ASX ends higher; energy, utilities lift, Origin jumps, WiseTech falls

This year, the markets have consistently swung between extreme fear and greed. One minute, equities are tanking as bond yields soar – the next they are ripping as yields decline. Over the year, they have done very little other than offer a lot of volatility.

Investors are understandably having great difficulty determining where the economy is actually heading, given it has not responded as it normally would to the extraordinary tightening of monetary policy.

When our internal strategists presented modelling in late 2021 asserting that the US Federal Reserve would have to raise its policy rate by 500-600 basis points and that the Reserve Bank of Australia would be compelled to lift by 400-500 basis points, there was not a person on the planet who would have thought that these economies could withstand this cost of capital shock without lurching into a recession.

And yet the Aussie and US economies, among others, have remained remarkably resilient. Unemployment rates have barely budged from their 3 point-something-per-cent cyclical lows. Demand-side services inflation remains robust and sticky, running at multiples of the central banks’ targets.

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Bell Rock, the British hedge fund caught in an activist campaign against coal miner Whitehaven, is disputing a decision by Australia’s Takeover Panel, which claims the hedge fund did not meet its disclosure requirements.

The panel has received an application from Bell Rock seeking a review of the decision handed down on Wednesday.

“A review panel has not been appointed at this stage and no decision has been made whether to conduct proceedings. The panel makes no comment on the merits of the application,” the panel said in an announcement.

Previously, the panel had ordered Bell Rock to issue a “corrective notice” within five days outlining its full holding of Whitehaven shares and derivatives, after finding the hedge fund’s failure to properly disclose its investments had created a market for Whitehaven shares that was not efficient, competitive or informed.

Wednesday’s ruling by the Takeovers Panel is another blow to a struggling activist campaign that failed to achieve its primary goal: to deter Whitehaven from spending billions on new coal mines and instead return billions of dollars to shareholders.

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AVZ’s chief executive Nigel Ferguson said its retail shareholder base showed it “overwhelmingly” supported its board. Around 70 per cent of the share register voting in favour of the current board’s recommendations for director re-elections at its AGM.

Shares in the Perth-headquartered explorer have been suspended by the ASX since May 2022, with around $2.7 billion of paper shareholder wealth trapped in limbo.

Three renegades – Peter Huljich, Michael Carrick and Ty Ludbrook – seeking to spill AVZ’s board failed to receive sufficient shareholder support for election to the board.

Mr Ferguson said the current board has the right strategy to resolve disputes with stakeholders in the Democratic Republic of Congo and obtain a solution to advance the Manono lithium project in the south-east of the resource-rich country.

The chief executive of JPMorgan’s $US2.5 trillion ($3.8 trillion) asset management business said heavy investment in artificial intelligence had given the Wall Street titan a market-beating edge over its rivals.

George Gatch, a 37-year JPMorgan veteran, said his business was investing twice as much money as its competitors in AI to process data faster and better manage risk.

“I’m convinced we have a competitive advantage and better insights than the market,” Mr Gatch said in an interview during a trip to Sydney from New York.

“The way to improve returns is to provide more information and better insights to our investment teams faster – the machines don’t make the decisions, they provide information to help humans make better decisions.”

Mr Gatch that said along with managing investment and market risk, the technology could boost returns for clients.

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Money managers are ramping up small-cap fund launches, anticipating renewed demand from investors once the mega-cap rally that’s dominated the last 12 months finally runs out of steam.

Melbourne hedge fund Munro Partners has become the latest to push into the segment, launching its Global Growth Small and Mid Cap Fund, headed by existing Munro portfolio manager Qiao Ma, at the start of this month.

Ms Ma said the Munro team had talking about a global growth small and mid-cap fund for some time.

“Hunting for smaller, edgier, and less discovered companies has always been a thrill for investors like us,” Ms Ma tells The Australian Financial Review.

“We also thought the timing could be favourable after 2022, when the share prices of the smaller companies declined substantially and far more than their larger cap peers,” she said.

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One of the first things Michele Bullock did when she took over as Reserve Bank of Australia governor two months ago was to call in the bank’s senior officials to talk about leadership.

Bullock spoke about how she planned to lead the bank through a period of change in line with the 51 recommendations from the independent review of the RBA.

Bullock told senior colleagues the behaviour that she would be modelling; being collaborative, empowering staff and listening carefully to junior and senior people at the 1500-member bank.

She also laid out to the five assistant governors –  the bank is awaiting the appointment of a deputy governor – that she expected them to be doing similar and would be finding ways to measure their performance.

