ASX rises, Liontown plunges on funding setback, Wall Street becomes bull market — as it happened

The Australian share market has finished the session in positive territory.

The ASX 200 closed up 0.8 per cent or 55 points, to 7,477, with education (+5.1pc) and industrial (+1.6pc) stocks leading the gains.

Here are the top and bottom movers of the day.

Ocean freight rates are surging after a missile attack and attempted hijacking of a Maersk ship this weekend prompted carriers to suspend plans to restart transits through the Red Sea, a key artery to the vital Suez Canal trade route.

Yemen-based Houthi militants have been attacking high-value cargo vessels in the Red Sea since November in a show of support for Palestinian Islamist group Hamas fighting Israel in Gaza. It has forced ships to reroute around the southern tip of Africa, driving up costs for vessels, though rates are still far below pandemic levels reached in 2021.

Egypt's Suez Canal connects the Red Sea to the Mediterranean Sea and is the fastest way to ship fuel, food and consumer goods from Asia and the Middle East to Europe. Shippers use the route to ferry about one-third of all global container cargo, including toys, tennis shoes, furniture and frozen food.

The attacks are already delaying delivery of products destined for numerous companies because the Suez route is used by the likes of IKEA, Walmart and Amazon.

Asia-to-North Europe rates more than doubled to above $US4,000 per 40-foot container this week, with Asia-to-Mediterranean prices climbing to $US5,175, according to Freightos, a booking and payments platform for international freight.

Rates for shipments from Asia to North America's East Coast climbed 55% to $US3,900 per 40-foot container. West Coast prices jumped 63% to more than $US2,700 ahead of expected cargo diversions to avoid Red Sea-related issues, Levine said.

While rates have spiked, they remain far below 2021's pandemic-fueled record highs of $14,000 per 40-foot container for Asia to North Europe and the Mediterranean and $22,000 for Asia to North America's East Coast.

Reuters

Data services company Appen has plunged 35.9% to $0.29 to hit its record low.

That's after its major client Google decided to terminate its contract, which was worth $126 million.

Appen posted a full-year earnings before interest, taxes, depreciation, and amortization (EBITDA) loss of $US20.4 million.

Shares of Appen fell 71.4% in 2023.

Asian shares were tracking higher on Monday as AI hype helped the tech sector ahead of a week brimming with central bank meetings, major economic data and corporate earnings.

Chip stocks have been on a roll since Taiwan Semiconductor Manufacturing (TSMC) upgraded its profit outlook last week on booming demand for high-end chips used in AI applications.

That helped send the Nikkei up 1.2% to a fresh 34-year peak and brought gains for January to 8.7%.

Chipmakers, including Nvidia and Advanced Micro Devices, were among the beneficiaries of the AI-driven rally.

That should sharpen attention on results from Intel and IBM this week, along with Tesla, Netflix, Lockheed Martin and a host of others.

MSCI's broadest index of Asia-Pacific shares outside Japan advanced 1.1%, after taking a drubbing last week.

The index has been pressured by weakness in China's markets, which hit five-year lows last week and sparked speculation state funds were having to support stocks.

Beijing still seems reluctant to deliver aggressive stimulus, with the central bank again skipping on a rate cut in its market operations on Monday.

The Bank of Japan is also expected to keep policy super easy at a meeting on Tuesday, helped by a second month of slowdown in consumer prices.

The general assumption among analysts is the central bank will want to see if the spring wage rounds deliver strong growth before deciding whether to nudge toward tightening.

"Drawing on the first 'shunto' results released mid-March and the April branch managers' meeting, the BoJ will be able to confirm the sustainability of wages and exit negative interest rate policy in April," wrote analysts at Barclays in a note.

"Thereafter, we expect gradual rate hikes from H2 24, but policy rates should remain well below neutral."

Here's a major up that isn't listed in our ASX 200 wrap because its value has slumped so much it has fallen out of the top 200 stocks.

