The ASX clawed its way back into the green today after early falls. The index is now at a two-day high.
The S&P/ASX200 gained 29.2 points or 0.38% to 7,709.8 after setting a new 20-day low. The index has lost 4.42% for the last five days, but has gained 1.89% over the last year to date.
Top-performing stocks in this index are Arcadium Lithium Plc and Pilbara Minerals Ltd (ASX:PLS), up 7.48% and 5.71% respectively.
In contrast to Monday’s sea of red, all sectors were higher today with Energy the best performed gaining 1.83%. Utilities and Real Estate took silver and bronze up 1.66% and 1.63% respectively.
As noted, Energy stocks drove the market higher after large-caps Woodside Energy Group (up 1.67%), Santos Ltd (ASX:STO) (up 1.25%) and Yancoal (up 2.6%) delivered solid gains.
Woodside recovered after investors wiped almost $2.6 billion off the oil and gas giant’s market value following Tuesday’s announcement that it made a $3.7 billion purchase of a lower-carbon ammonia project in the United States.
CEO Meg O’Neill said the acquisition supported Woodside’s strategy to thrive through the energy transition.
“This transaction positions Woodside in the growing lower carbon ammonia market. The potential applications for lower carbon ammonia are in power generation, marine fuels and as an industrial feedstock, as it displaces higher-emitting fuels.
“Global ammonia demand is forecast to double by 2050, with lower carbon ammonia making up nearly two-thirds of total demand.
“This project exceeds our capital allocation framework targets for new energy projects. Both phases are expected to achieve an internal rate of return above 10% and payback of less than 10 years.
“This acquisition is a material step towards delivering our Scope 3 investment and abatement targets. Phase 1 has the capacity to abate 1.6 million tonnes per annum of CO2-e and with the addition of Phase 2, the project has the capacity to abate 3.2 million tonnes per annum CO2-e, or over 60% of our Scope 3 abatement target.”
Looking at the small cap index, the S&P/ASX Small Ordinaries (XSO) gained 0.86% today to 2,913.80 but is down 5.24% over the past five days.
The Australian dollar is trading at 0.66 US cents.
UBS says banks immune to jitters
J.P. Morgan's Andrew Triggs thinks Australian banks are "likely to be largely immune" from recent jitters regarding US economics and the interest rate outlook. The recent "unwind" of Yen carry trades that pummelled stocks on Monday will also have little effect.
Triggs points out that the US accounts for only 5% of Australia’s exports and rapid RBA rate cuts are unlikely as its cash rate is much lower than Fed funds.
"Indirect impacts are more likely, with transmission through credit spreads to wholesale funding costs, and lower swap rates reducing hedge benefits," Triggs said.
"Our house economics view remains a relatively soft landing in Australia."
In this light, the company upgraded ANZ to Neutral and cut Westpac to Underweight, while keeping its price targets unchanged at $27 and $25 after recent share price moves.
Negative catalysts for ANZ, including its exposure to US/NZ rate cuts and its markets conduct issues, "now look to be factored into its valuation," Triggs said.
Westpac "does not appear rich in negative near-term catalysts," but has "significantly outperformed the other banks this year, and valuation is now very stretched."
NIM outperformance versus peers is likely for Westpac in 2H24, but RBA rate cuts would impose pressure given its retail deposit franchise, and replicating portfolio tailwinds are short-dated, Triggs said.
ANZ shares were last up 0.6% at $27.47. Westpac was down 0.1% at $27.78.
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