Evening Wrap: ASX 200 eases from session highs ahead of US inflation data

The S&P/ASX 200 closed 23 points higher, up 0.31%.

The local sharemarket struggled to hold onto a strong open ahead of US inflation data, Australian consumer sentiment bounced from record lows in December but business confidence deteriorated.

Let's dive in.

MARKETS

The ASX 200 sold off from session highs of 0.66%. The market seemed reluctant to hold onto the strong open ahead of the US inflation print on Wednesday, 12:30 am AEDT.

• Tech led to the upside, with names like WiseTech Global and Xero up more than 2%

• Financials pushed the index higher thanks to a positive trading update from Bendigo Bank. The big four banks closed between 0.7% and 1.7% higher

• Materials extended its pullback, now on a two-day losing streak, down -2.95%

ECONOMY

Australian consumer sentiment rose 3% to 80.3 in December from 78.0 in November.

• "Despite this welcome lift the level of the Index remains comparable with the lows seen during the COVID pandemic and the Global Financial Crisis." - Westpac Economics

• "Despite this welcome lift the level of the Index remains comparable with the lows seen during the COVID pandemic and the Global Financial Crisis." - Westpac Economics

Australian business confidence was -4 in December from 0 in November.

• Fell below zero for the first time since December 2021

• "Conditions remain strong across industries with only construction and finance, business & property below +20pts in trend terms, and conditions have also held up across the states." - NAB Economics

• "Overall, the survey highlights a growing concern that the economy’s strength over 2022 is set to come to an end as we enter 2023, and forward orders have softened from +14 in September to +5 in November." - NAB Economics

COMMODITIES

“A risk-off tone across markets saw commodities come under pressure. Surging COVID-19 cases in China weighed on sentiment. A stronger USD added to the headwinds,” said ANZ senior commodity analyst, Daniel Hynes. 

• Brent crude +1.0% to US$78.85 a barrel

• Iron ore futures fell -2.3% to US$106.95 a tonne

Latest news

Post market brief

The ASX 200 sold off from session highs, some understandable de-risking ahead of a rather binary catalyst.

XJO chart (Source: TradingView)

I took a closer look at the inflation print, talking about various things including S&P 500's previous reactions, gasoline prices, rents and JPMorgan's game plan.

The game plan was rather interesting, so I'll drop the table below.

Source: JPMorgan, Bloomberg | Table: Market Index

Note that the S&P 500 rallied 5.5% after inflation came in cooler-than-expected at 7.7% last month compared to analyst expectations of 8.0%.

We're in a market that's so desperate to rally off good news yet to vulnerable to anything that isn't. Expectations are key and the consensus is for inflation to cool to 7.3%.

Major announcements

Large caps (>$1bn)

• Bendigo Bank (BEN) +6.9%: Posted 22% growth in cash earnings for the five months ending 30 November. The bank said “NIM tailwinds expected to continue into the second half of FY23.” 

• CSL (CSL) -0.4%: Appointed Dr Paul McKenzie as CEO from 6 March 2023. Dr McKenzie has been CSL’s Chief Operating Officer since 2019 

• Chalice Mining (CHN) -8.1%: Extended its scoping study to allow for new metallurgical testwork results   

Mid-to-small caps

• G8 Education (GEM) +2.5%: Reported YTD 30 November EBIT of $71m and NPAT of $41m compared to a respective $75m and $43m a year ago   

• Galan Lithium (GLN) -0.8%: Executed a binding term sheet to acquire its remaining 20% interest in the Greenbushes South tenements from Lithium Australia

• Zip (ZIP) -10.5%: Completed a convertible notes offer at around 23 cents for the dollar. The company said this will reduce its cash liability under its existing notes payable by $76.6m   

Capital raisings

• Mincor (MCR) -4.4%: Successfully raised $55m at $1.39 per share, representing a 12.3% discount to its pre-raise close  

Broker updates 

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