Buy now, pay later company Zip has released a trading update that RBC Capital Markets analyst Wei-Weng Chen says points towards its first profitable half in three years.

"The company is guiding to 1H24 cash EBTDA [earnings before tax, depreciation and amortisation] of $29-33 million which marks a return to positive cash EBTDA (last seen 1H21)," the analyst noted.

"Additionally, significant deleveraging of ZIP's outstanding convertible liabilities has seen the company's outstanding balance fall to $62 million from c.$500 million slightly more than a year ago."

Despite cost of living pressures, Wei-Weng Chen says Zip doesn't appear to be seeing a significant jump in loan losses.

"US loss rates of 1.3-1.4% remain below the company's target range of 1.5-2.0%," the analyst observed.

"AU net bad debts improved by 54bps Q/Q to 3.64% of receivables. The company expects AU bad debt trends to continue to improve during 2H24 and beyond."

Zip shares were up 7.9% to $0.685 by 12:35pm AEDT.

However, despite the positive update, Wei-Weng Chen has a price target of just 50 cents on Zip stock.

Australian shares are still tracking higher after midday, led by heavyweight financials, while technology stocks have emerged as the top percentage gainers following a chipmaker-fuelled rally on Wall Street last week.

The ASX 200 was up 0.8% to 7,482 points, by 12:05pm AEDT. The benchmark lost 1% last week.

The S&P 500 posted a record high close on Friday for the first time in two years, fuelled by a rally in US chipmakers and other heavyweight technology stocks on optimism around artificial intelligence.

On the domestic bourse, Australian technology stocks rose as much as 1.4%, their highest since September.

Sector majors Xero and Wisetech Global climbed 2.4% and 1.4%, respectively.

Financials climbed 1.3%, with the big four banks rising between 0.9% and 1.7%.

Gold stocks rose as much as 0.4%, lifted by a 1.6% jump in shares of Northern Star Resources.

Bucking the trend, energy stocks were flat as oil prices dipped on Friday on concerns over demand in China.

Heavyweight mining stocks slipped 0.6%, with sector majors Rio Tinto and Fortescue falling 0.3% each.

Shares of Liontown Resources fell as much as 21% to their lowest level since June 2022 to emerge as the top loser in the benchmark index, after the lithium miner announced a review of the planned expansion of its Kathleen Valley project.

Lynas Rare Earths fell nearly 2%, their lowest level since July 2021, after its second-quarter revenue fell sharply.

Diversified miner South32 fell as much as 4.2% and was on track for its worst day in five months on lower-than-expected quarterly coal and manganese output.

Prospective lithium producer Liontown Resources has been by far the biggest loser on the ASX 200 today after it updated investors about its Kathleen Valley lithium project.

Following a more than 80% slump in the price of spodumene (a key lithium ore) over the past year, a lending syndicate that was proposing to loan $760 million to Liontown has now terminated that commitment.

The company says those lenders "remain highly supportive" of the Kathleen Valley project and it is negotiating a "smaller debt facility that will reflect the project review".

That project review is "examining options to defer the timing of the previously announced 4 million tonne per annum underground development work, sequencing adjustments to the mine plan, and scope for additional cost optimisations", the company says.

However, Liontown has assured investors that there is no change to the 3 million tonne per annum plant capacity design that the company is currently building.

The company said it had about $515 million in the bank as at December 31, 2023, having fully drawn on $300 million of project funding from Ford.

It says this should be enough money to fund the construction activities required to achieve first production around the middle of 2024.

"Liontown remains confident in the long-term outlook of the lithium market and Kathleen Valley's status as a Tier-1 long-life producer," it concluded.

With its share price down 21.3% to $0.94, investors don't seem to share quite as much confidence.

A couple of years back, my Perth-based colleague Rachel Pupazzoni took a look at Australia's lithium industry. It's still a great backgrounder as to how the sector has expanded.

