Evening Wrap: ASX 200 extends gains, tech and gold stocks rally on dovish Fed

The S&P/ASX 200 closed 10 points higher, up 0.14%.

The local sharemarket closed below session highs of 0.45%, South Korea ops for a conservative 25 bp hike, Japanese PMIs slump towards contraction, Woodside largely unphased by falling oil prices and gold stocks surge.

Let's dive in.

Markets

The ASX 200 rose for a third straight session thanks as Fed meeting minutes signal a downshift in future rate hikes, sending equity markets higher.

• Technology led to the upside after Fed minutes boosted appetite for risk assets and sent bond yields lower

• Materials also pushed higher as the dovish Fed pushed the US dollar lower, which is typically a tailwind for commodity prices

• Energy was the most notable decliner as oil prices tumbled towards year-to-date lows after the EU considered a generous price cap of US$65-70 on Russian crude

• 106 of the top 200 advanced (53%)

Economy

South Korea raised interest rates by 25 bps to 3.25%.

• In-line with expectations

• South Korea's inflation remains well-above the central bank's target of 2.0% at 5.7% in October

• There are signs of hope, with produce inflation falling to a 16-month of 7.3% in October

Japan's manufacturing PMI fell into contraction, down to 49.4 in November from 50.7 in October.

• Below forecasts of 50.8

• The first contraction since January 2021

• “Central to the latest downturn was a poor performance at Japanese manufacturing firms. Cooling demand conditions and acute inflationary pressures reportedly continued to hamper output and new orders." - Lauren Denman, Economist at S&P Global

Japan's services PMI slumped to 50.0 in November from 53.2 in October.

• Well-below forecasts of 53

Commodities 

“The worsening economic backdrop weighed on sentiment across commodity markets. Government policies looking to contain the impact of rising energy prices also contributed to the uncertainty,” said ANZ senior commodity analyst, Daniel Hynes. 

• Copper +0.9% to US$3.65/lb

  • Still down -7% from 14 November highs

• Iron ore futures -0.03% to US$92.40 a tonne

Latest news

Post market brief

The ASX 200 faded from session highs of 0.45%, closing 0.15% higher. Do we begin to see some selling come in as we approach the 7,300 level?

XJO chart (Source: TradingView)

A few sector-ish charts and commentary for today.

Energy: The Russian price caps and unexpected EIA build is drawing concerns that a) there's going to be more Russian oil on the market, more supply means lower prices and b) that demand is weakening in the US, unless we see a big turnaround leading into the holidays. Still, if you look at Woodside in isolation, you'd think oil is trading at somewhere north of US$100 a barrel. So whose leading who? Does Woodside chop around a little more and then break out again?

WTI price chart (Source: TradingView)

Woodside price chart (Source: TradingView)

Gold: Gold stocks rallied as the Fed seeks to slow the pace of future rate hikes. With peak hawkishness potentially in the rear view mirror, gold has a lot more breathing room. The only problem for investors who have only just started to catch on, most major gold names have rallied 30-40% since November.

Major announcements

Large caps (>$1bn)

• Bellevue Gold (BGL) +7.1% latest grade control drilling in the Upper Aramand Area at the Bellevue Gold Mine outlined 17% more gold than contained in the Resource estimate 

• Evolution Energy (EVN) +6.6% new drillholes at the Ernest Henry Project in Queensland intersected significant mineralisation widths within and below pre-feasibility study mine life areas 

• Sayona Mining (SYA) +2.3% has further progressed the restart of its North American Lithium operation in Canada, with procurement 98% completed and on track for production to restart in 1Q23

• QUBE (QUB) +1.5% AGM notes a very strong start to FY23. Underlying revenue, earnings and margins have been ahead of internal expectations for the first four months to October   

• AGL Energy (AGL) -1.0% plans to close its Torrens Island B Power State on 30 June 2026 as part of its Torrens Island’s transition into a low-carbon energy hub

• Harvey Norman (HVN) -1.4%  trading update notes 6.9% sales growth for the 1 July to 31 October period. Sales have been negatively impacted by the deprecation of the Euro, Pound and New Zealand dollar

• New Hope (NHC) -8.8% posted $648m earnings for the October quarter, up 167% compared to a year ago and issued a $300m on-market buy back 

Mid-to-small caps

• Nick Scali (NCK) +9.5% AGM guided to 1H23 net profits of $56-59m, up 57-66% compared to a year ago. Gross margins for the first four months of FY23 improved 180 bps to 61.3% and expected to continue to improve

• Kogan.com (KGN) +7.9% AGM posted -38.2% sales growth in the first four months of FY23, down to $267.6m but inventory levels have continued to normalise  

• PointsBet (PBH) +4.0% launched its online sports betting operations in the state of Maryland, United States 

• Universal Store (UNI) +1.96% trading update notes 40.2% higher Group sales for the first 21 weeks of FY23. No forward looking guidance was provided

• Tyro Payments (TYR) +0% AGM notes a strong start to FY23, with the first four months trending towards the top end of guidance. Management are targeting positive free cash flow exiting FY23

Broker updates 

Scans