ASX News LIVE | XJO Opens Up as Safe-Haven Assets See Flurry of Demand; Gold, Silver & Oil All Lift

Australian shares rally back above 7000

The S&P/ASX 200 closed 70.4 points, or 1%, higher at 7040.6 today, its best one-day performance so far this month. The rally was fueled by a dovish shift in rhetoric from US Federal Reserve members and early signs of inflation easing in Australia from the NAB business survey.

US Fed hints at slower rate rises

Federal Reserve Vice Chairman Philip Jefferson and Bank of Dallas president Lorie Logan suggested that the recent surge in long-term Treasury yields may reduce the need for the US central bank to raise its benchmark interest rate again. This was seen as a sign that the Fed may be slowing down its aggressive rate hike campaign.

Australian inflation easing

NAB’s monthly business survey showed that labour cost growth eased to 2% in quarterly equivalent terms in September, and purchase cost growth declined to 1.8%. Overall price growth eased to 1%. This suggests that inflation may be peaking in Australia, which could give the RBA more room to pause its rate hike cycle.

Interest rate-sensitive sectors surge

Interest rate-sensitive sectors surged on the ASX, with the tech sector a standout, gaining 3.02%. Other sectors that performed included Telecoms (+2.24%) and Real Estate (+1.80%).

Utilities stocks lead the way

Utilities stocks were the best-performing sector on the benchmark, up 4.17% buoyed by a 5.5% gain by Origin Energy to $9.21. The rally came after Australia’s competition watchdog approved an $18.7 billion buyout offer for the electricity and gas wholesaler. Fellow utilities heavyweight AGL also rallied 3.9% to $10.89.

The outlook for Australian shares remains positive in the short term, with investors likely to remain focused on the Fed’s next policy meeting in November. If the Fed signals a more dovish stance, it could provide further support for Australian equities. However, investors will also need to keep an eye on risks such as the ongoing conflict in the Middle East and the potential for a recession in the US.

Virgin Australia has reported its first profit in 11 years.

The company reported a statutory net profit after tax of $129 million for FY23. This is a significant gain from its $565.5 million in 2022.

The report also showed revenue more than doubled to $5 billion as customers took holidays that were put off due to COVID-19 restrictions and concerns.

CEO Jayne Hrdlicka said today’s return to profitability was an ‘important milestone’ for the airline.

‘By creating a systemically lower cost base and a conservative balance sheet as well as investing heavily in technology and our frontline, we are well positioned for the future,’ she said.

Virgin Australia is owned by US private equity firm Bain Capital, who bought the airline back in 2020 for $3.5 billion after the company went into voluntary administration as costs and debt overcame the airline during Australian travel restrictions.

Now, Bain has been eyeing a potential public listing, while Virgin says it will hire 1,500 frontline staff next year.

According to Bloomberg sources, Bain Capital has pushed back the IPO launch to 2024, citing market conditions.

The Virgin IPO launch was set to be the largest this year, and a rapid return to public markets after less than three years since it was overcome by debt.

Life360 [ASX:360] shares are up by nearly 6% today after responding to what it called ‘inaccurate information’ from unnamed broker research that affected its share price yesterday.

In an announcement today Life360 responded by saying:

‘Life360 notes broker research citing Monthly Active User (MAU) data based on inaccurate information from a third-party provider. At September 30, 2023, Life360’s global MAU were 58.4 million, a quarter-on-quarter uplift of 8.1% from 54.0 million at June 30, 2023. U.S. MAU of 35.4 million increased 5.3% quarter-on-quarter from 33.6 million at June 30, 2023.’

The company also announced that its next report on Q3 earnings will be released on 15 November 2023.

The latest data from the ABS shows Job vacancies in Australia fell to 390,400, an 8.9% fall in the three months to August. That’s the fifth consecutive quarter of falling job numbers.

Despite this decline, the level of job vacancies remained elevated, with vacancies 71.5% higher than they were in February 2020, prior to the start of the pandemic.

The number of businesses reporting at least one vacancy provides a good measure of the overall health of the labour market. In February 2020, just before the COVID-19 pandemic, 11.0% of businesses reported having at least one vacancy. This number fell sharply to 6.5% in May 2020 as businesses were forced to lay off workers due to the economic downturn.

By November 2022, the proportion of businesses with vacancies had rebounded to 27.7%, reflecting a strong economic recovery. However, this number has started to decline again in recent quarters, and by August 2023, it had fallen to 21.7%.

