The ASX 200 crumbled 178 points to 6962 ahead of the Australia Day holiday and anticipating more volatility in US markets as FOMC kicks off. CPI kicked higher on fuel and housing and left a giant hole in market sentiment. Banks were hit hard with the Big Bank Basket melting to $169.78 (-2.5%) and other financials also in the doghouse. QBE down 4.5%, IAG off 2.5% and MQG down 2.3%. Platform stocks also under pressure with NWL down 2.8% and HUB off 2.0%. Healthcare too was under pressure led lower by CSL down 1.6% and SHL falling 2.5%. Industrials sold off heavily across the board, TCL down 1.6%, REA down 2.6%, XRO kicked 3.5% lower and WOW off 1.7%. REITs also under some pressure, GMG falling 2.4% and CHC whacked 6.2%. Tech stocks inevitably hit with SQ2 down 4.2% and XRO heading down 3.5%. In miners, it was once again the lithium players that were depressed. It has been a huge run and inevitable some of the more leverage punters would be forced to liquidate whatever they had. PLS down 6.3% AKE off 7.7% and MIN falling 7.5% all stand outs for the wrong reasons. Iron ore miners held up a little better but BHP still down 1.3% and RIO down 0.8% despite a win with the Oyu Tolgoi project in Mongolia. Energy stocks eased with STO down 4.8% and WPL dropping heavily off 4.0%. In company news, CDA surprised the market with a very positive update rising 16.9%, FMG production report showed a bigger discount to 62% fines and the stock fell 5.0%. A2M saw a 7.1% rise after some takeover rumours swirled and WAF dropped 16.9% on Burkina Faso updates following a military coup. On the economic front it was all about the CPI and fuel and housing price rises. With the headline at 3.5% the RBA will be challenged on the pace of rate normalisation here. Market very skittish on this. The AUD slipping to 71.42c. Asian markets weak as Lunar New Year beckons, Japan down 2.0%, HK off 1.2% and China down 0.8%. 10-year yields up to 1.95%.

MAJOR MOVERS:

  • Winners: CDA, A2M, BBN, AD8, LFG, EQT, 360
  • Losers: WAF, BRN, WBT, NMT, MNS, 88E, ADO, PRN.
  • Positive sectors: Rare.
  • Negative sectors: Everything.
  • Hi 7130 Lo 6921
  • Big Bank Basket: Falls to $169.78 (-2.5%)
  • All-Tech index: Down 2.9%.
  • Gold: Better at $2580.
  • Bitcoin: Finding a bottom and rising to US$36412
  • Aussie Dollar:  Steady at 71.37c 10-YEAR YIELD: Rises to 1.95%
  • Asian Markets: Japan down 2.2%, HK off 1.4% and China down 1.3%
  • US Futures: Dow futures down 236 NASDAQ futures down 177

STOCKS ON THE MOVE

  • CDA +16.85% earnings upgrade.
  • A2M +7.07% takeover rumours from Saputo.
  • AIA +0.74% freezes aeronautical rates.
  • SZL +9.81% Z1P -2.13% merger rumours.
  • MYR +6.76% trading update.
  • PRT +4.49% update on return of capital.
  • RIO -0.82% clears issues surrounding Mongolian copper mine expansion.
  • PBH -8.27% first bet in NY.
  • PRN -10.65% Burkina Faso update. Things continuing as usual.
  • BPT -7.77% production fall but higher revenue from better global oil and gas prices.
  • WAF -16.86% Burkina Faso update.
  • BRN -13.60% hot air escaping.
  • PAN -7.55% nickel price falls.
  • NMT -13.33% battery tech under pressure.
  • 1MC -20.59% sell off big run.
  • CAE -11.32% returns high grade Cu in Hole 4.
  • Speculative stock of the Day: Nothing today. Hardly a surprise.

IN THE NEWS

  • Fortescue (FMG) Q2 total ore shipped 47.5Mwmt vs year-ago 46.4Mwmt. Average revenue of US$74.36/dmt represented realisation of 68% of the Platts 62% CFR Index for the quarter and compares to US$118/dmt in the September quarter. Iron ore prices fell heavily from July to mid-November. C1 cost of US$15.31/wmt was higher vs quarter-ago of $12.81/wmt. Cash balance was US$2.9bn at the end of December vs quarter-ago of US$4.1bn. Guidance unchanged for production and costs. Capital expenditure guidance was lifted by US$200m after incorporating the acquisition of WAE.
  • Accent Group (AX1) sees first-half EBIT between $30-$31.0m vs consensus of $33.7m. Like-For-Like sales across November and December were down 3.4% compared with the first-half FY21 and up 4.8% on the Pre-COVID firs-half FY20 sales. Digital sales remained strong. Gross margin % in December recovered well and was above expectations
  • Betmakers (BET) Q2 receipts from customers $24.6m up 17% over the quarter and more than 500% vs a year ago. Cash flow was positive and it has $110.9m in cash on its balance sheet. No debt. Management observed strong growth in its core divisions. Bet launched two additional clients to its platforms during the quarter, bringing the total to 10, and noted those clients are now generating ~$1.2bn in turnover per annum (annualised H1 FY22 turnover) on BetMakers’ platforms. BET said it expects that growth to continue during the remainder of FY22.
  • Zip (Z1P) is understood to have revived ‘exclusive’ talks with Sezzle (SZL) about potential scrip acquisition. Z1P walked away from previous discussions on the back of high demands from SZL. There is chatter Z1P could end up paying a 50% premium for SZL. Z1P and SZL are both down more than 70% since their 2021 all-time highs.

ECONOMIC NEWS/ BOND MARKETS

  • The Consumer Price Index (CPI) rose 1.3% in the December quarter beating expectations of 1% to be up 3.5% annually vs expectations of 3.2%. The market has fallen on the release as the hotter than expected number validates a more hawkish stance from the RBA which meets next Tuesday. The trimmed mean measure which is what the RBA looks at was up from 2.1% to 2.6% which is importantly within their target range of 2.5-3%. Higher wage growth close to 3% in annual term is needed as well to force the central bank’s hand on rates.
  • The most significant price rises in the December quarter were new dwellings and automotive fuel. Shortages of building supplies and labour, combined with continued strong demand for new dwellings, contributed to price increases for newly built houses, townhouses and apartments the ABS said.
  • Business confidence as reported by NAB showed the index of business confidence shed 24 points to -12 in December, below the level seen during the delta outbreak. Business conditions fell 3 points to 8 due to a declining employment index which itself receded 9 points to +2 . Profitability was up 1 point to +10 and trading conditions remained unchanged at +14.
  • Tennis Australia has reversed the ban on ‘Where in the world is Peng Shuai?’ T shirts.

CV19 NEWS

  • Restrictions extended in NSW. No singing or dancing unless it’s a Youth Conference. 47,000 new cases. 78 deaths.

ASIAN MARKETS

  • Singapore has tightened monetary policy.
  • The Chinese onshore yuan rose to an all-time high versus the currencies of China’s major trading partners.
  • South Korean grew at its fasted pace in 12 years.

US AND EUROPEAN NEWS

  • Powell heads into the Fed bunker for two days.
  • Biden holds successful talks with European leaders. US puts 8500 troops on alert.
  • Boris under fire for another birthday. This time his birthday party and he will cry if he wants to.
  • CS now expecting a FY loss.
  • European markets set to open higher. They did not see the Wall Street Rally.

And finally….

Clarence

XXXX