Market Highlights: Cum-Cum raid on major banks by French police, and 5 ASX small caps to watch on Wednesday
Aussie shares are poised to open lower on Tuesday amid concerns that the probability of a US recession has gone above 60%. At 7.30am AEDT, the April ASX 200 futures contract was down 0.40%.
On Wall Street overnight, the major US indexes were down less than half a per cent, with Energy and Communication overperforming other sectors.
Technology-related shares were sold off the most as Apple and Microsoft fell around 0.4%.
Alibaba jumped 14% on the NYSE after announcing that it will split its US$220bn empire into six units as part of a massive restructuring. The six businesses will have their own CEOs, and will reportedly be seeking future IPOs.
Ride hailing company Lyft fell almost 8% as the company announced a new CEO, David Risher, who has been on the Lyft board since July 2021.
Shares in Lyft initially rose when the announcement was made, but reversed course when Risher said the company was not for sale.
In Europe meanwhile, 150 French investigators were involved in raids of major lenders including Societe Generale, BNP Paribas, HSBC, Natixis and Exane overnight.
The raids were related to a probe on dividend arbitrage strategy known as Cum-Cum, allegedly perpetrated by these large banks.
Cum-Cum basically refers to a scheme where shareholders transfer their stock for a short period to investors overseas to avoid paying a dividend tax.
Investors outside the country would hold these shares during dividend payout day, and were refunded the tax collected on dividends due to their non-resident tax status.
They then sell the securities back to the original owner and the amount of tax saved is split between the parties involved.
February’s CPI report will be released today at 11.30am AEDT.
The last reading in January was 7.4%, and consensus for February is for 7%.
The RBA has already stated that inflation has peaked, raising investor hopes that a pause in its tightening cycle is in sight.
The full effect of the RBA’s 10 consecutive hikes are yet to be felt however, and the board continues to have a tricky task in walking the fine line between bringing down inflation and not tipping the Australian economy into recession.
But looking overseas, we can see that it’s not plain sailing to get inflation under control, where UK inflation is stubbornly high.
“The recent overseas banking crisis has also thrown a spanner in the mix for the RBA, but board members quickly reassured consumers this week that banks were unquestionably strong,” said Josh Gilbert, market analyst at eToro.
Bond yields in the US have climbed from six-month lows as investors sold down bond positions.
Crude prices climbed another 1% overnight on improvement in risk appetite, and further supported by a halt to exports from Iraq’s Kurdistan region which knocked around 450,000 barrels per day offline.
Gold rebounded 1% to US$1,973.37 an ounce after giving back some of the banking panic gains it accumulated recently.
“….gold traders may even have one eye on the all-time highs if rate cuts this year become a reality,” said Oanda analyst, Craig Erlam.
Iron ore rose 2% and Bitcoin was up 0.55% in the last 24 hours to US$27,282.
While Bitcoin did fall a few per cent in response to reports that the CFTC is suing Binance, the drop doesn’t feel particularly significant.
“Bitcoin is displaying such unbelievable resilience to what is happening around it, even in the crypto industry, that you have to wonder just how sustainable that can be,” said Erlam.
8VI Holdings (ASX:8VI)
8VI says it has obtained regulatory approvals to commence its financial advisory businesses in Singapore and Malaysia. With these approvals, both 8VI FIN and Vastus Wealth can now commence their operations and work with key partners, including insurers and wealth protection providers, to cater to the wealth protection needs of clients in the Singapore and Malaysia markets.
Corazon Mining (ASX:CZN)
Corazon announced that results of a recently completed soil sampling program at the Miriam Nickel Project in WA have expanded the lithium target zone to approximately 1.6km in length. As a next step in the systematic exploration of the project’s lithium potential, a soil sampling program has been completed, which was designed to define the extents of the spodumene-rich pegmatite for first pass drill testing.
Karoon Energy (ASX:KAR)
Karoon advised that the PAT-1 well, the second of two new production wells drilled into the Patola field in the BM-S-40 production licence in Brazil, was safely brought onstream on 27 March 2023 at an initial rate of more than 12,000 barrels of oil per day (bopd). Together with production from the PAT-2 well, which commenced production on 15 March, the current total production rate from the BM-S-40 licence is now more than 40,000 bopd. Production rates are expected to decline over the coming weeks.
Widgie Nickel (ASX:WIN)
Widgie announced maiden independent Faraday lithium Mineral Resource Estimate (MRE) of 481,000t @ 0.59% Li2O (0.30% Li2O cut-off) in Southern Starter Pit location to a maximum depth of 65m. High grade core of 106,000t @ 0.87% Li2O was defined (at 0.80% Li2O cut-off). The fast-track work streams continue to prove up DSO opportunities.
Scorpion Minerals (ASX:SCN)
RC drilling at Youanmi has confirmed shallow east dipping LCT pegmatites along 3km of strike. Drilling has intersected pegmatites at a depth of 175m below surface and these remain open down dip. First assays are expected early to mid April.
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