Evening Wrap: ASX 200 extends losses in volatile trade, RBA rate hike in focus

The S&P/ASX 200 closed 17 points lower, down -0.27%.

The local sharemarket faded strong gains at the open, energy stocks outperformed amid a rebound in oil prices, CoreLogic reports a -1.4% decline in housing prices in September and all eyes on the RBA rate hike on Tuesday.

Let's dive in.

ASX 200, All Ords and All Tech intraday overview

Markets

The ASX 200 whipsawed between session highs of 0.45% and lows of -0.96%.

• 8 out of 11 sectors advanced

• Defensive and yield sensitive sectors like Utilities and Real Estate outperformed

• Energy stocks also outperformed as oil prices bounced

• Tech led to the downside, in-line with the weakness in US markets

• Telecommunications, Discretionary and Staples also underperformed benchmarks

• 61% of the Top 200 companies declined

Announcements

• Mesoblast (ASX: MSB) +7.7% submitted new information to the FDA for its remestemcel-L product used to treat children with steroid-refractory acute graft

• Unibail-Rodamco Westfield (ASX: URW) 5.9% sold its Villeneuve 2 shopping centre in France. It has now completed 3.2bn euros worth of disposals, representing 80% of its European disposal programme

• Yancoal (ASX: YAL) +4.9% announced a US$1.0bn debt repayment from available cash

• Tyro Payments (ASX: TYR) +3.9% reported a 63% increase in transactions to $3.5bn in September compared to a year ago

• Liontown Resources (ASX: LTR) -2.4% received approvals from the Western Australian Government to commence major site works for its flagship Kathleen Valley Lithium Project

• Argosy (ASX: AGY) -3.96% advised its Rincon Lithium Project is currently 97% completed

• Core Lithium (ASX: CXO) -4.1% successfully raised $100m at $1.03 per share.

• Nickel Industries (ASX: NIC) -5.1% said its Hengjaya Project has commenced its transition from the production of nickel pig iron to the production of nickel matte for the electric vehicle supply chain

• InfoMedia (ASX: IFM) -6.4% received an indicative takeover offer from Solera and a consortium of funds in September for $1.70 per share. The takeover offer failed to turn into a binding agreement

Broker updates

• Core Lithium (ASX: CXO) -4.1% Macquarie retained an Outperform rating but lowered its price target from $1.80 to $1.70 reflecting revisions for the lithium miner's FY23-25 earnings forecasts

• Karoon Energy (ASX: KAR) +2.2% Morgans retained an Add rating with a $3.60 target price to reflect the recently completed intervention program at Bauna

• Sandfire Resources (ASX: SFR) -2.95% Morgan Stanley retained an Overweight rating with a $5.95 target following a positive feasibility study for the Degrussa Processing extension. The news of CEO Karl Simich stepping down was a negative surprise but met with a capable interim replacement

Quick bites 

• Morgan Stanley's Mike Wilson: “A Fed pivot, or the anticipation of one, can still lead to sharp rallies. Just keep in mind that the light at the end of the tunnel you might see if that happens is actually the freight train of the oncoming earnings recession that the Fed cannot stop”

• ASX 200 performance on rate hike days:

  • 3 May -0.42% (larger-than-expected)

  • 7 Jun -1.53% (larger-than-expected)

  • 5 Jul +0.25% (in-line)

  • 2 Aug +0.07% (in-line)

  • 6 Sep -0.38% (in-line)

Economy

• CoreLogic reported a -1.4% decline its national Home Value Index in September

  • According to CoreLogic’s research director, Tim Lawless, it is probably too early to suggest the housing market has moved through the worst of the downturn.

  • "... if interest rates continue to rise as rapidly as they have since May, we could see the rate of decline in housing values accelerate once again," he said

• RBA has its interest rate decision on Tuesday at 1:30 pm AEST

  • The market is widely expecting another 50 bps to take the cash rate to 2.85%.

Commodities 

• Iron ore futures fell -1.4% to US$94.05 a tonne

  • "Chinese prices are likely to rebound in October with market fundamentals improving and macro support policies coming into force," according to Mysteel's chief analyst, Wang Jianhua

  • "But pessimism still haunts the market," he admitted

• Copper prices fell -1.1% to US$3.37/lb

• Oil prices rose 2.3% to US$87.3 a barrel but still down -1.3% in the last two sessions

Latest news

Post market charts

S&P/ASX 200: Teased at a break below June lows which would've marked a two-year low. Again, we're dangling too close to the sun. Volatility remains high and anything could happen.

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

S&P/ASX 200 Energy: The Index is on a five day winning streak as OPEC weighs in on a 1m barrels a day output cut to bolster prices. OPEC delegates will meet in person in Vienna on Wednesday for the first time since the beginning of the pandemic to discuss what kind of reduction they'll opt for.

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

S&P/ASX 200 Tech and Discretionary: Two similar charts. The risk-off attitude on Wall Street is really taking a toll on these growth-heavy sectors. Interesting note from Bank of America last week which flagged "a softening trend in consumer spending in most hardline categories on a year-on-year basis."

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

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

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