Lithium takeover bid sees global short squeeze play out overnight
Global equity markets were lower overnight. Despite worries about the crisis among US regional banks quietening thanks in part to policymakers’ efforts to alleviate the challenges, and investors’ fear that higher rates could push the economy into a recession came back into focus.
Overnight the Nasdaq Composite fell Tuesday as an uptick in rates put pressure on the tech-heavy index. The tech-heavy Nasdaq shed 0.5 per cent, while the S&P 500 fell 0.2 per cent. The Dow Jones Industrial Average lost 0.1 per cent.
Behind the numbers the real short term emerging thematic once again is lithium.
On the ASX yesterday the battery metals sector surged after Perth-based explorer Liontown Resources rejected a $2.50 a share takeover bid from US commodities giant Albemarle. This put a massive short squeeze into play as hedge funds chased to cover short positions across the lithium sector on the ASX. The market has been happy to be short ASX explorers and long producers.
This has also played out in the US overnight, shares of US small-cap lithium miners are soaring in response to the Albemarle news. Shares of Piedmont Lithium, Lithium Americas and Sigma Lithium are up 6.9 per cent, 4.1 per cent, and 9.9 per cent, respectively.
And the US and Japan have agreed to strike a deal on critical mineral supply chains and to expand access to respective tax breaks. The deal also aims to counter China's dominance in the electric vehicle battery sector.
EVs which will use materials collected or processed in Japan will be eligible for incentives under the US Inflation Reduction Act.
Standard Lithium Ltd. shares were up 15 per cent on Tuesday after the company said it had sampled the highest confirmed lithium grade brine in North America, The near-commercial lithium company said the grade of 634 mg/L lithium in brine used for Direct Lithium Extraction has a meaningful impact on both capital expenditures and operating costs in connection with the extraction process, with a higher grade typically resulting in lower overall costs.
In tech news, Alibaba shares rose 14.3 per cent after announcing it will split itself six ways. The Chinese internet giant said it will divide itself into core businesses including artificial intelligence and e-commerce — and each can pursue “independent fund-raising and IPOs when they are ready,” The announcement came after Jack Ma, Alibaba’s co-founder, reappeared in China, signalling that regulators there may be easing a crackdown on tech.
Overnight, S&P500 sectors were mixed. Energy was the best performer, whilst communication services was the biggest laggard.
Futures
The SPI futures are pointing to a 0.4 per cent fall.
Currency
One Australian dollar at 7:20 AM is buying 67.07 US cents..
Commodities
Iron ore futures are pointing to a 1.65 per cent gain.
Gold added 1 per cent. Silver gained 1.4 per cent. Copper fell 0.1 per cent and oil added 0.7 per cent.
Figures around the globe
Across the Atlantic, European markets closed higher. London’s FTSE added 0.2 per cent, Frankfurt rose 0.1 per cent while Paris closed 0.1 per cent higher.
In Asian markets, Tokyo’s Nikkei added 0.2 per cent, Hong Kong’s Hang Seng gained 1.1 per cent while China’s Shanghai Composite closed 0.2 per cent lower.
Yesterday, the Australian sharemarket closed over 1 per cent higher at 7034.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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