue to slide as demand remains uncertain.

In Australia, eyes are on the Reserve Bank.

It releases its half-yearly financial stability review this morning, which may give us an indication of how households are faring with higher interest rates.

Also expected today are Australian Retail sales numbers which should give us an insight into the state of the economy moving forward.

S&P500 finished down -0.13%, while the DOW was flat at -0.030%. The Nasdaq ended its session down -0.12%.

The ASX 200 opened its session today flat but has since gained slightly, up 0.20% to 6,939.6.