Evening Wrap: ASX 200 extends gains, consumer confidence near all-time low, US futures flat

The S&P/ASX 200 closed 25 points higher, up 0.36%.

The local sharemarket rallied for a third straight session heading into US midterms, Australian consumer sentiment tumbles to near all-time lows, business confidence remains sold but under pressure and commodities struggled to hold onto gains amid Chinese lockdowns.

Let's dive in.

Markets

The ASX 200 closed near session highs and extended its winning streak to three.

• Defensives outperformed while growth and cyclical sectors underperformed

• Staples led to the upside thanks to near 2% gains from heavyweights Woolworths and Coles. The Staples Index trading near a six-week high

• Financials bounced after a sharp selloff on Monday. Westpac shares closed 2% higher after falling -4% yesterday due to an upward revision to its FY24 cost target

• Energy and Materials were the only red sectors as China's covid infections jump to 7,454 on Monday, the highest since May 1. Many cities have imposed varying levels of restrictions but resisting full-blown lockdowns

• 102 of the top 200 advanced (51%)

Economy

Westpac’s consumer sentiment index tumbled -6.9% to 78.0 in November from 83.7 in October.

• The print of 78.0 is below the low point of the GFC and only slightly higher than when covid first hit in April 2020

• “Christmas spending plans are very subdued this year. Nearly 40% of consumers expect to spend less on gifts this year – the highest proportion planning cutbacks since we started asking the question in 2009,” said the Westpac report 

• “Attitudes towards major household purchases continue to show a clear sensitivity to rising prices and interest rates. The ‘time to buy a major household item’ sub-index declined 4.3% to 81.4, well below the long run average of 126 and, outside of the initial COVId hack in 2022, the weakest monthly read since the GFC.” 

NAB’s business confidence index fell to 0 in October from 5 in September.

• “The slowing in purchase costs growth seen in September was partly reversed, with costs up 4.1% in quarterly terms, but labour cost growth continues to moderate after spiking in July,” said NAB Economics

• “Final product prices grew 2.0%, with retail price growth up to 3.0%, indicating the strong inflation seen in Q3 will likely continue into Q4.”

• “Overall, the survey indicates demand remained strong through October but highlights that headwinds are beginning to weigh on businesses’ expectations for the future,” said NAB Chief Economist Alan Oster

Commodities 

"Commodities struggled to hold onto last week’s gains as hopes of a near-term rebound in China waned. A weaker USD helped limit the downside, as did low inventories amid tight supplies," said ANZ senior commodity strategist, Daniel Hynes.

• Iron ore futures on the Dalian Commodity Exchange rose 0.45%

• Copper -0.96% to US$3.57/lb, down -3.2% in the last two sessions

Latest news

Post market brief

Different heavyweight sectors continue to take turns in pulling the market higher. Yesterday, Materials and Energy rallied while Financials tanked. Today is the opposite. Still, we're grinding higher, with another close above the 200-day moving average.

The US midterm elections will take the spotlight on Wednesday, followed by the US inflation print on Friday.

Its widely expected that the Republicans will take back the house, with Predictlt pricing 70/30 odds of a Republican/Democrat Senate. The five key rates which will decide which party wins all has near coin-flip odds.

Index charts

S&P/ASX 200: Another attempt at closing above the 200-day. The short-term moving averages are positively sloping. Let's see how the market holds up heading into midterms and US CPI.

XJO chart (Source: TradingView)

S&P/ASX 200 Energy: Heavyweight Woodside is feeling the weight of Chinese lockdowns. Buying the oil dip seems to have worked wonders, does this weakness spell another temporary demand hit amid still tight supplies?

XEJ chart (Source: TradingView)

S&P/ASX 200 Financials: A bounce after a touch on the 20-day (red). Did the market overreact to Westpac's FY24 cost revision (from $8bn to $8.6bn). The result was otherwise a beat against Bloomberg expectations.

XFJ chart (Source: TradingView)

S&P/ASX 200 Staples: Trying to make the case for a bottom.

XSJ chart (Source: TradingView)

Major announcements

Large caps (>$1bn)

• The Lottery Corp (TLC) +3.95% AGM notes Group revenues up 11% for the fourth months to 31 October 2022 compared to the prior period

• Kelsian (KLS) +0.6% secured two new 10-year contracts with ConocoPhillips and Shell Santos, with a combined $216m in estimated revenue  

• Magellan Financial (MFG) +0.4% co-founder Hamish Douglass sold approximately 13m shares in a block trade at $9.10 per share that took place on Monday

• Tassal Group (TGR) 0% announced that the Supreme Court of New South Wales has approved its proposed acquisition by Cooke 

• Centuria Capital (CNI) -0.3% secured a $35.5m, high-quality distribution centre in Queensland for its new single-asset, unlisted real estate fund

• Inghams (ING) -2.3% AGM notes “we do not expect any benefit from reduced pricing (input costs) to be felt until later in FY23 into FY24.”

• Santos (STO) -5.3% AGM provided 2022-23 guidance of 103-106 and 91-98 mmboe respectively compared to 92.1 mmboe in 2021 

• Sims (SGM) -9.7% downgraded its 1H21 EBIT forecast to $65-75m from $361.7m a year ago due to persistent ‘soft market conditions’

• James Hardie (JHX) -13.7% lowered its full year guidance to US$710-650m from US$780-830m and expects the US housing market to slow over the next six months

Mid-to-small caps

• Weebit Nano (WBT) +4.4% integrated its embedded Resistive Random-Access Memory (reRAM) module into silicon wafers for the first time

  • The silicon wafers will be sliced into chips and sent for testing/product qualification 

Broker updates 

Scans