ASX recovers from early weakness: Aus shares close 0.3% higher

At the closing bell, the S&P/ASX 200 was 0.31 per cent or 22.30 points higher at 7127.70.

The Dow Jones futures are pointing to a rise of 51 points.
The S&P 500 futures are pointing to a rise of 6.25 points.
The Nasdaq futures are pointing to a rise of 9.50 points.
The SPI futures are pointing to a rise of 34 points when the market next opens.

Best and worst performers

The best-performing sector was Consumer Staples, up 1.73 per cent. The worst-performing sector was Health Care, down 0.83 per cent.

The best-performing stock in the S&P/ASX 200 was Challenger (ASX:CGF), closing 5.63 per cent higher at $6.76. It was followed by shares in Brambles (ASX:BXB) and City Chic Collective (ASX:CCX).

The worst-performing stock in the S&P/ASX 200 was PointsBet Holdings (ASX:PBH), closing 7.69 per cent lower at $3.60. It was followed by shares in Novonix (ASX:NVX) and Magellan Financial Group (ASX:MFG).

Asian markets

New Zealand raised its cash rate by another 50 basis points to 3 per cent, the latest in a series of interest rate hikes in an effort to curb inflation.

Elsewhere, Japan stocks surged following better-than-expected export figures and Australian wages rose. Trading in the Asia-Pacific was mixed.

The Shanghai Composite is up 0.28 per cent and the Shenzhen Component is up 0.64 per cent. Hong Kong’s Hang Seng index is 0.84 per cent stronger. Chinese food delivery giant Meituan shares have risen 4.62 per cent. The move marks a rebound from the 9 per cent plunge Tuesday, which followed a report that Tencent is planning to sell the majority of its $24 billion stake in the company.

Japan’s Nikkei 225 has increased 1.06 per cent while the Topix index has added 1.09 per cent after the country reported better-than-expected exports growth for July compared with a year ago. Its exports growth of 19 per cent beat the 18.2 per cent expected by analysts in a Refinitiv poll, driven by a strong recovery in car exports.

Elsewhere, the Kospi has reversed after a positive start, falling 0.79 per cent likely due to some profit taking. Singapore’s key exports grew at a slower pace in July due to softer shipments of non-electronic goods.


Australian wage growth undershoots forecasts

Quarterly growth in the Australian wage price index was unchanged in Q2 against expectations for a rise. On a y/y basis wage growth was also smaller than expected, resulting in real wages shrinking by 3.5 per cent — the largest fall on record. However, the data pre-dates the 5.2 per cent rise in the minimum wage that took effect on 1 July. The RBA’s business liaison also showed that more than 60 per cent of firms anticipate they will raise wages by more than 3 per cent over the coming year, reflecting the upward pressure on wages from a tightening labour market.

China’s infrastructures stimulus not enough to offset drag from falling property investment

Weaker-than-expected China activity data prompted more calls this week for authorities to step up stimulus. However, there remain concerns that measures announced are falling short of what is required to meaningfully boost growth (Bloomberg). Strategists noted infrastructure spending on areas like water, roads and communications grew at double-digit rates (y/y) in the past two months, but this has not been enough to offset the impact of plunging property investment. While policymakers have leaned on infrastructure spending, the total area of land covered by new and ongoing construction in big city regions fell 1 per cent y/y in July amid a freeze on existing apartment construction. Analysts noted the contribution to GDP from overall investment could be lower than 2021’s, despite a projected 10-13 per cent lift in infrastructure spending this year and reflecting the relatively larger drag on the economy from falling property investment.

China’s Premier Li urges major provinces to consolidate recovery

In an economic symposium, Premier Li Keqiang called on a group of major provinces (that make up 45 per cent of China’s GDP) for more efforts to shore up support for their respective economies (Xinhua). Li highlighted the implementation of pro-growth policies, but no new specific initiatives were revealed. A priority was placed on support for market entities and stabilisation of employment, with prices remaining unchanged. Li suggested that measures should be aimed at private consumption, particularly big-ticket items such as autos and housing. He urged local governments to steer towards austerity on the fiscal side. However, on infrastructure expenditure, he called for ramping up financial support for qualified projects via local government special bonds and other policy channels.

