ASX News LIVE | XJO Slips; Global Markets Down as Oil Prices Climb, Pressure Mounts on Qantas

With uncertainty in the air, global markets struggle to shake off the seasonal weakness of summer trading in the northern hemisphere.

Meanwhile, the soaring US Dollar has sent most Pacific/Asian currencies to multi-month lows, prompting Japan and China to step up the protection of their local currencies.

Germany is facing another energy crisis as electricity prices soar 443% this month as Black Sea blockades and Chevrons LNG strike news have driven prices through the roof.

With uncertainty in the air, global markets struggle to shake off the seasonal weakness of summer trading in the northern hemisphere.

Meanwhile, the soaring US Dollar has sent most Pacific/Asian currencies to multi-month lows, prompting Japan and China to step up the protection of their local currencies.

Germany is facing another energy crisis as electricity prices soar 443% this month as Black Sea blockades and Chevrons LNG strike news have driven prices through the roof.

Another subdued day in the ASX as the XJO finished down -0.78% at 7,257.10.

The Energy sector was the only one up today (up 0.96%), following rising oil prices, which topped over $90 per barrel after Saudi Arabia and Russia extended their production cuts till the end of the year. The rest of the ASX sectors remained well in the red.

Qantas shares were in the green today, up 1.4% to $5.72, as investors celebrated the exit of Alan Joyce amid controversy in his past few weeks.

Bottle maker Orora fell by 18.18% to $2.89 after shares opened onto the market after a brief pause while the company announced a $1.35 billion equity raise as it targets a buyout of France’s Saverglass which produces premier brand bottles such as grey goose vodka.

The worst Sectors of the ASX 200:

• Information Technology down -1.49%
• Telecommunication down -1.34%
• Industrials down -1.27%
• Discretionary down -1.22%
• Real Estate down -1.15%

The best performers of the ASX 200:

• Domain Holdings Australia [ASX:DHG], up 3.90%
• TELIX Pharmaceuticals[ASX:TLX], up 2.51%
• APM Human Services International [ASX:APM], up 2.21%
• Yancoal Australia [ASX:YAL], up 1.99%
• HMC Capital[ASX:ARB], up 1.87%

The worst performers of the ASX 200:

• Orora Ltd [ASX:ORA], down 18.18%
• Lovisa Holdings [ASX:LOV], down 4.43%
• Altium [ASX:ALU], down 4.36%
• Macquarie Group [ASX:MQG], down 3.79%
• ARB Corporation [ASX:ARB], down 3.65%

All figures shown are from 4:38pm AEST

Another subdued day in the ASX as the XJO finished down -0.78% at 7,257.10.

The Energy sector was the only one up today (up 0.96%), following rising oil prices, which topped over $90 per barrel after Saudi Arabia and Russia extended their production cuts till the end of the year. The rest of the ASX sectors remained well in the red.

Qantas shares were in the green today, up 1.4% to $5.72, as investors celebrated the exit of Alan Joyce amid controversy in his past few weeks.

Bottle maker Orora fell by 18.18% to $2.89 after shares opened onto the market after a brief pause while the company announced a $1.35 billion equity raise as it targets a buyout of France’s Saverglass which produces premier brand bottles such as grey goose vodka.

The worst Sectors of the ASX 200:

• Information Technology down -1.49%
• Telecommunication down -1.34%
• Industrials down -1.27%
• Discretionary down -1.22%
• Real Estate down -1.15%

The best performers of the ASX 200:

• Domain Holdings Australia [ASX:DHG], up 3.90%
• TELIX Pharmaceuticals[ASX:TLX], up 2.51%
• APM Human Services International [ASX:APM], up 2.21%
• Yancoal Australia [ASX:YAL], up 1.99%
• HMC Capital[ASX:ARB], up 1.87%

The worst performers of the ASX 200:

• Orora Ltd [ASX:ORA], down 18.18%
• Lovisa Holdings [ASX:LOV], down 4.43%
• Altium [ASX:ALU], down 4.36%
• Macquarie Group [ASX:MQG], down 3.79%
• ARB Corporation [ASX:ARB], down 3.65%

All figures shown are from 4:38pm AEST

Iron ore prices have spiked today, currently trading at $117.13, in a move that has surprised many as steel-hungry sectors like property and construction are struggling.

Despite the dreary headlines in the property sector, there is still enough demand in China for steel to keep the price above $100 for much of 2023.

‘Iron ore is still very resilient for an environment like this, and I think Chinese demand is playing a role in that,’ said Hao Hong, chief economist at Grow Investment Group. It shows parts of the economy, outside the property sector, are relatively healthy, he said.

