Evening Wrap: ASX 200 extends selloff led by tech, GDP growth misses expectations

The S&P/ASX 200 closed 62 points lower, down -0.85%.

The local sharemarket continues to tumble as recession fears grow, iron ore miners managed to eke out some gains, technology stocks got smashed and Australian Q3 GDP was mostly in-line with expectations.

Let's dive in.

Markets

The ASX 200 is in the midst of a pullback as the peak-inflation-and-pivot euphoria dies down and we move onto the next challenge: Avoiding a recession. Interestingly, the difference between the median recession bear and non-recession bear market is -35% versus -22% for the S&P 500, according to Jurrien Timmer, Director of Global Macro at Fidelity.

• Materials was the only green sector as BHP eked out a 0.1% gain and Fortescue rallied 2.3% higher

• Healthcare and Financials outperformed on a relative basis

• Risk-off attitude is taking a toll on growth-heavy sectors like Tech and Discretionary

• Energy also led to the downside after oil prices slumped almost -4.0% overnight and failed to bounce during the local session

• 129 of the top 200 declined (65%)

Economy

Australia’s services index fell to 45.6 in November from 47.7 in October, according to the Australian Industry Group. 

• Business and property services showed the strongest month-on-month decline and logistics the largest improvement

• “All activity indicators are in contraction. The employment and new orders indicators declined significantly in November, suggesting weakening demand.” - AI Group

• “However, capacity utilisation remained elevated, rising to 82.8%. In services, this reflects ongoing tight employment conditions.”

Australia’s Q3 GDP rose 0.6% quarter-on-quarter, down from 0.9% in Q2. 

• Missed analyst expectations of 0.7% growth

• "Households continued to increase spending on domestic and international travel as COVID-19 travel restrictions continued to ease. Spending on new vehicle purchases increased as international supply chain constraints eased, enabling an increase in vehicle imports.” - Sean Crick, ABS Head of National Accounts

• Of note, compensation of employees increased 3.2%, the largest increase since December 2006 

Commodities 

“Investors took time to re-evaluate the macroeconomic backdrop following recent strong gains across the commodities complex. The spectre of tighter monetary policy weighed on sentiment,” said ANZ senior commodity analyst, Daniel Hynes. 

• Newcastle coal futures +2.1% to US$408.8/t

• Iron ore futures -0.4% to US$107.8/t

Latest news

Post market brief

We're in the midst of a pullback from an almost 15% run from October lows. Volatility is beginning to pick up and we have yet to see any buying support kick in over the last two sessions.

What we don't want are more red bars, creating a scenario where we've got strong downside momentum from an overextended level. Let's see how the dust settles this week and whether or not we can look at levels like the 20-day for some bids.

ASX 200 (Source: TradingView)

Wednesday was a little heavy for risk sectors like Tech and Discretionary. Many tech names were trading in a range bound fashion for the past 2-3 months and the cooler-than-expected inflation print in November and Powell's dovish speech last week helped them break out or push the upper levels of their trading range. Now, they're U-turning rather fast. A few culprits include:

Data#3 (Source: TradingView)

Altium (Source: TradingView)

Dicker Data (Source: TradingView)

Seek (Source: TradingView)

Major announcements

Large caps (>$1bn)

• GQG Partners (GQG) +1.4%: FUM rose 8.2% month-on-month to $90.7bn from $83.8bn

• Santos (STO) -1.1%: Announced a simplified capital management framework including a minimum annual return of at least 40% of free cashflow and a further US$350m in on-market share buybacks 

• Lendlease (LLC) -1.5%: Denied claims by The Australian regarding a potential capital raising. The company said it has sufficient organic capital generation to fund its current business plan 

Mid-to-small caps

• Strike Energy (STX) +7.4%: Raised its ownership of Warrego Energy to 19.9%, which is currently in a bidding war between Strike and Gina Rhinehart’s Hancock Energy

• Tietto Minerals (TIE) -0.6%: Hit a gold incept or 184.55 g/t at its Abujar Project in South Gamina. The project is on track for its first gold pour in three weeks and seeks to produce 260,000 ounces of gold in the first year  

• Bellevue Gold (BGL) -12%: Successfully raised $60m at $1.05 per share or a 13.2% discount to accelerate the development of its Bellevue Gold Project  

Capital raisings

• Renascor (RNU): Plans to raise $70m at 27.5 cents per share, a 14.1% discount to its last closing price. Proceeds will be used to accelerate project development and bring forward the timeline for a Stage 2 expansion of its BAM Graphite Project 

Trading halts

• Latin Resources (LRS): Shares will be halted until Friday, 9 December, pending the announcement of a Maiden Mineral Resource Estimate for the Colina Lithium Project

• Bigtincan (BTH): Shares will be halted until Friday, 9 December, pending a material capital raising and share purchase plan 

Broker updates 

Scans