Coal, one of Australia’s biggest commodity exports, has surged to record levels as a result of the energy crisis, with the price of Newcastle coal soaring to all-time highs as miners cash in amongst a deepening energy crisis in Europe.

The price of thermal coal rose to a new high recently with Newcastle futures trading above $648 dollars a tonne, more than doubling since the start of 2022.

Australian coal producers continue to climb higher again today, with Whitehaven (ASX:WHC) up 3.3 per cent, Stanmore Resources (ASX:SMR) up 3.88 per cent, Yancoal ( ASX:YAL) up 6.5 per cent and Terracom (ASX:TER) up 4.04 per cent.

Lithium stocks are also back in focus today as demand for lithium continues to boom driven by rocketing growth in EV production, sending the price of the battery critical metal up more than 400 per cent over the past year.

Pilbara Minerals (ASX:PLS) is up 5.41 per cent, Core Lithium (ASX:CXO) 5.15 per cent, Vulcan Resources (ASX:VUL) 2.09 per cent, Sayona Mining (ASX:SYA) 5.88 per cent, Lake Resources (ASX:LKE) 4.55 per cent.

At noon, the S&P/ASX 200 is 0.10 per cent or 6.80 points higher at 6859.00.

The SPI futures are pointing to a rise of 14 points.

Best and worst performers

The best-performing sector is Information Technology, up 0.92 per cent. The worst-performing sector is Utilities, down 1.10 per cent.

The best-performing stock in the S&P/ASX 200 is Pilbara Minerals (ASX:PLS), trading 5.27 per cent higher at $3.90. It is followed by shares in Paladin Energy (ASX:PDN) and Liontown Resources (ASX:LTR).

The worst-performing stock in the S&P/ASX 200 is Super Retail Group (ASX:SUL), trading 5.05 per cent lower at $9.78. It is followed by shares in Incitec Pivot (ASX:IPL) and Breville Group (ASX:BRG).

Asian markets

Shares in the Asia-Pacific also traded higher on Tuesday ahead of the Reserve Bank of Australia’s rate decision.

Japan’s Nikkei 225 recovered from earlier losses to rise 0.46 per cent and the Topix index gained 0.28 per cent.

The Hang Seng index in Hong Kong advanced 0.56 per cent in early trade, while mainland China’s Shanghai Composite added 0.4 per cent. The Shenzhen Component was fractionally higher.

The Kospi in South Korea rose 0.3 per cent and the Kosdaq gained 0.92 per cent.

The Reserve Bank of Australia is expected to raise interest rates by a half point to 2.35 per cent, according to a poll by Reuters. The Australian dollar was slightly stronger at $0.6828 in morning trade.

MSCI’s broadest index of Asia-Pacific shares outside of Japan rose 0.44 per cent.

Analysts more bearish on China property prices this year

Quarterly Reuters survey showed new home prices are expected to fall 1.4 per cent in 2022, marking a downgrade from prior projections in May that prices would be unchanged. Property sales were seen tumbling 24.5 per cent in 2022, a far bigger drop than the 10 per cent fall forecast in the May poll. Noted underlying uncertainties in the real estate sector, plagued by a series of crises since the summer of 2020 after regulators cut excess leverage, causing some developers to default on their debts and struggle to complete projects, resulting in homebuyers threatening to stop making payments. While authorities have taken a series of support measures this year, analysts said more was needed. Prices are seen rebounding 2.0 per cent in 1H23, but sales were expected to fall 15 per cent due to ongoing sluggish demand.

Japan real wages continue shrinking, household spending disappoints

Headline nominal average wages rose 1.8 per cent y/y in July, compared to 1.9 per cent expected and followed a revised 2.0 per cent in the previous month. Growth in contracted earnings were stable, while special payments were slightly softer over the peak of semi-annual bonus awards. Real wages fell 1.3 per cent, close to the expected 1.2 per cent drop, extending declines of 0.6 per cent in June as the inflation factor continued to build. Total hours worked turned (slightly) negative for the first time in three months, mirroring scheduled hours, while overtime increased at the lowest pace since October last year. Employment growth was steady. Household spending rose 3.4 per cent vs consensus 4.6 per cent and prior 3.5 per cent. Translated to 1.4 per cent m/m decline, reversing 1.5 per cent growth in June. Most major categories were weaker, led by apparel, furniture, and health care.

OPEC+ agrees to cut production 100K bpd

Consistent with prior leaks, OPEC+ agreed to cut crude output 100K bpd for October, though it only amounts to 0.1 per cent of global demand (Reuters) and generally seen as a symbolic move. While the next meeting was set for 5-Oct, they enabled chairman (Saudi Energy Minister Prince Abdulaziz bin Salman al-Saud) to intervene whenever necessary to stabilise crude markets through calling for a meeting at any time if necessary. Decision essentially maintains the status quo as OPEC has been observing wild fluctuations in oil prices. On supply issues, Iran expects to add 1M bpd if the US nuclear agreement is revived, though negotiations still have ground to cover. Markets still indicate tight supplies as many OPEC states are producing below targets while fresh Western sanctions are threatening Russian exports.

PBOC cuts FX reserve ratio, Q3 seen as key for broader stimulus rollout

PBOC lowered the FX reserve requirement ratio for financial institutions by 200 bp to 6 per cent, effective 15-Sep (Xinhua). Marks the first cut to this rate since the 100 bp reduction in May to stem yuan weakness. Announcement follows a press briefing held by State Council Information Office officials to discuss stimulus strategy (PBOC). NDRC noted policymakers have stepped up efforts to support the economy since the end of May, though recovery needs more help due to ongoing pandemic effects and weak demand. Called for macro policies to be increased reasonably, stressing that China’s economy is at an important juncture and implementation of policies in Q3 is crucial. Also suggested goals for additional measures should include expanding effective demand and more relief for market participants. Authorities will follow up as soon as possible to keep the economy operating within a reasonable range and achieve the best results.

Japan FY23 budget requests reach $784B

Kyodo reported FY23 budget requests totaled JPY110.5T ($784B) amid record defence spending and swelling social security costs. Compared with the record JPY111.66T requested in FY22. Final figure likely to exceed the JPY107.6T for current FY. Budget to include spending on measures to help ease the economic impact of accelerating inflation. As per usual, MOF plans to draft the budget in December before parliament starts deliberations on it early next year. Largest portion was made up by the health ministry’s JPY33.26T due to ballooning pension payments and medical costs in a rapidly ageing society. The Defense Ministry requested a record JPY5.56T, up from the previous year’s JPY5.37T, equivalent to ~1 per cent GDP, and could be granted more than JPY6T to fund various upgrades. MOF applied for JPY26.99T for debt-servicing costs, up from JPY24.34T in the FY22 initial budget.

Company news

ABX Group (ASX:ABX) announced today that it has commenced its maiden REE resources estimation for Deep Leads and has received assays from most of its winter drilling campaign that expanded the lateral extent of REE mineralisation by 230 per cent. ABX’s Deep Leads REE mineralisation is enriched in the more valuable permanent magnet type of REE and includes true ionic adsorption clay zones that achieve 50 per cent to 75 per cent leaching extraction rates, which are high extraction rates by world standards. Shares in ABX are trading 8 per cent higher at 13.5 cents.

Commodities and the dollar

Gold is trading at US$1719.29 an ounce.
Iron ore is 3.2 per cent higher at US$98.00 a tonne.
Iron ore futures are pointing to a rise of 1.69 per cent.
One Australian dollar is buying 68.29 US cents.