China's demographic dividend has been one of the main contributing factors to its supercharged economic growth, but now the population shrank for the second year in a row, raising concerns over the economic outlook for the world's second largest economy.

According to the official data, China's economy expanded 5.2% last year, surpassing its 5% target. However, it was one of its the worst annual performances in more than three decades.

ANZ's Greater China chief economist Raymond Yeung observed several trends that the labour market has been experiencing due to its cyclical downturn.

• Shrinking labour force: Total population fell 2.08 million in 2023. Of the 1.4 billion total population, 68% is aged 15 to 64 years. With a labour participation rate of 76%, China's total workforce is estimated to be around 740 million in 2024 (official 2022: 768 million). After peaking in 2015, China's workforce is falling and is likely to equal India's by the middle of this century.

• Falling employment: Total employment has been declining since 2015 after peaking at763m. Around 63% of the total employment was in the urban area in 2022, compared with 48% in 2012. This employment structure is consistent with China's rapid urbanisation rate.

• Service dominating: The service sector employs 48% of the workforce, generating 52% of total GDP. But the primary sector encompassing agriculture, forestry and mining remains the most labour-intensive sector, with 177 million workers supporting only 7% of total GDP. Manufacturing has the highest labour productivity, with per person value-add 24% higher than the service and 4.6x the primary sector.

• Ageing mobile workforce: Of the 297 million rural workers residing in the urban area, around 58% are migrants. Around 55% of them have studied up to junior middle school. Around 48% work in factories and 52% work for the service sector, notably construction. They age rapidly as 29% of them were already above 50 years of age in 2022, compared with 22% in 2018.
  

Television shopping network, TVSN, has announced a deal with the Seven Network to broadcast its shopping channel.

Effective 1 July 2024, TVSN will transition all its Australian metropolitan and regional free-to-air broadcasts from its existing partners, TEN and WIN, to Seven.

The shopping channel will be available on Channel 77 in the capital cities, Channel 67 in regional markets and 7plus nationally.

The arrangement clearly isn't a huge revenue raiser for Seven, because it wasn't considered material enough to the company's finances to be worthy of an ASX announcement.

Seven West Media shares are down 0.9% to $0.2675 in morning trade.

It's not clear if Seven will get a free set of steak knives as part of the deal.

Lynas Rare Earths is one of the bigger losers on an up day for the ASX overall, falling 1.5% to $5.86 in the first 45 minutes of trade, here's why, from Reuters:

Australia's Lynas Rare Earths on Monday reported a sharp drop in second-quarter revenue reflecting a plunge in underlying prices coupled with a planned shutdown of its Malaysian operations which hurt output.

The world's largest producer of rare earths outside China said sales revenue fell by 51.7% to $112.5 million ($US74.06 million) in the three months to December 31, 2023 compared with $232.7 million a year ago.

Underlying rare earth prices sank during the quarter on the back of easing demand from green energy firms along with rising supply from top producer China.

• ASX 200: +0.7% to 7,474 points
• Australian dollar: +0.2% to 66.08 US cents
• S&P 500 (Friday): +1.2% to 4,840 points
• Nasdaq (Friday): +1.7% to 15,311 points
• FTSE (Friday): Flat at 7,462 points
• EuroStoxx (Friday): -0.3% to 469 points
• Spot gold: +0.1% to $US2,030/ounce
• Brent crude: -0.5% to $US78.18/barrel
• Iron ore (Friday): +0.2% to $US129.70/tonne
• Bitcoin: -0.5% to $US41,406

Prices current around 12:15pm AEDT.

Live updates on the major ASX indices:

It seems that no matter how many central bank officials come out and say it's "premature" to talk about rate cuts, the market keeps powering ahead regardless.

Following Wall Street's tech-led rally on Friday, the ASX is being pulled higher by many of the sectors most sensitive to interest rate changes — industrials, consumer cyclicals, real estate and financials.