Japan posts 12th straight trade deficit, machinery orders rebound moderately

The customs trade deficit came to JPY1,436.8B in July, compared to the consensus JPY1,405.0B, and follows JPY1,398.5B in the previous month. Exports rose 19.0 per cent y/y versus the consensus 18.2 per cent and revised 19.3 per cent in the prior month. Main drivers were autos, metallurgical fuel and semiconductor-making equipment. Imports grew 47.2 per cent versus the consensus 45.7 per cent and 46.1 per cent in the prior month. Fossil fuels continued to soar by triple digits. The FX factor remained notable, with the yen down 23.1 per cent y/y versus the dollar on a customs-cleared basis. Core machinery orders increased 0.9 per cent m/m in June versus the consensus 1.3 per cent, rebounding moderately from a 5.6 per cent drop in the prior month. A firmer bounce in manufacturing was held back by a stall in non-manufacturing demand. Overseas orders fell for the second straight month, while public orders were little changed after dropping sharply in May. Core orders still finished Q2 with a strong 8.1 per cent q/q gain on the back of a strong start in April. The Q3 survey projection points to a 1.8 per cent decline as partial payback.

Company news

Fletcher Building (ASX:FBU) has boosted its 2021-22 annual dividend by a third to 40 NZ cents per share after meeting its full-year earnings guidance, despite battling Covid, rising building costs and interest rates, especially in the company’s home market of New Zealand. The trans-Tasman group told stock exchanges on Wednesday that it will pay a final dividend of 22 NZ cents a share, up from 18 cents a year, taking the full year payout to 40 NZ cents (30 cents previously). At the same time the company said it had completed $NZ274 million of its $NZ300 million buyback in the year to June. Revenue for the year rose 5 per cent to just on $NZ8.5 billion, with net after tax profit of $NZ432 million 42 per cent higher than 2020-21’s $NZ305 million. EBIT of $NZ756 million for the year was just above guidance for the year of around $NZ750 million. Shares in FBU closed up 2.84 per cent at $5.07.

Nuheara (ASX:NUH), a company transforming the way people hear by creating smart and affordable hearing solutions, announced today that the US Food and Drug Administration’s landmark final ruling has established a regulatory category for over-the-counter hearing aids in the United States. The ruling allows hearing aids within the OTC category to be sold directly to consumers in stores or online without a medical exam or fitting by an audiologist. There is now a 60-day enactment period until the OTC hearing aid consumer retail sales are allowed, anticipated for mid-October 2022. Shares closed up 51.35 per cent at $0.28.

Frontier Energy (ASX:FHE) today announced that results from its Renewable Expansion Technical Assessment have been completed by Xodus Group for the company’s 100 per cent owned Bristol Springs Project located in the South West region of WA. The expansion study incorporated the total land under the company’s control and assessed the various renewable energy solutions available. It concluded the optimal outcome was a solar-only solution that would produce at least 438MW. Executive Chairman Grant Davey commented: “Our strategy aligns with the federal and state governments’ drive to decarbonise energy supply to industry and households. Our Expansion Study indicates the potential for lower cost of green hydrogen production through economies of scale and world class infrastructure in the area.” Shares closed up 5.08 per cent at $0.31c.

XTEK (ASX:XTE) today announced that the Group’s HighCom Armor Solutions business has received an order valued at A$2.7m from a US Federal Government agency customer for specialist body armour and ballistic helmets. The order is expected to be quickly fulfilled and shipped to the customer before the end of Q1 FY23. Scott Basham, XTEK Group CEO, said, “This multi-million dollar order continues the cracking start to the new financial year for the Group, with us having already recognised US$11m (~A$15.6m) so far in Q1. And of course, we still have two final shipments to complete the transformational order we received back on 27 May 22, that are worth a further US$11m (~$A15.6m) scheduled to occur through August and September. It’s exciting to say, but FY23 is already shaping up to be even more promising than what FY22 was for the Group.” Shares closed up 3.85 per cent at $0.405.

Commodities and the dollar

Gold is trading at US$1779.00 an ounce.
Iron ore futures are pointing to a fall of 1.1 per cent.
Light crude is trading $0.99 higher at US$87.15 a barrel.
One Australian dollar is buying 70.05 US cents.

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