Evening Wrap: ASX 200 eases ahead of US jobs report, coal and cannabis stocks surge

The S&P/ASX 200 closed 55 points lower, down -0.8%.

The local sharemarket sold off in-line with how Wall Street performed, energy stocks rallied as oil prices continue to rally, tech stocks slide, AMD announces a massive earnings downgrade and all eyes on the US jobs report tonight.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

The ASX 200 experienced a modest pullback after Wall Street handballed us a rather weak session. A few more thoughts in the post market brief below.

• 2 out of 11 sectors higher

• Energy, notably oil and coal stocks, led to the upside again as oil prices kick on

• Defensive sectors including Staples and Health Care were also relative outperformers

• Real Estate, Tech, Materials and Telcos led to the downside

• 68% of the top 200 declined

Announcements

• Stanmore Resources (ASX: SMR) +9.6% completed its acquisition of the remaining 20% interest in BHP Mitsui Coal 

• Karoon Energy (ASX: KAR) +9.2% received approval from Brazil’s oil and gas regulator to progress the development of the company’s Bauna field

• Allkem (ASX: AKE) +3.15% and the International Finance Corporation have agreed on a non-binding term sheet for the financing of the Sal de Vida Project in Argentina  

• Emerald Resources (ASX: EMR) +2.6% posted significant gold exploration results for its Okvau and Bullseye prospects in Cambodia 

• GQG Partners (ASX: GQG) -3.1% announced a -9.4% month-on-month decline in funds under management in September and inflows of US$0.8bn for the quarter 

• Talga Group (ASX: TLG) -10.6% raised $22m at $1.10 per share, a 17% discount to its last closing price

Notable broker updates 

• Appen (ASX: APX): Ord Minnett retained a Sell rating with a $2.60 target price 

• Fortescue (ASX: FMG): Macquarie retained an Underperform rating with a $14.50 target price

• Magellan (ASX: MFG): Morgans retained a hold rating with a $10.94 target price (from $10.94)

Economy

• RBA financial stability review highlights:

  • “Banks remain well capitalised and loan arrears are low. However, global financial conditions could tighten further in the period ahead and test the resilience of some households and businesses.”

  • “Despite a strong labour market, income growth has not kept up with inflation in Australia, leaving households with less capacity to service their debts.”

  • “Debt-servicing challenges will become more widespread if economic conditions, particularly the level of unemployment, turn out to be worse than expected and housing prices fall sharply.”

Commodities 

• Iron ore futures +0.05% to US$95.75, up 0.3% for the week

• Copper -0.93% to US$3.41, flat for the week

• Gold -0.01% to US$1,711, up 3.05% for the week

Latest news

Post market brief

We live another week eh? Today was a modest pullback, somewhat in-line with what happened on Wall Street. We sold off towards close, finishing at session lows, which isn't the best look.

US unemployment and non-farm payrolls will be the key data to watch tonight. We're in this weird market where good news isn't necessarily good for the stock market. So far this year, the S&P 500 has gained when job numbers miss and fall when job number beats, according to Bank of America.

Source: Bloomberg

Still, Fed policymakers seem numb to any form of economic data and continue to express their hawkish resolve in the battle against inflation.

Overnight, Governor Chris Waller said the jobs report likely will not alter the Fed's view and they will be 100 per cent focused on lowering inflation. But that doesn't mean traders or the bond market can react positively to a weaker-than-expected jobs report. Let's see how it plays out.

Alongside the jobs report, over the next month, there's also the US CPI announcement, Fed interest rate decision and US mid-term elections. So prepare for fireworks.

Index charts

S&P/ASX 200: Same as yesterday. Nothing much to see here. An unsurprising pullback but the close was rather weak. Still, inconsequential to what could happen overnight on Wall Street. More time is needed to see what kind of pullback this is.

XJO chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Energy: On a 9-day winning streak, up 15.5%. Wild momentum as it runs back into the September high. Will we see some selling here?

XEJ chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Materials: Pulling back from the trendline and 200-day moving average. China is back from its week long National Day holiday next week, which should see some more movement in iron ore prices. There's also the 20th Nation Congress of the Chinese Party meeting on 16 October where we could get more cues about how Xi will deal with ongoing lockdowns, property market stress and below-trend growth.

XMJ chart (Source: TradingView, Annotations by Market Index)

S&P/ASX 200 Tech: Previous support zone turning into a little bit of resistance. Could see some more weakness for US chipmakers on Friday after AMD released its earnings after hours. In August, it forecasted Q3 margins of 54% and US$6.7bn revenue. It cut these expectations to 50% and US$5.6bn respectively. Rising yields and heavyweight downgrades, not a good look.

XIJ chart (Source: TradingView, Annotations by Market Index)

That's it for me. Have a good weekend and I'll see you guys on Monday.

Scans