That's despite a US rate cut in March now only being a 50-50 gamble, whereas markets saw it as an 80+% odds-on favourite just last week.

But when the bulls are running, it seems nearly impossible to stand in their way.

The stocks getting trampled as the bulls rush to those rate sensitive sectors have been some mining, energy and utilities firms.

In particular, there is a continued exodus out of lithium, nickel and rare earths companies, whose prices have been smashed along with those of the commodities they produce.

Kind of odd in a world supposedly scrambling to decarbonise.

Uranium miners are also giving up some ground after a recent jump in prices.

Overall, the ASX 200 index is up 0.5% to 7,458 shortly after the first half hour of trade.

Gas companies Woodside and Esso will supply extra gas to the east coast energy market in return for receiving higher prices, the federal government has announced.

The supply deals were made under the government's Gas Market Code, which began operation last year.

That code set a price cap of $12 per gigajoule, but allowed gas suppliers to go above the cap, subject to ministerial approval, if they promised to prioritise the domestic wholesale market.

Energy Minister Chris Bowen and Resources Minister Madeleine King said the agreements would see over 260 petajoules of gas made available between now and 2033, enough to power all east-coast gas power stations for two and a half years.

Some fresh data out from jobs website Seek on the work from home trends.

After peaking in April at 11%, the proportion of jobs that advertise that the role can be done from home at least some of the time has fallen to 9.4%.

However, Seek economist Matt Cowgill says the ability to work from home is one of the criteria job hunters still value most highly.

Nassim Khadem looks at the disconnect in expectations between bosses and workers, and whether the rise in unemployment will swing the balance back in favour of employers and working from the office.

• ASX 200 futures: +0.4% to 7,418 points
• Australian dollar: -0.1% to 65.94 US cents
• S&P 500 (Friday): +1.2% to 4,840 points
• Nasdaq (Friday): +1.7% to 15,311 points
• FTSE (Friday): Flat at 7,462 points
• EuroStoxx (Friday): -0.3% to 469 points
• Spot gold: +0.3% to $US2,029/ounce
• Brent crude: Flat at $US78.56/barrel
• Iron ore (Friday): +0.2% to $US129.70/tonne
• Bitcoin: +0.1% to $US41,634

Prices current around 9:45am AEDT.

Live updates on the major ASX indices:

Good morning, and it certainly looks set to be a positive one on the markets.

Wall Street's benchmark S&P 500 index jumped 1.2% on Friday to 4,840 points, hitting a record high for the first time since January 2022.

Over time, we expect share markets to keep hitting fresh records, particularly when inflation is eroding the purchasing power of money, so two years is quite a while to have to wait to recover from the most recent dip.

However, as NAB's head of market economics Tapas Strickland points out, if you don't weight the index for the size of the firms, the S&P 500 would still be more than 5% off its previous record, showing most of the recent growth has been concentrated in the very large tech firms — the so-called Magnificent Seven.

It was a similar story on Friday.

"Tech stocks outperformed with the IT sub-sector up 2.4% and the NASDAQ +1.7%," Strickland observes.

And that's despite rising US consumer confidence and comments from another Federal Reserve official pushing back bets on an imminent interest rate reduction.

"US Fed Funds pricing eased back further, with a March rate cut now 49% priced, down from 56% on Thursday and well down on last week's 83%," Strickland observes.

"There is now 135bps [basis points] of cuts priced for 2024, down from last week's 168bps."

Federal Reserve Bank of San Francisco president, and voting member of the rate setting FOMC this year, Mary Daly said that rate cut talk is still "premature".

"While I think it's appropriate for us to look forward and ask when would policy adjustments be necessary so we don't put a stranglehold on the economy, it's really premature to think that that's around the corner," she told Fox Business.

Grab a big coffee and stay with me for the morning and Samuel Yang for this afternoon on the markets blog.