Source: Bloomberg

BHP Group, the world’s second-biggest iron ore producer, said it’s seeing ‘solid demand from infrastructure, power machinery, autos and shipping, offsetting weakness in new housing starts and construction machinery.’ Consultancy Kallanish Commodities Ltd. adds ‘white goods’ to that list, a category that includes products like fridges and washing machines.

Our small-caps expert, Callum Newman, sees an opportunity here. Click below to see his thoughts on the subject.

https://www.moneymorning.com.au/20230906/why-i-reckon-george-soros-would-back-this-trade-today.html

Iron ore prices have spiked today, currently trading at $117.13, in a move that has surprised many as steel-hungry sectors like property and construction are struggling.

Despite the dreary headlines in the property sector, there is still enough demand in China for steel to keep the price above $100 for much of 2023.

‘Iron ore is still very resilient for an environment like this, and I think Chinese demand is playing a role in that,’ said Hao Hong, chief economist at Grow Investment Group. It shows parts of the economy, outside the property sector, are relatively healthy, he said.

Source: Bloomberg

BHP Group, the world’s second-biggest iron ore producer, said it’s seeing ‘solid demand from infrastructure, power machinery, autos and shipping, offsetting weakness in new housing starts and construction machinery.’ Consultancy Kallanish Commodities Ltd. adds ‘white goods’ to that list, a category that includes products like fridges and washing machines.

Our small-caps expert, Callum Newman, sees an opportunity here. Click below to see his thoughts on the subject.

https://www.moneymorning.com.au/20230906/why-i-reckon-george-soros-would-back-this-trade-today.html

After unexpectedly stepping down two months early, CEO Alan Joyce may be out of the frying pan, but now Qantas Chairman Richard Goyder is in the fire.

Mr Goyder is facing calls to step down from the role after a nightmare few weeks for the Airline as the company is facing lawsuits over flight credits and cancelled flights. The company is alleged to be selling tickets to flights that were cancelled in order to profit from the difference from the credits to the new tickets, in a scheme that the ACCC is investigating.

The ACCC has already said that if found to be true, the company is likely to face a record-high fine in the realm of around $250 million.

The company is also in the political hotseat over allegations of political pressure being used to thwart new routes into Australia by competitor Qatar Airways.

If these weren’t enough, there are a couple more scandals thrown in for good measure. For more information, click below.

https://www.moneymorning.com.au/20230905/qantas-asxqan-shares-face-turbulence-as-ceo-steps-down-early.html

After unexpectedly stepping down two months early, CEO Alan Joyce may be out of the frying pan, but now Qantas Chairman Richard Goyder is in the fire.

Mr Goyder is facing calls to step down from the role after a nightmare few weeks for the Airline as the company is facing lawsuits over flight credits and cancelled flights. The company is alleged to be selling tickets to flights that were cancelled in order to profit from the difference from the credits to the new tickets, in a scheme that the ACCC is investigating.

The ACCC has already said that if found to be true, the company is likely to face a record-high fine in the realm of around $250 million.

The company is also in the political hotseat over allegations of political pressure being used to thwart new routes into Australia by competitor Qatar Airways.

If these weren’t enough, there are a couple more scandals thrown in for good measure. For more information, click below.

https://www.moneymorning.com.au/20230905/qantas-asxqan-shares-face-turbulence-as-ceo-steps-down-early.html

The New South Wales government will increase coal royalty rates by 2.6% from July 2024, replacing the emergency coal cap introduced in December 2022.

The new scheme is expected to generate $2.7 billion in revenue for the state over four years.

Treasurer Daniel Mookhey said the increase would not lead to higher household power bills, as the cost would be borne by coal producers. He also said that the government would use the additional revenue to rebuild essential services and provide cost-of-living relief to families.

The decision to raise coal royalties was made after extensive consultations with stakeholders. Mookhey said that the government had ‘struck the right balance’ between ensuring a fair return for the people of New South Wales and not putting undue pressure on the coal industry.

The New South Wales government will increase coal royalty rates by 2.6% from July 2024, replacing the emergency coal cap introduced in December 2022.

The new scheme is expected to generate $2.7 billion in revenue for the state over four years.

Treasurer Daniel Mookhey said the increase would not lead to higher household power bills, as the cost would be borne by coal producers. He also said that the government would use the additional revenue to rebuild essential services and provide cost-of-living relief to families.

The decision to raise coal royalties was made after extensive consultations with stakeholders. Mookhey said that the government had ‘struck the right balance’ between ensuring a fair return for the people of New South Wales and not putting undue pressure on the coal industry.

The Australian Dollar is facing downward pressure as investor’s concerns about the health of the Chinese market grow.

The AUD now sits at 63.80 US cents, the weakest it’s been in 10 months.

