As it happened: ASX rebounds 1.9% but still finishes the week lower

The head of Australian-founded sustainable Bitcoin miner Iris Energy is unfazed by the cratering price of bitcoin and other cryptocurrencies, saying the asset would have to fall significantly before it became unprofitable to mine.

Dan Roberts, the Sydney-based chief executive of Nasdaq-listed Iris, told The Age and The Sydney Morning Herald while he would rather the price of bitcoin be higher, the current downfall - which has seen the cryptocurrency’s price fall nearly 20 per cent to $41,000 in the last five days - didn’t bother him.

“I’d rather bitcoin was higher, but it’s really not interrupting anything day-to-day,” he said. “We do get caught up in the broader crypto narrative, notwithstanding that the underlying business is more of a real asset data centre business.

“The revenue line is exposed to [bitcoin], but even at the current price the profits are pretty compelling.”

On Thursday, Iris reported adjusted earnings of $9.8 million for the third quarter of the financial year - a 358 per cent increase on the prior year - though the company reported an underlying net loss of $3.6 million due to foreign exchange losses. Revenue was $20.2 million, up 445 per cent.

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Iron ore headed for its biggest weekly drop since mid-February as China’s spreading virus restrictions and worsening property crisis prevented a recovery in demand.

The steel-making ingredient was steady near $US126 a tonne in Singapore on Friday and is down around 9% per cent this week. Beijing reported a slight increase in Covid-19 cases, while officials denied the city will be locked down amid growing concern the capital’s response to its outbreak will be intensified.

In the property market, Sunac China Holdings Ltd., the country’s fourth-largest developer, missed a dollar bond payment this week. The latest default is spurring fears that there could be more to come, which would further weaken a sector that’s important for iron ore demand.

Iron ore has fallen around a quarter from this year’s peak in early March as the virus restrictions spread. The lockdowns are making it hard for the government to deploy infrastructure spending, and are occurring at a time of year when construction typically ramps up after winter.

“China’s virus-related restrictions are weakening the impact of support measures during the peak construction season and property indicators are down,” ANZ Banking Group analysts including Daniel Hynes said in a note. “Steel production could increase, though looming control measures are a downside risk.”

Iron ore rose 0.3 per cent to $US125.90 a tonne as of 12:09 p.m. in Singapore and is down 8.7 per cent this week. Futures in Dalian rose 1.6 per cent, paring their weekly drop to 2 per cent. Steel rebar edged higher in Shanghai, while hot-rolled coil was little changed.

Bloomberg

Orica, one of Australia’s largest gas users, is calling on the winner of next week’s federal election to provide clearer direction on energy security and climate policy as businesses brace for the “double whammy” of spiking power and gas prices this year.

Despite the Coalition and Labor promising to reduce energy bills after annual inflation rose to its highest level in two decades, higher prices are looming across the east coast amid a series of breakdowns at coal-fired power generators and intensifying global competition for coal and gas because of Russia’s invasion of Ukraine.

Wholesale power prices across the nation’s main grid have risen more than 141 per cent in the past year and are continuing to climb. Short-term domestic gas prices in Victoria and New South Wales are trading more than four times higher than usual levels, while long-term gas supply contracts have increased from between $6 and $8 a gigajoule to as much as $9.50 this year.

The cost pressures are fuelling concerns among large energy consumers and manufacturers that rely on gas as a raw material for industrial processes, including Melbourne-based Orica, which produces fertilisers and commercial explosives for the mining, quarrying, oil and gas sectors.

While Orica reported a much-improved half-year financial result on Thursday including a better-than-expected 56 per cent jump in pre-tax earnings, chief executive Sanjeev Gandhi said he wanted to see long-term energy and decarbonisation policies placed at the top of the next government’s agenda.

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Oil advanced for a third day, book ending another tumultuous week of trading as investors weigh the prospect of a European Union ban on Russian crude imports and uncertainty over China’s virus resurgence.

West Texas Intermediate futures rose above $US107 a barrel, but are still set for the first weekly decline in three. Some EU nations said the bloc may have to consider delaying the ban on Russian oil if it can’t get Hungary to agree on the embargo. Beijing authorities have denied rumours that the capital will go into lockdown, as virus restrictions in Shanghai drag on.

Oil is up more than 40 per cent this year as economies rebound from the pandemic, although China’s virus outbreak and Russia’s war in Ukraine have contributed to choppy trading since late February. Global benchmark Brent crude remains in a bullish backwardation structure, signalling a tight market.

“Risks are increasing that Brent crude will once again test the upside of its recent range around $US116 a barrel,” said Jeffrey Halley, a senior market analyst for Oanda Asia Pacific. “The squeeze on diesel supplies and distillates globally is another supportive factor.”

Investors are assessing the impact of shrinking American fuel stockpiles ahead of the summer driving season, along with the prospect for aggressive monetary tightening after the US consumer-price index for April increased more than analysts were expecting. The war in Ukraine has fanned inflation globally.

