ASX flat; Tabcorp, CSL sink; Forager rallies 9pc

Lithium Power International shares surged 20 per cent before entering a trading halt on Thursday, following media speculation the pre-revenue miner had sold itself to state-owned Corporacion Nacional del Cobre de Chile.

The ASX-listed lithium explorer with tenements in Chile’s abundant “lithium triangle”, including its flagship Maricunga project, granted due diligence to the company, known as Codelco, last month.

Bloomberg reported on Wednesday that Codelco, the world’s biggest copper producer, is nearing a deal to acquire the lithium hopeful for nearly $315 million. The offer is reportedly worth 50¢ per share.

Shares in the company climbed from 34¢ to 42¢ following the Bloomberg report, triggering the trading halt on Thursday.

The takeover talks come as the mineral-rich South American country moves to take control of significant resources projects under its new national lithium strategy released in April.

AFR’s Street Talk column reported in July the strategy posed a potential roadblock to Lithium Power’s plan to develop its battery-grade lithium project.

The company has requested trading halt remain in place until October 16.

The timing of Fletcher Building’s five-year fixed bond deal is up in the air as the company deals with the fallout from plumbing failures and a faulty pipe product in Western Australia.

The building products company mandated ANZ, Citi, and Westpac as joint lead managers on a potential five-year Australian-denominated fixed rate senior unsecured benchmark transaction last week.

Investor marketing meetings finished up on Monday and timing of the launch set for “as early as this week, subject to investor feedback and market conditions”, Citi said.

While it was set to be launched before Friday, sources close to the deal said it was likely earmarked for next week given Woolworths is in the market with a $1.75 billion 7.5-year senior unsecured deal.

Read more here.

Philipp Hofflin is portfolio manager of Lazard Asset Management’s Australian equity fund, based in Sydney. The firm oversees about $305.4 billion in assets.

What did you make of the reporting season? Which company did exceptionally well?

August results reported were overall in line with expectations, but management caution for the coming year led to net downgrades.

Monadelphous is a Perth-based mining, energy and infrastructure services company. It’s a cyclical business with contracting risk – that is, the risk of signing contracts that are under-priced for the eventual costs.

It’s built up one of the best records in the country over many decades of disciplined tendering to avoid such risks and has a deserved reputation as the “best in breed”. With resources capital expenditure low, there remains scope for a cyclical upswing, but we really like its position as a “picks and shovels” exposure to the huge investment required for the energy transition.

Monadelphous’ latest result and various contract wins raised our confidence, and it was very well received by the market after indicating that the COVID-induced capex cycle may have bottomed. It also has no net debt.

Read more here. 

The Australian sharemarket edged higher, tracking a late Wall Street rally as US Federal Reserve board minutes suggested policymakers see more reason for caution, bolstering hopes that rates have peaked.

The benchmark S&P/ASX 200 index rose 0.1 per cent, or 6.3 points to 7094.7 in the late afternoon after sharp losses in the healthcare sector pared the gauge’s earlier gains. The local currency was trading around US64.17¢, recovering from an 11-month low hit last week.

In the minutes, policymakers “noted that it was important to balance the risk of overtightening against the risk of insufficient tightening”. That helped buoy the US sharemarket. The S&P 500 gained 0.4 per cent and the Nasdaq rallied 0.7 per cent.

And West Texas Intermediate crude traded near $US83 a barrel, erasing most of the surge following Hamas’ weekend attacks on Israel.

Overnight

Traders await the September US consumer price index at 8.30am in Washington (11.30pm AEDT).

Tom Essaye at Sevens Report said a “good” report could be the catalyst for a “strong” market rally. It also comes after data showed a measure of producer prices rose by more than forecast last month from higher energy costs.

Atlanta Fed president Raphael Bostic said the central bank did not need to keep tightening unless inflation’s descent started to stall. Meantime, governor Christopher Waller noted the Fed could “watch and see” what happened before taking further action with rates as financial markets tighten.

Part of the rally on Wall Street reflected a further easing of US government bond yields, as the yield on the US 10-year note slipped 10 basis points to 4.56 per cent at 4.15pm in New York.

Iron ore futures on the Singapore exchange traded higher in the afternoon, up 0.8 per cent to $US113.40 a tonne on the November contract.

Stocks on the move

Aurizon, Beacon Lighting and Brambles all host AGMs on Thursday.

The healthcare sector was the worst performer, down 4.6 per cent. CSL extended its decline from yesterday, dropping 6.5 per cent. Fisher and Paykel lost 3.1 per cent.

Tabcorp shares sank 6 per cent after it announced that its revenue dropped 6.1 per cent in the first quarter of financial 2024. Gaming services revenue declined 12.7 per cent, due to the sale of eBet and lower contracted electronic gambling machines.

Forager surged 9 per cent. Chief investment officer Steven Johnson is looking to delist his Forager Australian Share Fund from the stock exchange after a sustained period of it trading at a more than 15 per cent discount to net asset value.

Takeover target Liontown shed 1.3 per cent. It has given a seven-day extension to US company Albemarle for its due diligence period. Albemarle’s $3-a-share cash offer won over the Liontown board led by Tim Goyder on September 4.

Redbubble rallied 27.1 per cent after it returned to positive underlying cash flow, according to the company’s latest quarterly trading update. It booked an underlying cash flow of $700,000, up $16.9 million on the prior corresponding period.

Air New Zealand dropped 3 per cent. The airline cautioned the market against using its first half financial 24 earnings guidance to the full-year given the “ongoing uncertainties” in the trading environment.

With Bloomberg

Air New Zealand has cautioned the market against using the company’s first half financial 24 earnings guidance to the full-year given the “ongoing uncertainties” in the trading environment.

