ASX Today — Live ASX News | XJO Rises, IMF Issues Soft Landing Warning

The International Monetary Fund has given headline writers plenty to work with after releasing two major reports overnight.

One was the fund’s bi-annual Global Financial Stability report. The other its latest World Economic Outlook report.

The latter offered a gloomy forecast. IMF’s baseline forecast is for growth to fall from 3.4% in 2022 to 2.8% in 2023 before inching to 3% in 2024.

However, advanced economies are slated to fare worse. The IMF forecasts a ‘pronounced growth slowdown’ for advanced economies, from 2.7% in 2022 to 1.3% in 2023.

In a worrying sign, the Fund thinks it unlikely that inflation returns to target before 2025 ‘in most cases’.

The Global Financial Stability report wasn’t any rosier.

The IMF said financial stability risks have ‘risen significantly as the resilience of the global financial system has faced a number of severe tests’ since the Fund’s last report in October 2022.

In an ‘I told you so’ moment, the IMF said the current leverage and credit issues besetting the financial system were ‘repeatedly flagged’ in previous releases.

Maybe the Global Financial Stability report will become required reading for market participants as a consequence.

The report delved into the recent Silicon Valley Bank collapse and the forced acquisition of Credit Suisse. IMF said its estimates suggest the impact on unrelialised losses in held-to-maturity portfolios for the median bank in Europe, Japan, and emerging markets ‘would likely be modest’.

That said, the impact on ‘some other banks could be material’. Make of that what you will.

Source: IMF

One thing that stood out was the potential ramifications of tighter financial conditions in an era defined by leverage. IMF singled out insurance as an example:

“For example, in an effort to increase returns, life insurance companies have doubled their illiquid investments over the last decade and also make increasing use of leverage to fund illiquid assets.”

Source: IMF

Enerdata expects that global electricity generation will increase 91% between 2020 and 2050.

Plenty of that increase in demand for electricity will come as we move through the energy transition…

But, as you can see below, much of the demand will come from developing countries like India, Vietnam, and Brazil as they continue to industrialise and require more electricity.

Source: Enerdata

This global increase in electricity demand means we’re going to need more copper.

Copper is a fundamental metal in electrification and for the energy transition, since solar panels, wind turbines, electric vehicles, etc. all use more copper.

S&P Global expects that copper demand could double from 25 million metric tonnes today to 50 million metric tonnes by 2035.

Supply may struggle to keep up with this increase in demand though, after years of underinvestment in the sector.

Goldman, in particular, is quite bullish on copper. It expects that we could be hit with a long-term supply gap of 8.2 million tonnes by 2030 and that prices for the metal could hit US$15,000 a tonne as early as 2025 (prices are around US$9,000 a tonne at the moment).

So we could be heading for a shortage as supply struggles to keep up.

https://www.moneymorning.com.au/20230412/hydrogen-versus-electrification-who-wins-the-battle.html

The beleagured lithium junior AVZ Minerals (ASX:AVZ) will remain suspended after failing to answer questions to the ASX’s satisfaction regarding its Manono Project.

AVZ has been suspended since May 2022, an interminable stint on the sidelines.

The suspension — which is nearing its one-year anniversary — is in place until AVZ resolves issues regarding the mining and exploration rights for its flagship Manono project in the Democratic Republic of Congo.

AVZ owns 75% of Manono — host to one of the largest undeveloped hard rock lithium deposits in the world.

An asset like that attracts attention and, it seems, plenty of drama.

By AVZ’s reporting, the miner is in a legal battle of its life, trying to secure the rights to Manono from ‘various non-actors’ who are ‘seeking to unlawfully acquire an interest’ in the project.

Today, the ASX said AVZ will remain suspended ‘due to its inability to confirm compliance’ with listing rules, especially listing rule 3.1.

A question the exchange asked the miner back in February finally received a response, but that response failed to convince the ASX that AVZ is in compliance with listing rules.

Listing rule 3.1 states that ‘once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information.’

In response to the ASX’s questions, AVZ said it was in compliance with all listing rules except listing rule 3.1.

Why?

The full response is capture below.

Ratcheting up intrigue, AVZ said it cannot comply with the rule because the miner is worried about ‘unauthorised access and dissemination’ of confidential information.

AVZ is so worried it feels it is under ‘continuing besiegement by non-state actors who intend to unlawfully acquire, for themselves and/or other third parties, an interest in the Manono project.’

$AVZ $AVZ.AX will remain suspended as it struggles to satisfy questioning from the #ASX.

AVZ said it is under 'continuing besiegement by non-state actors who intend to unlawfully acquire … an interest in the Manono Project'. pic.twitter.com/MKBl2nbYDs

— Fat Tail Daily (@FatTailDaily) April 12, 2023

 

Yesterday, I mused whether Bitcoin’s recent rally could reinvigorate the animal spirits of yesteryear.

