Lithium Shorts Scramble as Rio Tinto Eyes Arcadium

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Welcome to Equity Espresso’s Market Recap.

The Australian sharemarket closed just shy of a record high, with the S&P/ASX 200 index rising 0.7% to 8,205.4 points. The market was buoyed by strong performances in the banking and lithium sectors despite a thinned trading session due to the Labour Day holiday in several states.

Seven sectors ended the session positively, with Technology (+1.64%) and Financials (+1.54%) leading the gains. Life 360 (+6.84%) was one of the big movers in the tech. sector, while Westpac (+2.12%) was the best performer of the big banks.

Rio Tintos (-2.03%) bid for Arcadium Lithium (+45.69%) sparked a rally in lithium stocks, likely forcing short-sellers to cover their positions. This led to significant gains for companies like Liontown Resources (+18.92%), Sayona Mining (+12.90%), and Core Lithium (+8.70%). 

Oil prices dipped 0.8% on Monday, with Brent crude at $US77.44 and West Texas Intermediate at $US73.73 per barrel. This follows last week's 8% surge, the largest in over a year, due to Middle East conflict concerns.

Company News

• Arcadium Lithium (+45.69%) shares soared on the news that Rio Tinto had approached them regarding a potential acquisition. No details of the deal were provided. Rio Tinto (-2.03%) shares fell slightly on the news.

• GQG Partners (-3.10%) shares fell after it reported a 0.5% or $800 million increase in FUM during September to $160.8 billion.

• ProMedicus (+1.84%) continues to hit all-time highs after announcing it has secured an 8-year contract renewal with St. Louis-based Mercy Health for a minimum value of $98 million.

• Western African Resources (-19.52%) saw its share price tumble after Burkina Faso President Ibrahim Traore said it plans to withdraw mining permits from some foreign companies and seek to produce more of its own gold. The company said it is unaware of any plans by the government of Burkina Faso to withdraw any of its mining permits.

Wall Street

U.S. stocks rallied on Friday, with the Dow Jones (+0.8%) reaching a record closing high and the Nasdaq gaining over 1% following a stronger-than-expected jobs report. The data showed significant job gains in September and a drop in the unemployment rate to 4.1%, alleviating concerns about economic weakness.

The positive economic news led investors to adjust their expectations for future Federal Reserve rate cuts, with the probability of a 50-basis-point reduction in November dropping significantly to just 8%. The market's response was broad-based, with small caps and Financials outperforming. The Russell 2000 index rose 1.5%, while the S&P 500 financials index gained 1.6%.

Spirit's (-24.55%) stock plunged following a report from The Wall Street Journal that it is potentially filing for bankruptcy after its failed merger with peer airline firm JetBlue. Rivian Automotive's (-3.15%) stock slipped after it cut its annual production guidance for 2024 to between 47,000 and 49,000 vehicles, citing a supply shortage. The company had previously forecasted production of 57,000 vehicles.

S&P500 Sector Performance

Economic Data

• The U.S. added 254,000 jobs in September 2024, much higher than an upwardly revised 159,000 in August and well above forecasts of 140,000. It was the strongest job growth in six months and higher than the average monthly gain of 203,000 over the prior 12 months.

• The U.S. Unemployment rate unexpectedly dropped to 4.1% in September 2024, reaching a three-month low and defying market predictions of no change from August's 4.2% rate.

• The FAO Food Price Index rose 3% to 124.4 in September 2024, its highest since July 2023. Sugar prices surged 10.4% due to supply concerns, while vegetable oil prices increased 4.6% to levels not seen since December 2022.

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🌎️ Around The Globe

• The U.S. Department of Energy offered EVgo a conditional $1.05 billion loan guarantee to expand its E.V. charging infrastructure. This funding would support the deployment of 7,500 high-power charging stalls across 1,100 stations, including in marginalised urban areas.

• OpenAI secured a $4 billion revolving credit line from major banks, increasing its total liquidity to over $10 billion. This follows the closure of its funding round at a $157 billion valuation, which raised $6.6 billion from investors, including Microsoft and Nvidia.

• PayPal completed its first business transaction using PYUSD, its dollar-pegged digital asset. The company settled an invoice from Ernst & Young LLP on September 23 through SAP's digital currency hub, which facilitates instant transfers.

• Nvidia CEO Jensen Huang said there is "insane" demand for the company's new Blackwell AI chip, priced between $30,000 and $40,000 per unit.

• Tesla recalled over 27,000 Cybertrucks due to a rearview camera activation delay when reversing. The issue affects vehicles manufactured between November 2023 and September 2024. Tesla addressed the problem with an over-the-air software update.

• The International Longshoremen's Association, representing 45,000 striking U.S. dockworkers, agreed to suspend their three-day strike until January 15. This decision follows a tentative wage agreement with the U.S. Maritime Alliance, representing ports and shipping companies. Workers will resume their duties immediately, allowing time for further contract negotiations.

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*1-year, 3-year and 5-year returns are calculated as of August 31 2024.

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