EU nations said a delay to the Russian oil ban would allow the bloc to proceed with the rest of a proposed sanctions package. Governments are still aiming for a deal on the full package, including a phased-in oil ban, by Monday, when foreign ministers meet in Brussels, according to diplomats.

Russia’s oil revenues are up 50 per cent this year even as many buyers shun its crude due to the invasion, with the EU the largest market in April, the International Energy Agency said in its monthly report on Thursday.

Bloomberg

In the two decades since the dot-com crash, investors have been bracing themselves for another bubble to burst. Yet year after year, tech firms like Facebook and Alphabet continued to enjoy uninterrupted expansion and unwavering faith among their investors that it would continue. Even the financial crisis of 2008 barely registered as a blip. But now there is serious talk among entrepreneurs and investors that the correction everyone feared might finally be happening.

Given how intrinsically technology is woven into our lives - and how it will pioneer new avenues through augmented reality, streaming services, artificial intelligence and more - the broader tech boom of the past two decades seems set to continue in the long run. But investors for now must navigate something novel: uncertainty. Already the Nasdaq 100 has declined about 30 per cent since November 2021. So-called FAANG stocks, including Facebook parent Meta Platforms, Apple, Amazon, Netflix and Google, have lost more than $US2 trillion ($2.9 trillion) in value since the start of the year.

Now signs are pointing to a mood shift among tech firms and those who invest in them.

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Shanghai has been in a total lockdown for weeks. There is mass testing in Beijing, travel restrictions and a full closure of the capital may not be far away. Other mega-cities will soon follow as the omicron variant rips through the country. China is increasingly looking like an economic and political disaster zone. It is committed to a crazy zero-COVID policy that will take a huge toll on its society and economy - New Zealand, except amplified to the power of a thousand.

Not very surprisingly, the China bears are out in force, predicting that weaknesses in its centralised, autocratic system are about to be brutally exposed, and that its rise to global pre-eminence will be stopped dead in its tracks.

It is a tempting narrative - and yet it is also fundamentally flawed. True, President Xi Jinping and his ruling clique have made plenty of mistakes in their COVID strategy, although they are hardly unique in that. They should have got shots into people’s arms faster. Even so, there is growing evidence a triple dose of the Sinovac shot delivers acceptable levels of immunity.

Lockdowns might be harsh, but they will make sure the healthcare system is able to cope while vaccination delivers enough immunity to deal with the virus. By the autumn, the relentless rise of its economy will be back on track - and it will take more than COVID to derail China.

With the war in Ukraine raging, and money markets struggling to cope with soaring inflation and rising interest rates, it is easy to ignore what is, without question, a far more important story for the global economy. While the rest of the world has more or less forgotten about COVID, and completely reopened, China is stuck in 2020.

Shenzhen started locking down in January. By March, Shanghai had gone into a total lockdown, with travel into and out of the city severely restricted, a strict quarantine regime, mass testing, and the closure of offices, schools and factories. Beijing has already started mass testing alongside selective lockdowns and it would hardly be a surprise if the whole city was sealed off over the next couple of weeks. Many other mega-cities may follow. After all, as we already know, omicron rips through countries at lightning speed.

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Fuel giant Ampol’s chair Steven Gregg says there’s no end in sight to a global petrol crunch due to western sanctions on Russia and reduced exports out of China, and it remains to be seen whether the federal government’s cut to the fuel excise can keep prices from rising.

Gregg made his comments after the Group of Seven nations - which include the US, the UK, three European countries and Japan - formally agreed to phase out or ban Russian oil earlier this week in a move to further isolate Moscow over its invasion of Ukraine.

“We don’t know how long the conflict is going to go on for and the effect of the oil price, or a number of factors that contribute to that,” Gregg told reporters after the company’s annual general meeting on Thursday. With the market for crude oil remaining tight, the fuel giant was now preparing for “all eventualities,” he said.

Looking at the surging prices consumers have to pay at the bowser, “whether that effect is mitigated by the fuel excise reduction by the government, it’s hard to know,” he added.

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One of AGL’s top shareholders says it is weighing climate and financial risks before deciding how to vote on the energy giant’s proposed demerger as healthcare workers call on it to reject the plan and push for earlier closures of coal-fired power stations.

With just five weeks to go until AGL investors vote on the board’s controversial plan to split its retail arm and carbon-heavy power plants into two separate businesses, tech billionaire Mike Cannon-Brookes has been ramping up efforts to convince shareholders to keep the company whole and bring forward its planned exit from coal-fired electricity in 2045 to as early as 2030.

Aware Super, a $148 billion superannuation fund that holds 1.4 per cent of AGL shares, said it was acutely aware that climate change was a material financial risk to its members’ retirement savings.

“It’s also an issue of particular concern to our members given a high proportion work in healthcare and other frontline roles – the first responders who frequently have to deal with the impact of climate change on the ground,” a spokesperson said.

“At the same time, we’re also conscious of the short-term financial risk associated with the debate over AGL’s demerger strategy.”

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