Markets Overview

  • ASX SPI 200 futures little changed at 7,247.00
  • Dow Average down 0.4% to 35,314.49
  • Aussie down 0.4% to 0.6545 per US$
  • U.S. 10-year yield fell 6.7bps to 4.0220%
  • Australia 3-year bond yield fell 15 bps to 3.73%
  • Australia 10-year bond yield fell 18 bps to 4.02%
  • Gold spot down 0.6% to $1,925.14
  • Brent futures up 0.8% to $86.06/bbl

Economic Events

  • 11:00: (AU) Australia to Sell A$700 Million 2.75% 2035 Bonds

Asian equity futures fell, suggesting a cautious open to trading around the region on Wednesday as investors await consumer and producer price data from China that’s projected to show ongoing weakness.

Contracts for Australia and Japan were fractionally lower while those for Hong Kong slipped 0.3%. A gauge of US-listed Chinese stocks dropped 2.4% after a larger-than-forecast slump in trade data added to concerns over the world’s second-largest economy. Problems at Country Garden, once China’s largest developer, are adding to the gloom.

US shares trimmed losses as dip buyers emerged following a slide driven by worries about the financial system and the economy.

Treasuries rose, helped by a well received three-year note auction, while the dollar touched its highest level in over a month amid haven demand on worries over everything from China’s outlook to the health of US and Italian banks.

Treasury 10-year yields dropped to around 4%. Tuesday’s $42 billion sale of three-year notes produced a lower-than-expected yield, a sign that demand was stronger than anticipated.

Oil edged lower Wednesday after a rebound Tuesday as Ukrainian President Volodymyr Zelenskiy said his country would retaliate if Russia continues to block its ports. Copper — a barometer of the global economy — slid on the disappointing Chinese trade figures.

Other News

Australia’s bid to become a major refiner of battery-ready chemicals is taking a knock as smaller producers look to form joint ventures with major Asian conglomerates to manufacture lithium hydroxide overseas.

Liontown Resources Ltd., which is developing a large mine in Western Australia, announced an agreement with Japanese trading company Sumitomo Corp. on Monday to explore production of lithium hydroxide in Japan. It follows a move by Pilbara Minerals Ltd., which has partnered with South Korea’s Posco Holdings Inc., to manufacture the highly-refined product in the Asian nation.

Producing lithium hydroxide in Australia was “a big bet to make,” Liontown Chief Executive Officer Tony Ottaviano said Monday in an interview at the Diggers and Dealers conference in Kalgoorlie, Western Australia.

While lithium hydroxide is used in nickel-cobalt-manganese (NCM) batteries, it’s still uncertain whether this type will continue to dominate. Future market demand was “too fluid and dynamic” to predict, Ottaviano said.

Australia’s government has ambitions to help break China’s stranglehold on the battery supply chain — a priority for the US and other western governments — to help fuel the electric vehicle boom. While the nation produces more than half of the world’s lithium, it ships almost all of it to China in the form of bulky, low-grade ore, where it is refined into a delicate, battery-grade chemical.

The current Australian lithium hydroxide refineries — operated by China’s Tianqi Lithium Corp. and US company Albemarle Corp. — have struggled to meet production targets. Domestic conglomerate Wesfarmers Ltd. is due to start production next year. In May, Posco said it was 40% cheaper to build a lithium processing plant in South Korea than Australia due to cheaper labor and materials costs, according to the Australian Financial Review.

Nascent lithium miners in Australia aren’t rejecting onshore processing altogether. But instead of ultra-refined lithium hydroxide, they are exploring less refined products that are easier and cheaper to produce.