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At the ASIC Forum in Melbourne this week, Chanticleer got the chance to ask Reserve Bank governor Michele Bullock a question about what HSBC (and former RBA) economist Paul Bloxham has rightly described as a true shock to the economy: the stunning surge in immigration, which is running well above 500,000 annual arrivals.

Bullock appeared decidedly sanguine. First, she emphasised that immigration was ultimately beneficial for the Australian economy, and pointed out “the current surge in migration is a catch-up” from the sharp drop during the pandemic. “We’re basically going to get back up to our trend where we were before,” she said.

She also noted that Australians tend to miss the fact that migration is a supply and demand factor; during the pandemic and its aftermath, businesses were telling her they needed migration to fill staff shortages, and were less interested in hearing her counterpoint that such a migration surge would have an impact on demand.

Now, of course, the opposite is true – everyone is thinking about demand, but paying little attention to supply.

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The sharemarket rose at midday on Friday, led by a rebound in energy stocks ahead of next week’s OPEC+ meeting. Origin shares were also trading higher.

The benchmark S&P/ASX 200 index added 0.3 per cent, or 27.4 points to 7053.8 at noon, led by gains in the energy and utilities sectors. Trading was subdued with Wall Street closed for Thanksgiving.

Over in New York, while Wall Street was closed due for a public holiday, US futures were trading higher.

Energy stocks were in the green, recovering from Thursday’s sell-off and shrugging off the move lower in the crude oil price as markets awaited next week’s OPEC+ meeting, which will now be held online rather than in person, as Angola and Nigeria pressed for higher output quotas.

Woodside rallied 1.4 per cent, Santos gained 1.3 per cent and Ampol edged 0.8 per cent higher.

Origin Energy advanced 2.5 per cent, leading utility stocks higher. The takeover target remains in the spotlight after shareholder AustralianSuper blasted attempts by Brookfield to “buy more time” on its $18.7 billion bid.

Elsewhere in markets, bond yields rose across Europe as the latest PMI data showed just a modest improvement in the eurozone’s economy, paring expectations of rate cuts by the European Central Bank next year.

The Australian dollar gained 0.3 per cent to US65.60¢ amid thin trading. Earlier in the week a weaker greenback, a higher iron ore price and a shrinking gap between Australian and US government bond rates pushed the local dollar to a three-month peak of US65.89¢ on Tuesday.

Stocks on the move

Select Harvest tumbled 5.3 per cent after net losses deepened to $115 million in fiscal 2023, from $4.8 million a year ago, resulting in the final dividend being scrapped.

Star Entertainment edged up 0.4 per cent following a six-month extension to operate its Queensland casinos before its 90-day suspension after the Attorney-General approved its remediation plan.

WiseTech lost 3.3 per cent and was one of the worst performers on the ASX 200 after the company announced that chairman Andrew Harrison would retire in March. Board member Richard Dammery is his replacement.

Fletcher Building rallied 1.2 per cent. The building materials company announced that Bruce McEwen, chief executive of its distribution unit, resigned and would leave in March.

Virgin Money tumbled 6.3 per cent. The UK company said full-year profit was down 42 per cent to £345 million ($660.5 million), after it took a hefty and conservative £309 million provisioning charge against potential but not yet apparent bad debts, particularly in its credit card book.

Adairs, Auswide Bank, Autosports, Core Lithium, NextDC, Neometals, PEXA Group, Qualitas, Silver Lake Resources and WiseTech Global are set to host annual meetings on Friday.

Oil held a decline after the OPEC+ alliance was forced to delay a critical meeting amid a dispute over output quotas, casting a pall of uncertainty over the group’s production policy for next year.

US benchmark West Texas Intermediate traded near $US76 a barrel, about 1 per cent lower than Wednesday’s close before the Thanksgiving break. Brent ended near $US81 a barrel on Thursday after losing 0.7 per cent.

Saudi Arabia, the de facto leader of the Organisation of Petroleum Exporting Countries, and its allies are embroiled in a dispute over output quotas for African members. The meeting initially planned for this weekend has been pushed back to November 30, and it’ll be an online session instead of in-person.

Crude is on course to post a monthly loss in November after sinking by more than 10 per cent in October. The market’s weakness has been driven by signs of increased supplies from non-OPEC countries, rising stockpiles, and the fading of the war premium initially generated by the Israel-Hamas conflict.

Before the delay, traders had thought Saudi Arabia was gearing up to announce an extension of its unilateral 1 million barrel-a-day cutback. There were also some predictions that Riyadh could even steer other members into joining them with additional curbs, but the spat has put that outcome in doubt.