The airline expects earnings before taxation for the first half of 2024 to be in the range of $180 million to $230 million, assuming that the average jet fuel price stays around $US110 a barrel for the remainder of the period.

It holds $200 million in COVID related credits, according to its latest announcement to the ASX.

Shares dropped 3.3 per cent to 65.25¢ in afternoon trading.

Beata Manthey, Citi’s global equity strategist, says it can be hard to make the case for equities in a world full of risks: rates, recession, inflation and, of course, geopolitics.

But Manthey, who is in Australia for Citi’s 2023 investment conference, is building a case that stocks can rally, with her forecasts suggesting upside of 12 per cent and 13 per cent by the middle of next year.

The argument goes like this.

First, while Citi still predicts a recession early in 2024, economic growth is proving more resilient, or less subdued, than expected. And even if that recession does arrive – Manthey points out that “there is always a recession coming and this one is coming later and later” – global GDP growth should still be positive.

Second, while growth is subdued, the retreat in bond yields and the sharp change in rhetoric from US Federal Reserve policymakers, who are suddenly saying rates might now be high enough, could remove a key challenge for stocks.

Read more here. 

ASIC deputy chairwoman Karen Chester has warned the insurance sector that the watchdog is watching to ensure they do not use AI to skirt around regulations.

“A brief reminder, beyond being able to explain ‘the why’ for a decision, recommendation or prediction by AI within your business, you will also need to ensure AI uses meets your obligations to provide financial services efficiently, honestly and fairly,” Chester told an Insurance Council of Australia event.

AI was key to tackling structural headwinds in the industry, such as higher reinsurance costs related to increasingly prevalent catastrophic weather events and consumer affordability. IAG pushed premiums up 20 per cent in June to cope with its higher costs.

Chester said AI use was already prevalent overseas.

“Internationally, some insurers are rethinking their products and looking at basics or partial cover offerings (not all perils, or not a full rebuild). Some start-ups are using AI to simplify and tailor policy offerings to match the needs and financial situation of the policyholder.“

ASIC also reminded the industry of the action it had taken against insurers in the last six months, including pricing failures, failing to meet their obligations and inaction on risk mitigation.

The Australian sharemarket is higher at midday, tracking a late Wall Street rally as US Federal Reserve board minutes suggested policymakers see more reason for caution, bolstering hopes that rates have peaked.

The benchmark S&P/ASX 200 index rose 0.2 per cent, or 12.8 points to 7101.2, buoyed a rally in bank and technology stocks. The local currency was trading around US64.12¢ after briefly falling below US64¢.

In the minutes, policymakers “noted that it was important to balance the risk of overtightening against the risk of insufficient tightening”. That helped buoy the US sharemarket. The S&P 500 gained 0.4 per cent and the Nasdaq rallied 0.7 per cent.

And West Texas Intermediate crude traded near $US83 a barrel, erasing most of the surge following Hamas’ weekend attacks on Israel.

Overnight

Traders await the September US consumer price index at 8.30am in Washington (11.30pm AEDT).

Tom Essaye at Sevens Report said a “good” report could be the catalyst for a “strong” market rally. It also comes after data showed a measure of producer prices rose by more than forecast last month from higher energy costs.

Atlanta Fed president Raphael Bostic said the central bank did not need to keep tightening unless inflation’s descent started to stall. Meantime, governor Christopher Waller noted the Fed could “watch and see” what happened before taking further action with rates as financial markets tighten.

Part of the rally on Wall Street reflected a further easing of US government bond yields, as the yield on the US 10-year note slipped 10 basis points to 4.56 per cent at 4.15pm in New York.

Iron ore futures on the Singapore exchange traded higher in the afternoon, up 0.2 per cent to $US112.75 a tonne.

Stocks on the move

Aurizon, Beacon Lighting and Brambles all host AGMs on Thursday.

The healthcare sector was the worst performer, down 2.7 per cent. CSL extended its decline from yesterday, dropping 4 per cent. Fisher and Paykel lost 2.3 per cent.

Tabcorp shares sank 6 per cent after it announced that its revenue dropped 6.1 per cent in the first quarter of financial 2024. Gaming services revenue declined 12.7 per cent, due to the sale of eBet and lower contracted electronic gambling machines.

Forager advanced 7.8 per cent. Chief investment officer Steven Johnson is looking to delist his Forager Australian Share Fund from the stock exchange after a sustained period of it trading at a more than 15 per cent discount to net asset value.

Takeover target Liontown shed 2.1 per cent. It has given a seven-day extension to US company Albemarle for its due diligence period. Albemarle’s $3-a-share cash offer won over the Liontown board led by Tim Goyder on September 4.

Redbubble rallied 29.4 per cent after it returned to positive underlying cash flow, according to the company’s latest quarterly trading update. It booked an underlying cash flow of $700,000, up $16.9 million on the prior corresponding period.

Steel maker BlueScope declined 2 per cent after it was downgraded to underweight by Morgan Stanley.

With Bloomberg

Commonwealth Bank says the Reserve Bank of Australia board meeting on November 7 is “live” and has ascribed a 40 per cent chance of an increase to the cash rate.

Economist Gareth Aird in a note to clients said the release of quarterly inflation data later this month will be the “most important” economic publication in guiding the board in its decision.

The major bank forecasts that the risk to the third quarter CPI are to the “upside.” The Australian Bureau of Statistics is scheduled to release its latest inflation report on October 25.

“Our central scenario has the RBA on hold from here and we continue to look for an easing cycle to commence in mid‑2024,” he added. “But there is a clear near term risk that the RBA delivers on its long held hiking bias and increases the cash rate by 25 basis point at either the November or December Board meetings (we assess the probability of rate hikes at both meetings to be low).”