Check out what FT’s Alphaville came across overnight — a Frankenstein’s monster of stitched together hype reported by CoinDesk:

AI-Focused Blockchain CryptoGPT Raises $10M Funding at $250M Valuation

CryptoGPT recently rolled out AI assistant “Alex” and is developing its ZK rollup layer 2 blockchain and a data-to-AI engine, which collects, encrypts and transfers data for commercial applications. Zero-knowledge (ZK) layer 2 blockchain CryptoGPT has cashed in on the recent surge in interest around artificial intelligence (AI) to raise $10 million in funding.

The Series A round, which was led by market maker DWF Labs — which has emerged as one of the most active investors during the crypto bear market — gave the AI-focused blockchain a $250 million valuation, according to a statement.

CryptoGPT recently rolled out Web3-focused AI assistant “Alex” and is developing its ZK rollup layer 2 blockchain and a data-to-AI engine, which collects, encrypts and transfers data for commercial applications. “Instead of applying ZK technology to payments, CryptoGPT integrates it for private data transfers,” CryptoGPT said in the statement on Monday. The proceeds of the new funding will be used to grow its developer team globally and build on its regional presence in the Asian markets, said Dejan Erja, co-founder and chief technology officer of the AI-focused blockchain. CryptoGPT’s broad aim is to allow users to earn money by monetizing their data across fitness, dating, gaming and education. It also plans to roll out non-fungible tokens (NFT) that store the owner’s activity data.

CryptoGPT has even issued its own token coin, which currently has a market cap of US$13 million.

CoinDesk’s reportage admitted there is ‘some skepticism around the longer-term viability of such tokens, with views that the healthy gains enjoyed by them in recent months are little more than a short-tern price pump by opportunistic traders on the back of the hype.’

Indeed.

#Bitcoin's recent rally may be reinvigorating the animal spirits of yesteryear in #crypto.

Say hello to CryptoGPT. pic.twitter.com/evb7QaKrMe

— Fat Tail Daily (@FatTailDaily) April 12, 2023

NEXTDC (ASX:NXT) — a company describing itself as a data centre-as-a-Service provider — is up 8% in early trade after announcing that ‘recent customer wins’ led to contracted utilisation of its services rising 43% to 120MW since the start of the year.

These customer wins will not percolate to its bottom line this year, however.

Revenue for the ‘majority of the new customer contract wins is expected to be progressively recognized from late FY24 through FY29’.

NEXTDC’s chief executive Craig Scroggie said:

“It is very pleasing for the Company to have secured this record level of incremental customer contract wins. Having done significant work over recent years to deliver UI certified Tier IV metropolitan hyperscale data centres in S3, M2 and M3, the Company is very well positioned to continue to take advantage of further customer growth across these critical digital infrastructure assets.”

Western Australia — home to some of the largest iron ore producers in the world — could be struck by the largest cyclone in nearly a decade this week.

The storm is expected to pass near Port Hedland, a major iron ore export hub. Both BHP and Fortescue ship iron ore from the port.

The Bureau of Meteorology thinks Cyclone Ilsa — as the weather system has been dubbed — will be the strongest since December 2013.

The Pilbara Ports Authority has started clearing vessels from the Port of Hedland this morning.

Iron ore prices rose 1.93% overnight to US$121.43/t.

The Bureau of Meteorology also issued a flood watch for parts of the Kimberley and De Grey regions, home to gold producer De Grey Mining (ASX:DEG) and lithium producer Pilbara Minerals (ASX:PLS).

The ASX 200 opened 0.56% higher on Wednesday, with NEXTDC (ASX:NXT) jumping 8.5% as ‘contracted utilization’ rose 43% since the start of the year.

Champion Iron (ASX:CIA) was another early bolter, rising 8%.

Unsurprisingly, Whitehaven Coal was the worst performer at the open, down nearly 5% after divulging a big March quarter production miss and flagging a FY23 production downgrade.

 

Whitehaven is set to report a big production miss for the March quarter, with the full quarter production report scheduled for next Friday.

The coal producer said its March 2023 quarter managed run-of-mine production will be 4.3Mt. This will be well down on the prior year and below Whitehaven’s own plans.

The March 2022 quarter had managed run-of-mine production of 5.2Mt.

The price of coal will be one consolation.

The March 2022 quarter managed an average coal price of $315/t. Whitehaven expects the average price to be $400/t for the March 2023 quarter and a net cash position of $2.7 billion.

$WHC has revised down its FY23 coal production forecasts, with 'operational constraints' at Maules Creek crimping volumes. #ASX #coal $WHC.AX pic.twitter.com/7EqkisGCHx

— Fat Tail Daily (@FatTailDaily) April 12, 2023

Coal producer Whitehaven Coal (ASX:WHC) revised down its FY23 guidance as managed run-of-mine is expected to come in below plan at 4.3Mt for the March quarter and have cascading effects for the rest of the year.

Labour shortages have been a persistent issue but Whitehaven said it also contended with ‘several additional operational constraints at Maules Creek’.

That meant production in the March quarter only rose 9% from the December quarter, less than the producer initially expected.

While Whitehaven expects June quarter volumes to pick up, the constrained volumes at Maules Creek will mean WHC’s full year ROM production forecasts ‘have fallen below the bottom end of guidance’.