• Both the ASX 200 and small cap index were in the red again today
  • 8 out 11 sectors finished lower let by materials (aka mining)
  • KPMP says our strong labour market has flow through implications to wages growth, spending and inflation

 

The ASX 200 was down today, losing 0.57% on lower-than-normal volume and the ASX XEC was down 1.43%.

A total of 8 out of 11 sectors were lower, led by materials which lost 1.31%, while leading the winners was Consumer Staples, up 73%.

Aussie labour force, population and wealth data were all released today, and Commsec associate economist Harry Ottley says the labour market remains incredibly tight. 

“We see the current level of underutilisation as the floor with unemployment modestly increasing over the forecast horizon,” he said. 

“Whilst there has been a slowing of trend employment growth and tentative signs of the economy slowing, it will take some time for unemployment to move higher as it is a lagging indicator. 

“In November, we expect that employment rose by a modest 15k and for the participation rate to be steady which is enough for the unemployment rate to remain at 3.4%.” 

That’s actually still near a 50 year low, according to KPMG chief economist Dr Brendan Rynne.

“Slightly more than half of all new employees were recruited into full time roles, which dragged down the ratio of full time share of employment to 69.7 percent – but this is a level that is still notably higher than at the start of the pandemic,” he said,

“Notably, every state and territory saw employment levels rise, with NSW leading jobs growth, while the resource-heavy states of Queensland and Western Australia saw the weakest employment growth.”

The implication is that aggregate demand and household spending in Australia will remain robust, supported by the weight of income being earned across the population. 

“This will ensure the RBA enters 2023 with a keen eye to maintaining the contractionary path for the cash rate,” Dr Rynne said.

“KPMG’s central forecast is for another 25bp rise in the cash rate early next year – however, with the continuing strength in the labour market and flow through implications to wages growth, spending and inflation, the RBA may need to tighten rates beyond this level to bring inflation back into its target range in a timely manner.”

 

NOT THE ASX

US stocks turned lower after the Federal Reserve raised interest rates by 50 basis points, which is what everyone expected would happen. 

But the Fed also signalled rates may have to move even higher than previously thought to rein in inflation – by 5.1% by the end of next year to be exact.

That’s up from previous estimates in September of around 4.6%.

Officials also said they see unemployment rising and economic growth being tepid in 2023.

“We’re not out of the woods yet,” said Viraj Patel, global macro strategist at Vanda Research. 

“We’re still in a higher-than-normal inflation environment.”

Investors also remained cautious about the outlook for the economy and anticipate the run-up in borrowing costs will begin to weigh on corporate profits and consumers in the coming months.

“2023 is the year when you will start to see the impact of all these rate increases,” said Seema Shah, chief global strategist at Principal Asset Management. 

“You can see strains are certainly building up, but the actual economic numbers are pretty resilient. We don’t think that will last.”

Chinese stocks extended their losing streak to a third session as the market continued to retreat from the rally spurred by Beijing’s removal of a host of Covid-19 restrictions. Investors are looking to the economic policy meeting of the country’s top leaders this week, which will set the policy tone and economic priorities for the upcoming year.

 

ASX SMALL CAP LEADERS

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The biggest winner was Peregrine Gold (ASX:PGD) after a rock sampling program returned grades of up to 122,497g/t gold and 23,234g/t silver at Birdsnest, part of PGD Newman project in WA.

That’s equivalent to 120kg of gold for every tonne of dirt moved.

This style of mineralisation requires “precise surgical diamond drilling to resolve continuity in 3D or down plunge”, technical director George Merhi says.

“It is very rare for a greenfield exploration program in WA to encounter mineralisation of this nature sitting undisturbed at surface,” he says.

Diamond drilling at both Birdsnest and Peninsula will start in Q1 2023.

Ora Gold (ASX:OAU) also dropped a fairly solid result on the table this morning, boasting (among other highlights) a return of 7m @ 15.75g/t Au from 30m in OGGAC456, incl. 6m @ 38.06g/t Au from 41m.

Later in the day, the company released a correction which usually signals that something’s been overstated.

But, in Ora’s case the typo in the original release actually downplayed the result listed above – it’s meant to be 17m @ 15.75g/t. Noice.

And family-focussed social media platform Tiny Beans (ASX:TNY) announced its outlook for 2023 is pretty bloody good, and should see the company turn cash-flow positive a full six months earlier than they’d expected to.

 

ASX SMALL CAP LAGGARDS

Here are the worst performing ASX small cap stocks:

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TRADING HALTS

Pearl Gull Iron (ASX:PLG) – Cap Raise.

Critical Resources (ASX:CRR) – Strategic Acquisition.

Koba Resources (ASX:KOB) – Cap Raise.

DMC Mining (ASX:DMM) – Exploration update.

Legacy Minerals Holdings (ASX:LGM) – Cap Raise.

PolarX (ASX:PXX) – Cap Raise.

I Synergy Group (ASX:IS3) – Cap Raise.

 

 

 

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