AU Weekly Wrap | Australia's Q3 GDP growth misses expectations; Northern Star to buy De Grey Mining for A$5 billion in gold sector merge

Moomoo News AU wrote a column · Dec 6, 2024 17:40

AU Weekly Wrap | Australia's Q3 GDP growth misses expectations; Northern Star to buy De Grey Mining for A$5 billion in gold sector merge

Market Review

The Australian stock market experienced a downturn this week, with the $S&P/ASX 200 (.XJO.AU)$ slipping by 0.2% and closing below its record high of 8514.5 reached on Tuesday. Sector performance has been mixed, with 6 out of the 11 sectors showing a decrease alongside the S&P/ASX 200 Index.

The Energy sector was notably impacted by falling oil prices due to delayed output increases, with $Santos Ltd (STO.AU)$ dropping 1.2% on Friday, respectively. Banking stocks also faced losses, with $Westpac Banking Corp (WBC.AU)$ and $CommBank (CBA.AU)$ declining amid increased speculation of a potential early rate cut by the Reserve Bank, although the cash rate is expected to remain at 4.35% in the upcoming meeting.

Macro News

Australia's Q3 GDP Growth Misses Expectations
Australia's economic growth was slower than anticipated in the third quarter, impacted by high borrowing costs and persistent inflation, which continued to pressure the weakening economy.

According to data released by the Australian Bureau of Statistics on Wednesday, real gross domestic product (GDP) increased by 0.3% in the three months ending in September. This was a slight improvement from the 0.2% growth recorded in the previous quarter but fell short of the 0.4% increase forecasted by Reuters.

On a yearly basis, the economy expanded by 0.8%, which also did not meet Reuters' projection of 1.1% growth.

According to Matt Simpson, a market analyst at FOREX.com and City Index, this weaker-than-expected data for the third quarter may increase calls for a rate cut by Australia's central bank, as detailed in his commentary.

Australian Job Growth Strong in Q3 2024 Across Key Industries
The Australian Bureau of Statistics reported on Friday that filled jobs in Australia increased by 1.6% to 16 million in the quarter ending September. The growth was observed across 15 of the 19 industries, with healthcare, social assistance, and professional, scientific, and technical services leading the expansion. However, this growth was partially offset by declines in other sectors such as administrative and support services.

Overall, the total number of jobs rose by 1.5% to 16.3 million during the same period. Main jobs saw a similar 1.5% increase reaching 14.9 million, while secondary jobs experienced a more substantial rise of 4.1% to 1.1 million.

The data also showed a decrease in job vacancies by 3.5%, with the rate of vacant jobs dropping to 2.1%. Conversely, the number of individuals holding multiple jobs increased by 2.8% to 986,400. Hours worked across the economy went up by 0.8% totaling 5.94 billion hours.

On a year-over-year basis, filled jobs saw a 3% increase, while total jobs went up by 2.5%. Despite this growth, job vacancies experienced a significant decline of nearly 18%. Main jobs increased by 3.1% and secondary jobs by 2.5%.

Company News

Northern Star to Buy De Grey Mining for A$5 Billion in Gold Sector Merge $Northern Star Resources Ltd (NST.AU)$ announced on Monday its plans to acquire $De Grey Mining Ltd (DEG.AU)$ in an all-stock transaction, valuing the smaller gold mining firm at A$5 billion ($3.3 billion). This move comes as elevated gold prices are driving consolidation within the industry.

For Northern Star, the acquisition of De Grey provides a strategic advantage by granting access to the Hemi gold development project in Western Australia, expected to significantly enhance their growth potential from the medium to long term, with operations ramping up towards the end of the decade.

Iluka Receives Additional Australian Funding for Rare Earths Refinery
$Iluka Resources Ltd (ILU.AU)$ shares fell sharply by up to 10% after Morgan Stanley highlighted significant economic and execution risks at its Eneabba rare earths project, despite an additional A$400 million funding from the Australian government.
The report questioned the project's returns due to current commodity prices, predicting a potentially negative net-profit value. Shares dropped to A$4.96 in Sydney, marking the biggest intraday fall since August 2023. The Eneabba project, still in early construction and heavily reliant on government loans and further funding, aims to diversify the global rare earths supply currently dominated by China. Future funding is contingent on securing satisfactory offtake agreements, according to Iluka.

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