Evening Wrap: ASX 200 bounces, Woodside profits jump four fold, Chinese iron ore futures tumble

The S&P/ASX 200 closed 33 points higher, up 0.47%.

 The local sharemarket bounces led by tech and energy stocks, Woodside profits jump four fold to US$1.82bn in the first-half, Australian building permits plummet and Chinese iron ore futures dip on weak sentiment.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

• 10 out of 11 sectors higher

• A mix of defensive and growth sectors led

• Tech headlined gains thanks to gains from heavyweights Wisetech, Computershare and Xero

• Energy also outperformed as oil prices continue to bounce higher

• Materials was the only red sector

• 74% of the top 200 companies advanced

Stocks

• IGO (ASX: IGO) +3.8% reported record FY22 revenue, up 34% to $903m but profits fell -40% to $331m. During the year, IGO acquired Western Areas and produced its first battery grade lithium hydroxide at the Kwinana Refinery in WA

  • IGO CEO: “Our focus over the coming year will be to continue to consolidate our transformative growth over the past two years, to build lithium capacity at Greenbushes and the Kwinana Refinery, and bring Cosmos to first nickel production.” 

• Pointsbet (ASX: PBH) +3.5% received provisional certification to launch its sportsbook operations in Kansas on September 1, 2022. Upon launch, Kansas will represent the company’s 11th online sportsbook operation in the US 

• Woodside (ASX: WDS) +1.5% posted a 414% jump in net profits to $1.82bn, ahead of Morgans expectations of US$1.77bn. An interim dividend of 109 US cents was issued, the largest since 2014. The stock will go ex-dividend on Thursday, 8 September

  • Woodside CEO: "Production for the half-year was 19% higher at 54.9 million barrels of oil equivalent, benefiting from the contribution in the month of June of the former BHP assets and improved reliability at our LNG facilities."

• Link Administration (ASX: LNK) +0.7% posted 1.3% revenue growth in FY22 to $1.18bn. The company posted a statutory loss of -$67.6m (FY21: -$162.7m) due a non-cash impairment charge of $83.1m related to the BCM business 

• Sandfire Resources (ASX: SFR) -3.6% posted FY22 net profits of $111.4m (FY21: $128.6m) on 52% revenue growth to US$992.7m. C1 copper production costs jumped 55% from US$0.82 to US$1.27/lb

• Bubs Australia (ASX: BUB) -5% posted 123% revenue growth to $104.2m and underlying EBITDA of $4.8m (FY21: -$29.7m loss). Gross margins improved to 28.9% from -7.3% a year ago due to optimised product mix, supply chain efficiency and inventory management

  • Bubs: “FDA has confirmed their commitment to develop a framework for suppliers like Bub, who have been granted the enforcement discretion, to continue to import and sell infant formula beyond November this year.” 

• Terracom (ASX: TER) -5% reported FY22 net profits of $192.5m compared to a -$65.8m loss a year ago

  • Earlier this month, the coal miner issued a final dividend of 10 cents per share, which represents a yield of roughly 10%

Economy

• Australia building permits fell -17.2% in July from -0.6% in June

  • Consensus expected a decline of just -2.0%

  • "The decrease in the total number of dwellings approved in July was led by a sharp decline in approvals for private sector dwellings excluding houses, which dropped by 43.5 per cent. This was the lowest level recorded since January 2012 and was driven by a lack of approvals for large apartment developments,” said Daniel Rossi, head of construction statistics at the ABS

Commodities 

• Iron ore futures on China’s Dalian Commodity Exchange fell -4.3%

  • "The symposium of iron and steel enterprises in Tangshan last Friday emphasized the importance of reducing steel production capacity by 8.264 million mt in 2022. In this scenario, the market sentiment weakened," according to the Shanghai Metals Market

  • "On the demand side, it is expected that steel mills will resume the production this week, and the average daily output of pig iron may increase slightly. Therefore, steel mills still have demand for iron ore," the report added

Scans

Latest news

Post market charts

S&P/ASX 200: The market found strength at a key inflection level and managed to defend Monday’s lows. Interestingly, 17 out of the top 20 companies by market cap were green. BHP (ASX: BHP), Rio Tinto (ASX: RIO) and CSL (ASX: CSL) were the only red ones.

The Good: The ASX 200 is starting to form a range between 7,135 and 6,960.

The Bad: Volatility is starting to pick up (VIX at a 6 week high). Market rallied on hopes of a Fed pivot, so what happens now that Powell has quashed those views? 

Source: TradingView, Annotations by Market Index

S&P/ASX 200 Energy Index: Rallying off of higher energy prices and a better-than-expected half-year profit result from Woodside. It's worth noting the index faded from session highs of 3.1%. 

ASX 200 Energy Index weekly chart (Source: TradingView, Annotations by Market Index)

Stocks

Lithium holding up: Lithium names are refusing to fall, perhaps reflecting some of the near-term drivers for the industry. "In the short-term, continued robust electric vehicle demand globally and record-breaking heat and drought in the southwest of China are the key drivers for the market,” said Benchmark Minerals Intelligence last Thursday. Mineral Resources (ASX: MIN) rallies on earnings to a fresh all-time high. Allkem (ASX: AKE) is sitting near record highs. Pilbara Minerals (ASX: PLS) rallied ~3% and ~8% away from January highs. It goes to show where the money is going. The small-to-mid cap end of town has been relatively muted as, more broadly speaking, stocks pull into key moving averages and price levels.

Allkem daily chart (Source: TradingView, Annotations by Market Index)

Uranium diverging performances: Most uranium stocks were up 10-20% in early trade after Belgium extended the operating timeline of two of its nuclear power plants by 11 years. More advanced U names like Paladin Energy (ASX: PDN) and Boss Energy (ASX: BOE) were rather choppy and faded from intraday highs. Whereas a few small cap and spec names like Alligator Energy (ASX: AGE), Aura Energy (ASX: AEE) and 92 Energy (ASX: 92E) are rallying out of recent trading ranges and pushing 4-5 month highs.  

Aura Energy (top left), Alligator Energy (bottom left) and Boss Energy (right) charts (Source: TradingView, Annotations by Market Index)

Food for thought

QT Reminder: Fed’s quantitative tightening run rate is set to double, up to US$95bn a month starting this Thursday as part of its broader plan to reduce its outsized US$9tn portfolio, according to Bloomberg.

Markets vs. bonds on interest rates: Markets started to form a view that the Fed will hike into early 2023 and potentially start cutting rates in second half. But if you look at the ASX interbank cash futures, rates are expected to peak around 4.0% wit no rate cuts in 2024.