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Asian markets subdued following US treasury yield spike overnight

Asia-Pacific markets opened softer on Friday, following the US market lead. Treasury yields spiked and Federal Reserve Chair Jerome Powell signalled more work may be needed to bring down inflation.

Asian Markets

Markets are in a risk-off mode as losses pick up in Japan, Australia and Korea. S&P 500 futures extending losses after hours. Japan’s Nikkei 225 fell 0.76%, after gains of nearly 1.5% in the prior session. The Topix dropped 0.49% at open. South Korea’s Kospi opened 0.83% lower, also down after gains on Thursday, while the Kosdaq shed 1.13% at open. Futures for Hong Kong’s Hang Seng index stood at 17,546, pointing to a slightly stronger open compared with the HSI’s close of 17,511.29.

Bonds back under pressure with Australian yields sharply higher and JGB curve steepening. Treasuries are little changed.

China’s new yuan loans and total social financing are forecast to drop sharply in October, reflecting seasonal effects.

Weaker-than-expected October manufacturing, services and export data, and return to deflation has reinforced calls for additional support with economists eyeing another RRR cut.

At noon, the S&P/ASX 200 is 0.63 per cent lower at 6,970.60.

The SPI futures are pointing to a fall of 37 points.

Best and worst performers

The best-performing sector is Materials, up 0.08 per cent. The worst-performing sector is Utilities, down 1.37 per cent.

The best-performing large cap is Meridian Energy (ASX:MEZ), trading 0.87 per cent higher at $4.65. It is followed by shares in Fortescue Metals Group (ASX:FMG) and BHP Group (ASX:BHP).

The worst-performing large cap is James Hardie Industries plc (ASX:JHX), trading 2.73 per cent lower at $45.56. It is followed by shares in Xero (ASX:XRO) and ResMed (ASX:RMD).

The Reserve Bank has upwardly revised its inflation forecast and upgraded its economic growth outlook in its quarterly economic update released on Friday. Headline inflation is expected to slow 4.5 per cent by the end of this year, up from the previous forecast of 3.9 per cent, and remain sticky in 2024, before easing back to 3 per cent by mid-2025. The forecast for trimmed mean inflation was also upgraded, with the measure returning to the bank’s very top end of its 2 per cent to 3 per cent target in mid-2025. Growth rate is expected to climb 1.6 per cent by year-end, from 0.9 per cent previously projected, and steadily rise to 2.4 per cent by December 2025.

Company News

Ionic Rare Earths (ASX:IXR) announced today that construction at its Makuutu Demonstration Plant continues to progress well with first Mixed Rare Earth Carbonate on track to be produced in early Q1 2024. IXR Managing Director, Tim Harrison said “This plant at Makuutu is a key milestone for the supply chain engagement with product to be produced here likely to be sent to potential off-take partners in early 2024” Shares are trading 10 per cent higher at 2.2 cents.

Arizona Lithium (ASX:AZL) who are focused on the sustainable development of two large lithium development projects in North America, the Big Sandy Lithium Project and the Prairie Lithium Project, announced today that it has commissioned the pilot plant at its Prairie project in Saskatchewan. AZL is producing a lithium concentrate that will be sent to the Company’s Lithium Research Center in Tempe, Arizona, for further upgrading to high purity lithium end products, including high purity lithium carbonate. AZL Managing Director, Paul Lloyd, commented: “Having the pilot commissioned and operational is a significant milestone for our team, with brine being processed and lithium concentrate is being produced and sent to our Lithium Research Center in Arizona for further upgrading. Shares are trading 26.79 per cent higher at 3.6 cents.

Charger Metals(ASX:CHR) announced today that assay results from soil sampling completed earlier this year have identified several new lithium targets at the Mt Gordon tenement of the Lake Johnston Lithium Project, Western Australia. The results showed large expanses of the tenement are anomalous for lithium in soils. Charger’s Managing Director, Aidan Platel, commented: “The soil geochemistry results from our 100% owned Mt Gordon tenement are very encouraging. The size and strength of the lithium soil anomalies are significant, especially in the context of the successful Burmeister lithium discovery on the adjacent tenement which resulted from drilling of a lithium soil anomaly. Shares are trading 12.12 per cent higher at 37 cents.

Commodities and the dollar

Gold is trading at US$1964.30 an ounce.
Iron ore is 0.4 per cent higher at US$128.15 a tonne.
Iron ore futures are pointing to a 1.17 per cent rise.
One Australian dollar is buying 63.66 US cents.

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