The Seek job ads data are ugly: Easy to see why the smart folk in the market are embracing steady to lower interest rates pic.twitter.com/pNceDILKWR

— Stephen Koukoulas (@TheKouk) October 10, 2023

As China’s property sector continues to languish, with prices collapsing almost as quickly as the regional skyscrapers built out of shoddy materials, a brighter spark has been seen within the economy.

The centralised powers in China appear to be shifting their money towards its manufacturing sector. The results of this steady shift have been felt in the Australian economy for some time, with iron ore and steel demand higher than expected during the troubled reopening of China’s economy post-lockdown.

Fortescue Metals is up 18.72% in the past 12 months, mainly thanks to this shift, but other metals such as ‘critical’ or ‘green’ metals have also seen similar robust demand from China as its EV market ramps up.

Meanwhile, the Chinese EV sector has ramped up and is starting to eat into Telsa’s market share significantly. Telsa hit record sales in the second quarter, with 247,217 cars sold. Since then, it has seen a month-on-month 11% drop in sales.

Chinese rival BYD saw its passenger vehicles group 42.8% last month as Telsa struggles to outcompete the price of its rivals. In September, Tesla unveiled a restyled Model 3 that was 12% more expensive, while simultaneously, another competitor Xpeng launched a revamped car that was 15% cheaper.

This is probably one of the most important charts right now about the Chinese economy. To offset the collapse in the real estate sector, Beijing has managed to surge credit to the manufacturing sector, which has helped prevent a total collapse of domestic credit growth and demand pic.twitter.com/YPa0LQYYjZ

— Shanghai Macro Strategist (@ShanghaiMacro) October 9, 2023

Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC), has given the green light for the acquisition of ASX energy powerhouse Origin Energy by Brookfield and MidOcean.

The deal, valued at a staggering $18.7 billion, could be a significant milestone in the energy sector, which eyes a higher renewables mix of power.

Under the terms of the agreement, each share of Origin Energy will be purchased at a rate of approximately $8.91 a share.

Gina Cass-Gottlieb, the Chairwoman of the ACCC, stated that the commission meticulously evaluated the potential impacts of this acquisition on Australia’s competitive landscape. After a thorough analysis, the ACCC concluded that the benefits arising from this transaction, specifically in the context of Australia’s transition towards renewable energy sources, would far outweigh any potential drawbacks.

The decision had been delayed twice before the decision today as the ACCC weighed the risks on competition. In a statement today Ms Cass-Gottlieb said:

‘On the first limb of the test, we are not satisfied that the proposed acquisition would not be likely to substantially lessen competition. However, after a detailed review, we are satisfied that the proposed acquisition is likely to result in public benefits that would outweigh the likely public detriments.’

‘We found that the public benefits and public detriments in this matter were finely balanced. Likely detriments, particularly anticompetitive effects from vertical integration, had to be weighed against likely benefits to Australia’s renewable energy transition. We considered undertakings offered by Brookfield, AusNet and MidOcean in this weighing process.’

With the ACCC’s tick the deal now goes to a shareholder vote, which is likely to pass.

Good morning all,

The ASX 200 opened up 0.23% to 6,970 as momentum shifts into gold and energy stocks in the wake of the conflict in the Middle East.

Oil prices are up 4.4% on news of the attack by Hamas forces on Israel, the deadliest attack since the Yom Kippur War of 1973. So far no supply has been directly threatened, but the potential for a broader conflict has moved markets ahead of the reality.

Reporting by the WSJ has directly implicated Iran in the plot to attack, raising concerns of the conflict spreading to a larger Middle East War. Iran has so far denied any involvement in the attack that has killed over 1,100.

Israel says it has regained control outside of Gaza but the siege and bombing continues.

An hour ago the Israeli military said that it had no concrete evidence of Iranian involvement, saying:

‘Iran is a major player but we can’t yet say if it was involved in the planning or training,’ said R Adm Daniel Hagari, a spokesperson for the Israel Defence Forces.

The Dow finished up 0.59%, while the tech-heavy Nasdaq was up 0.39% and the S&P 500 closed up 0.63%.

Safe-haven demand pushed gold and silver prices up around 1.5%.

Euro natural gas prices spiked 15% overnight as the Israeli government instructed Chevron to shutter its Tamar gas field in northern Israel while pipeline issues in Finland disrupted supply.

The Aussie dollar started to make some gains against the USD, gaining 0.48%, reaching AU/USD 64.13 cents, as the initial flurry of movement into the safety of the greenback after news of the attack slowed.

In Australia, we have a day to check the temperature of the market with Westpac’s consumer confidence, NAB’s business confidence and building permit data out today.