• Shares finished flat ahead of major decisions by central banks
  • Core Lithium plunges after quarterly update
  • The Fed to raise interest rates by 25 basis points

 

Local shares closed flattish on Monday as traders looked for direction ahead of a pivotal week for central banks.

Energy stocks were the best performing, with giants like Woodside Energy (ASX:WDS) and Santos (ASX:STO) rising on the back of a strong week in crude oil prices as WTI lifted to a 3-month high.

Crude is rallying after OPEC+ said it will limit supply into 2024, while Saudi Arabia pledged a production cut for July that has since been extended to include August.

Lithium miners struggled on Monday, led by Core Lithium (ASX:CXO) which plunged by 16% after the release of its quarterly update (more details below).

Elsewhere, most markets in Asia are gaining ahead of central bank meetings later this week. The Fed will hand down its rates decision tomorrow US time, and the ECB’s is on 27th.

While the baseline scenario is for the Fed to raise interest rates by 25 basis points, this hike is already fully priced in by the markets.

“I highly doubt the central bank would go against what the market is already expecting,” said Erik Weisman, Chief Economist and Portfolio Manager at MFS Investment Management.

“But I am equivocal as to whether the Fed will raise rates yet even further, as the decision will be highly data dependent,” he added.

Weisman says where the US economy will ultimately land remains a mystery.

“The path for a soft landing appears to have improved, with both weaker inflation and a slowing labour market.

“But much of the lags monetary tightening is still in front of us.  And even if the Fed ends its hiking cycle this week, the effects of the last 16 months of tightening could still push the US into recession.”

 

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Mount Gibson Iron (ASX:MGX) rose after advising that the sale of its Mid-West iron ore and infrastructure assets to Fenix Resources, as announced on 29 June, has now formally completed.

Accordingly, MGX has received $10 million in cash, plus 60 million ordinary Fenix shares and 25 million Fenix options (exercisable in two tranches of 12.5 million options each at $0.25 and $0.30 respectively within five years of settlement), making Mount Gibson the single largest shareholder in Fenix with an approximate interest of 8.6%.

 

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Core Lithium (ASX:CXO) fell after saying that its Finniss lithium mine in the NT would significantly underperform the DFS study that underpinned its investment decision in 2021.

Early forecasts for the next two years have come in well below the 175,000tpa run rate envisaged in the original DFS.Core has set guidance of 90,000-100,000t of spod sales in FY24 at C1 costs of $1165-1250/t, with production of 80,000-90,000t anticipated.

Allkem (ASX:AKE) and Pilbara Minerals (ASX:PLS) were also down by around 5-6%.

Advanced lithium developer Latin Resources (ASX:LRS) also fell 13%.

Elsewhere, in the latest big M&A fizzer, South32 (ASX:S32) has lopped US$1.3 billion off the carrying value of its proposed Taylor zinc mine at the Hermosa project in Arizona.

The project was acquired in the purchase of Arizona Mining in a US$1.3b deal in 2018. Hermosa now has a book value of US$1.001b, US$482m of that for Taylor. The other US$519m is dedicated to its exploration ground alongside the Clark deposit.

NOW READ: Ground Breakers: Core smashed on guidance miss, South32 impairs US zinc project

 

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