The AUD has been in decline in recent weeks as more weak economic data trickles out of China, Australia’s leading trade partner.

There are some glimmers of hope as China’s previous largest property developer, Country Garden, managed to strike a deal with creditors to delay debt repayments.

After the decision by the RBA yesterday to keep rates on hold, there are also expectations that the US Federal Reserve will raise interest rates more aggressively than the RBA in the future.

Rising oil prices will also raise concerns as inflationary pressures come back into the fore as markets continue the struggle to headline inflation.

• ASX 200 down 0.81% to 7,254.9
• $AUD flat after big falls at 63.75 US cents
• ASX futures down -0.46% to 7,232.5
• S&P 500 down -0.42%
• NASDAQ flat -0.077%
• DOW down -0.56%
• FTSE down -0.20%
• STOXX down -0.25%
• SSE flat -0.055%
• Bitcoin up +0.51% to $US 25,773
• Spot gold down -0.59% to $US 1,926.30
• Iron ore up +8.03% to $US 118.19
• Brent Crude up 0.17% to $US 90.19pb

All figures shown are from 01:43pm AEST

Crude oil has surpassed $90 a barrel for the first time in 2023 as Saudia Arabia and Russia extend their voluntary production and export cuts until the end of the year.

The move is likely to reignite tensions with the Biden administration and put inflationary pressures on global markets as fuel costs inevitably rise worldwide.

Supply disruptions seen in the last few months in Libyia and Nigeria also highlight the sensitivity of price shifting due to production or political instability in the African region.

It is expected that backroom meetings will be occurring at the G20 summit in India this Saturday, but both parties have said no bilateral meetings are scheduled.

Saudia Arabia’s state media said the decision would still be reviewed monthly but has also warned that further cuts are not off the table.

The current output from Saudia Arabia will remain at 9 million barrels a day, 25% lower than its max capacity of 12 million barrels a day.

Australia’s barometer for economic health surprised many this morning as Annual gross domestic product (GDP) expanded 2.1%, above the expected 1.8%.

For the second quarter, GDP growth was 0.4% compared with 0.2% in the previous quarter.

The Australian Bureau of Statistics said the absence of significant COVID-19 disruptions in 2022-23 was the major factor in GDP growth. The economy is also benefiting from strengthening commodity prices, boosting export earnings.

However, the ABS warned that there are some risks to the outlook, including rising interest rates and the ongoing war in Ukraine.

Source: ABS

Here are the main reasons the RBA gave in their decision to keep rates on hold yesterday for the third month in a row.

• Big uncertainties around Australian figures moving forward:
  • unemployment lower than expected
  • property teetering but holding nationally with new builds down 15%, which is the lowest in years, but prices are holding in cities
  • weak spending nationally, with data yesterday showing some weak signs of life, with MoM retail spending up 0.5% from -0.8% the previous month.
• China’s property crisis is on a knife edge, although news out yesterday about Chinese debt restructuring may give its biggest players like Country Garden some breathing room

While the board reiterated that the tightening option was still on the table, many read this as the nail in the coffin for any further tightening this cycle.

RBA left rates at 4.1% as widely expected & retained its (mild) tightening bias. No great surprises. Our view remains that the risk of recession is very high & the cash rate has most likely peaked ahead of rate cuts next yr (as slower growth brings down inf faster than expected). pic.twitter.com/vGQmAsudD0

— Shane Oliver (@ShaneOliverAMP) September 5, 2023

Here’s the ASX 200 biggest movers this morning

Good morning,

An overnight rise in oil prices to a 10-month high has dampened Wall St and global markets.

Saudi Arabia and Russia have extended their voluntary production cuts of 1 million barrels a day through to December in a move seen as direct defiance of the US administration and further inflationary pressure for economies.

The ASX is expected to remain weak today, despite the RBA’s decision to keep rates on hold yesterday, the third month in a row.

The decision failed to move the needle as the move was widely expected, and some even feared the RBA may have tightened too much; some now are calling for earlier cuts to try to stave off recession, but inflation persists among core costs.

The final word from Phillip Lowe yesterday reminded Australians that their core priority remained to tame inflation and warned they would still consider further tightening if necessary. He also highlighted China’s economic woes as the main worry for the Australian economy.

Meanwhile, Canberra announced it will try to mitigate the impact of Australia’s ties to China by looking towards its Southeast Asian neighbours, launching a Southeast Asia Economic Strategy to 2040 while heading to Jakarta to meet ASEAN leaders at the summit there before heading to the G20 summit in India.

The Australian dollar fell more than 1% overnight to 63.53 US cents from the RBA change and further weak economic data from China, showing their services industry grew at its slowest pace in the past eight months.